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Condensed interim results for the 6 month period ended 31 May 2017 and change to the board
STELLAR CAPITAL PARTNERS LIMITED
Incorporated in the Republic of South Africa
Registration number 1998/015580/06
Share code: SCP
ISIN: ZAE000198586
CONDENSED INTERIM RESULTS
FOR THE 6 MONTH PERIOD ENDED 31 MAY 2017 AND CHANGE TO THE BOARD
OPERATIONAL UPDATE
INTRODUCTION
Stellar Capital Partners Limited ("Stellar Capital" or the "Company" or the "Group") presents its unaudited interim results for
the 6 month period ended 31 May 2017.
RESIGNATION OF CHIEF FINANCIAL OFFICER
Shareholders are advised that Mr. Charl de Villiers, Chief Financial Officer and executive director, has tendered his
resignation from the Company to pursue other interests. Mr. de Villiers has agreed to continue in the role as Chief Financial
Officer and executive director until 30 September 2017.
The board has appointed Mr. Sean Graham CA(SA), RA, ACMA as interim Chief Financial Officer and executive director, who
will be supported by Mr. David Hoek CA(SA), with effect from 1 October 2017. Mr. Graham currently serves as Company
Secretary and Chief Risk Officer and Mr. Hoek serves as Group Financial Manager. The process to appoint a permanent Chief
Financial Officer is underway and the outcome thereof will be announced in due course.
OTHER CHANGES TO THE BOARD OF DIRECTORS
Mr. HC Steyn was appointed as a non-executive director with effect from 4 April 2017. Mr. CE Pettit has resigned as Chief
Executive Officer from the Board of Directors with effect from 31 August 2017 and is to be replaced by Mr. PJ van Zyl with
effect from 1 September 2017.
COMMENTARY
Stellar Capital shareholders are advised to consult the provisional financial results for the 7 month period ended
30 June 2017 for commentary regarding the investment portfolio.
INVESTOR RELATIONS
For any questions or comments relating to this announcement, shareholders are invited to send an email to
scp.ir@fticonsulting.com.
SUM-OF-THE-PARTS ("SOTP") VALUATION AS AT
31 MAY 2017
As at As at As at
% of 31 May 30 November 31 May
R'000 portfolio 2017 2016 2016
FINANCIAL SERVICES
Prescient 33% 697 015 - -
Cadiz 4% 86 862 89 362 240 643
Praxis(1) 1% 29 671 139 621 133 997
IE Rentals(1) 0% - 51 384 37 272
Stellar Credit 0% 8 802 7 934 2 500
INDUSTRIALS AND TECHNOLOGY
Torre 19% 408 858 709 478 493 879
Amecor 16% 359 708 359 708 -
Tellumat(2) 9% 178 331 239 182 260 643
CORPORATE ASSETS
Financial assets(1) 1% 25 058 25 046 31 500
Loan portfolio(1) 13% 290 149 302 119 486 077
Venture capital portfolio(3) 1% 28 405 30 299 -
Cash and cash equivalents 3% 63 808 382 854 305 494
Other assets 0% 8 281 13 107 11 770
Total assets 2 185 155 2 350 094 2 003 775
Preference share liability (597 671) (565 652) (554 559)
Bridge facility (203 000) - -
Trade and other payables (11 804) (15 829) (6 315)
SOTP value 1 372 680 1 768 613 1 442 901
Net shares in issue ('000) 1 075 032 1 068 017 920 627
SOTP value per share (Rand) 1.28 1.66 1.57
SOTP value per share post preference share conversion (Rand)(4) 1.53 1.82 1.76
Notes:
1. On 31 May 2017, Stellar Capital reorganised the manner in which it invests in the loan portfolio held by Stellar Specialised
Lending ("SSL") through the acquisition of a financial instrument issued by Cadiz Asset Management Proprietary Limited
(refer to note 8), which bears exposure to the SSL loan portfolio on a pro-rata basis with all other investors. As such, the
exposure of the loans owing by Praxis and IE Rentals to SSL is not solely borne by Stellar Capital and therefore the SOTP
values as at 31 May 2017 do not include the value of these loans, but only the respective equity fair values. The comparative
period SOTP values at 30 November 2016 (i) in relation to Praxis comprises R29.6 million equity and R110 million pro-rata
loan exposure via SSL and (ii) in relation to IE Rentals comprises R5.7 million equity and R45.6 million pro-rata loan
exposure via SSL. The comparative period SOTP values at 31 May 2016 (i) in relation to Praxis comprises Rnil equity and
R133.9 million pro-rata loan exposure via SSL and (ii) in relation to IE Rentals comprises Rnil equity and R37.2 million
pro-rata loan exposure via SSL
2. The value comprises the sum of the investments in Tellumat and Masimong Technologies
3. Held in Stellar International
4. The conversion assumes an issuance of a maximum 215.8 million ordinary shares at R2.78 per share in settlement of
convertible preference share funding
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION AS AT 31 MAY 2017
Unaudited as at Audited as at Unaudited as at
31 May 30 November 31 May
R'000 Notes 2017 2016 2016
Non-current assets 2 023 963 1 954 277 1 041 724
Listed investments at fair value 7 408 858 709 478 493 879
Unlisted investments at fair value 7 1 388 795 1 219 609 546 807
Other financial assets 8 225 031 23 864 -
Property, plant and equipment 1 013 1 108 1 038
Deferred taxation 266 218 -
Current assets 161 192 395 817 1 005 072
Other financial assets 8 90 176 1 182 31 500
Loans to portfolio companies 2 794 4 622 667 255
Trade and other receivables 4 414 7 159 823
Cash and cash equivalents 63 808 382 854 305 494
Total assets 2 185 155 2 350 094 2 046 796
Equity 1 372 680 1 768 613 1 442 901
Equity attributable to owners of the parent 1 372 680 1 768 613 1 442 901
Non-current liabilities 535 258 506 465 500 118
Preference share liability 535 258 506 465 500 118
Current liabilities 277 217 75 016 103 777
Preference share liability 62 413 59 187 54 441
Other financial liabilities 10 203 000 - 43 021
Current tax payable 505 900 -
Trade and other payables 11 299 14 929 6 315
Total equity and liabilities 2 185 155 2 350 094 2 046 796
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME FOR THE 6 MONTH PERIOD
ENDED 31 MAY 2017
Unaudited Audited Unaudited
6 month year ended 6 month
period ended 30 November period ended
R'000 Notes 31 May 2017 2016 31 May 2016
Fair value adjustments 11 (830 638) (748 503) (448 425)
Fair value adjustments on listed investments (303 052) (404 071) (427 117)
Fair value adjustments on unlisted investments (68 897) 92 529 (18 808)
Fair value adjustments resulting from
capital distributions (458 689) (436 961) (2 500)
Dividend revenue 12 488 733 480 025 8 638
Capital distributions 458 689 436 961 2 500
Earnings distributions 30 044 43 002 6 138
Other dividend revenue - 62 -
Interest revenue 13 9 858 98 188 71 749
Impairment of loan to portfolio company - (2 289) (2 548)
Gross loss from investments (332 047) (172 579) (370 586)
Other income 931 8 870 8 431
Finance costs 14 (42 271) (71 543) (35 193)
Net loss before operating expenses (373 387) (235 252) (397 348)
Management fee (5 288) (11 129) (7 084)
Operating expenses (10 413) (15 837) (8 939)
Transaction costs (18 013) (21 306) (3 770)
Loss before tax (407 101) (283 524) (417 141)
Taxation (489) (25 990) (14 318)
Loss for the period (407 590) (309 514) (431 459)
Weighted number of shares in issue ('000) 1 072 004 942 745 923 139
Loss and headline loss per share (cents) (38.02) (32.83) (46.74)
The issue of 600 convertible redeemable preference shares has not been treated as dilutive in calculating diluted
earnings and headline earnings per share as the conversion thereof will result in a decrease in loss per share
(i.e. the conversion is anti-dilutive). As such, loss and headline loss per share is equivalent to diluted loss and
headline loss per share.
There are no items required to be excluded from earnings in order to calculate headline earnings for the current and
comparative periods and as such the headline earnings per share is equivalent to the earnings per share in respect of each
period presented.
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY FOR THE 6 MONTH PERIOD
ENDED 31 MAY 2017
Unaudited Audited Unaudited
6 month year ended 6 month
period ended 30 November period ended
R'000 Notes 31 May 2017 2016 31 May 2016
Balance at the beginning of the period 1 768 613 1 882 021 1 882 021
Loss for the period (407 590) (309 514) (431 459)
Issue of shares 11 709 198 485 12 951
Capitalisation of share issue costs (52) (223) (46)
Acquisition of treasury shares - (20 566) (20 566)
Disposal of treasury shares - 18 410 -
Balance at the end of the period 1 372 680 1 768 613 1 442 901
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 6 MONTH PERIOD ENDED 31 MAY 2017
Unaudited Audited Unaudited
6 month year ended 6 month
period ended 30 November period ended
R'000 31 May 2017 2016 31 May 2016
Operating activities 464 104 318 712 18 288
Cash generated from / (utilised by) operations and
capital distributions received 455 179 239 010 (45 965)
Interest revenue 9 858 98 188 71 749
Tax paid (933) (18 486) (7 496)
Investing activities (975 846) (747 458) (460 875)
Net acquisitions of investments (687 738) (565 607) (277 970)
Net (acquisitions) / disposals of other financial assets (289 916) 324 872 329 313
Net loans repaid by / (advanced to) portfolio companies 1 828 (505 469) (511 180)
Purchase of property, plant and equipment (20) (1 254) (1 038)
Financing activities 192 696 13 840 (49 679)
Proceeds from ordinary share issue - 88 998 -
Share issue costs (52) (223) -
Purchase of treasury shares - (20 566) (20 566)
Net proceeds from bridge facility 203 000 - -
Preference share financing costs (4 751) (54 369) (29 113)
Bridge facility financing costs (5 501) - -
Cash and cash equivalents at the beginning of the period 382 854 797 760 797 760
Cash and cash equivalents at the end of the period 63 808 382 854 305 494
Net decrease in cash and cash equivalents (319 046) (414 906) (492 266)
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
1. REPORTING ENTITY
Stellar Capital is a South African domiciled investment holding company listed on the main board of the JSE Limited ("JSE").
The condensed consolidated interim financial statements of the Group as at and for the 6 month period ended 31 May 2017
comprise the Company and its Consolidated Subsidiary, Stellar Management Services Proprietary Limited.
The Company has significant interests in both listed investment and unlisted investments, which are more fully set out in
note 7. As an investment holding company, Stellar Capital has applied the investment entity exception and accounts for its
investments on a fair value basis, in accordance with IFRS 10 Consolidated Financial Statements.
2. FINANCIAL PREPARATION AND REVIEW
These condensed consolidated interim financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), including the disclosure requirements of IAS 34 Interim Financial Reporting ("IAS 34") and
comply with the Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, as well as the JSE Listings Requirements and the
Companies Act, No 71 of 2008.
The results include, as a minimum, the information required by IAS 34 and do not include all the information required for a
complete set of IFRS financial statements and it is advised that these results be read in conjunction with the consolidated
annual financial statements of the Group for the year ended 30 November 2016 and 30 June 2017, which are available at
http://www.stellarcapitalpartners.co.za/financial-results/.
These condensed consolidated interim financial statements have been prepared by DJ Hoek CA(SA) under the supervision
of CB de Villiers CA(SA), the Chief Financial Officer and have not been audited or reviewed by the Group's auditors.
These condensed consolidated interim financial statements were approved by the Board of Directors on 30 August 2017.
The Directors take full responsibility for the preparation of these results.
3. ACCOUNTING POLICIES
The accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent
with those applied in the consolidated annual financial statements for the year ended 30 November 2016.
All subsidiaries classified as portfolio investments are accounted for at fair value through profit or loss ("FVTPL") in terms
of IAS 39 Financial Instruments: Recognition and Measurement and all associates classified as portfolio investments are
accounted for at FVTPL in terms of the exemption from applying the equity method of accounting provided in IAS
28 Investments in Associates and Joint Ventures.
4. USE OF ESTIMATES AND JUDGMENTS
Management is required to make estimates and assumptions that affect the amounts represented in the financial statements
and related disclosures. Use of available information and the application of judgment is inherent in the formation of
estimates. Actual results in the future could differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made by management in
applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied
to the consolidated annual financial statements for the year ended 30 November 2016.
5. SEGMENT INFORMATION
As the Group has only one business segment which is managed as a single pool of capital irrespective of the sector in which
the Group's investees trade, segmental reporting is not applicable.
6. DIVIDENDS
No ordinary dividends were declared during the 6 month period ended 31 May 2017. Preference share dividends are based
on 95% of prime on preference share capital of R600 million. Of the preference share dividends payable in the previous year,
R4.7 million remained unpaid as at 30 November 2016 and was paid in December 2016. Preference share dividends for the
7 month period ended 30 June 2017 of R34.7 million were paid on 30 June 2017, which included a payment to Mr. CJ Roodt,
an independent non-executive director of Stellar Capital, of R0.9 million.
7. INVESTMENTS HELD AT FAIR VALUE
All subsidiaries and associates have a principle place of business in South Africa with the exception of Stellar International,
which has a principle place of business in Mauritius.
Listed investments
% HELD % HELD
ENTITY NATURE OF OPERATIONS % HELD 30 NOVEMBER 31 MAY
31 MAY 2017 2016 2016
Torre Industrial group that distributes and rents capital
equipment and supplies aftermarket parts to the mining,
manufacturing, construction and industrial markets 56% 55% 35%
across Africa
MRI Processing and screening of coal fines, a South African
by-product of coal mining – currently under care and 14% 34% 34%
maintenance
Unlisted investment
% HELD % HELD
ENTITY NATURE OF OPERATIONS % HELD 30 NOVEMBER 31 MAY
31 MAY 2017 2016 2016
Prescient Diversified financial services group offering investment
management, fund services, administration, stock-
broking, wealth investment, retail and institutional and 49% - -
insurance products
Cadiz(1) Financial services group specialising in institutional and
personal investments 100% 100% 100%
Praxis Provider of short term finance to the panel beating
industry to address motor body repairers' working 60% 60% 51%
capital needs
IE Rentals Specialised ICT Asset Finance Solutions 50% 50% 50%
Stellar Credit Provision of management services 100% 100% 100%
Amecor Technology solutions and services in security 100% 100% -
Tellumat Technology solutions and services in manufacturing, air
traffic control systems, defence and security and turn-
key infrastructure solutions for the telecommunications 49% 49% 100%
industry
Masimong A subsidiary of a diversified BBBEE investment
Technologies holding company and the BBBEE partner of Stellar 100% prefer- 100% prefer- -
Capital relating to Tellumat ence shares(2) ence shares(2)
Stellar Specialised Credit fund specialising in mezzanine financing
Lending 100% 100% -
Stellar Holding company for international venture capital
International investments 100% 100% -
1. Cadiz is held via Friedshelf 1678 Limited, a 100% held subsidiary of Stellar Capital.
2. The preference shares held in Masimong Technologies are non-cumulative and redeemable at the instance of the issuer.
31 May 30 November 31 May
R'000 2017 2016 2016
Listed 408 858 709 478 493 879
Torre 408 858 709 478 493 879
MRI - - -
Unlisted 1 388 795 1 219 609 546 807
Prescient 697 015 - -
Cadiz 86 862 89 362 283 664
Praxis 29 671 29 671 -
IE Rentals - 5 693 -
Stellar Credit 8 802 7 934 2 500
Amecor 359 708 359 708 -
Tellumat 87 204 124 309 260 643
Masimong Technologies 91 127 114 873 -
Stellar Specialised Lending - 457 760 -
Stellar International 28 406 30 299 -
Total 1 797 653 1 929 087 1 040 686
Torre Industries Limited ("Torre")
Stellar Capital acquired an additional 1 271 801 ordinary shares in the period under review, which was settled by way of the
issue of 1 589 751 ordinary shares in the Company at R1.53 per share.
The investment has been valued at the closing quoted market price of R1.40 per share on 31 May 2017 (R2.44 per share on
30 November 2016 and R2.78 per share on 31 May 2016).
Mine Restoration Investments Limited ("MRI")
In December 2016, Stellar Capital disposed of its claims against MRI for R0.9 million and 162 912 103 shares in MRI for no
consideration. The loss on disposal of R13 million was recognised in previous financial years through negative fair value
adjustments. As a result of the disposal, Stellar Capital reduced its shareholding in MRI from 34% to 14%.
Due to the suspension of trading of MRI shares on the JSE, management does not consider the quoted market price to be
representative of fair value and has therefore not used the last traded closing quoted market price of 3 cents per share.
Management has estimated a Rnil fair value in respect of the investment (31 May 2016 and 30 November 2016: Rnil) due to
operations still being under care and maintenance as at 31 May 2017 in conjunction with the previously anticipated strategic
stake in Iron Mineral Beneficiation Services Proprietary Limited not materialising.
Prescient Holdings Proprietary Limited ("Prescient")
A 48.82% shareholding in Prescient was acquired for R697 million on 7 March 2017 and was settled by way of a cash
payment of R687.7 million and the issue of 5 425 131 Stellar Capital shares at R1.71 per share.
As at 31 May 2017, the fair value of the investment in Prescient has been estimated by applying a sum-of-the-parts valuation
to the underlying core operating units. These operating units have been valued primarily by applying a sustainable earnings
model. The P/E multiples applied to each underlying business are dependent on the nature of the operations thereof. Where
the sustainable earnings model is not considered to be the most appropriate valuation method, the underlying business has
been valued using a percentage of assets under management ("AUM").
The significant unobservable inputs included in the sum-of-the-parts valuation of Prescient are:
- P/E multiple: 8 – 15 times
- Estimated percentage of AUM applied to relevant entities: 3% - 5%
Friedshelf 1678 Limited ("Cadiz")
As at 31 May 2017, the value of the investment in Cadiz is supported by the estimated fair value of the major operating
entities. Collectively, these entities are not yet in a sustainable profit-making position and therefore management does
not consider a sustainable earnings multiple to be an appropriate valuation method. As such, management has used the
consolidated NAV of these entities as the basis for the estimated fair value. The value of the investment represents a
discount of 37% to the consolidated NAV of R137 million as per the latest financial accounts of Cadiz as at 31 May 2017.
Praxis Financial Services Proprietary Limited ("Praxis")
As at 31 May 2017 the fair value of the investment in Praxis has been estimated by management using the sustainable
earnings model, which is consistent with the valuation method used at 30 November 2016. Management considers the P/E
multiple to be the most appropriate valuation method. The valuation is based on an estimated sustainable net profit after
tax of R4.5 million and a P/E multiple of 10.9 times and the reasonability thereof was tested by reference to a discounted
cash flow model.
The Company has pledged and ceded in securitatem debiti to SSL the shares held in Praxis as a continuing general covering
collateral security in respect of the amounts owed by Praxis to Stellar Specialised Lending.
Integrated Equipment Rentals Proprietary Limited ("IE Rentals")
As at 30 November 2016, the fair value of the investment in IE Rentals was estimated by management using the sustainable
earnings model, which was considered to be the most appropriate valuation method (31 May 2016: Rnil). A P/E ratio of 10.9
times was used (which represented a discount of 24% to the listed peer group average of 14.3 times and a 5% discount to
the 3-year trailing average of 11.5 times). The sustainable net profit after tax was estimated to be R1 million which assumed
that, based on active management plans at the time of valuation, the portfolio company would operate under a refinanced
capital structure.
As the anticipated refinanced capital restructure has not materialised, management considers it prudent to revise the
valuation down to Rnil as at 31 May 2017 until such time as the weighted average cost of capital of the portfolio company
can be reduced materially.
The Company has pledged and ceded in securitatem debiti to SSL the shares held in IE Rentals as a continuing general
covering collateral security in respect of the amounts owed by IE Rentals to Stellar Specialised Lending.
Stellar Credit Proprietary Limited ("Stellar Credit")
As at 31 May 2017 the fair value of the investment in Stellar Credit has been estimated by management using the sustainable
earnings model which is consistent with the valuation method used in the previous financial year. Management considers
the P/E multiple to be the most appropriate valuation method. The valuation is based on an estimated sustainable net
profit after tax of R0.8 million and a P/E multiple of 10.7 times and the reasonability thereof was tested by reference to a
discounted cash flow model.
Amalgamated Electronic Corporation Limited ("Amecor")
As at 31 May 2017 the fair value of the investment in Amecor has been estimated by management using the sustainable
earnings model which is consistent with the valuation method used at 30 November 2016. Management considers the EV/
EBITDA multiple to be the most appropriate valuation method. The valuation is based on an estimated sustainable EBITDA
of R50.6 million and an EV/EBITDA multiple of 7.1 times and the reasonability thereof was tested by reference to a
discounted cash flow model.
Tellumat Proprietary Limited ("Tellumat")
As at 31 May 2017 the fair value of the investment in Tellumat has been estimated by management using the sustainable
earnings model, which is consistent with the valuation method used at 30 November 2016. Management considers the
EV/EBITDA multiple to be the most appropriate valuation method. The valuation is based on an estimated sustainable
EBITDA of R28.6 million and an EV/EBITDA multiple of 6.2 times and the reasonability thereof was tested by reference to a
discounted cash flow model.
Masimong Technologies Proprietary Limited ("Masimong Technologies")
As Tellumat is the only significant asset held by Masimong Technologies as at 31 May 2017, the fair value of the preference
shareholding in Masimong Technologies has been determined with reference to its share of the estimated fair value of
Tellumat (refer above for details of the valuation).
Stellar Specialised Lending Proprietary Limited ("Stellar Specialised Lending" or "SSL")
SSL is a credit fund and, as such, the investment is valued at the estimated net asset value of SSL, being primarily derived
from the value of the loan portfolio (after any impairments) less liabilities.
During the 6 month period ended 31 May 2017, SSL declared capital distributions of R456.1 million, which resulted in
negative fair value adjustments of same to the investment due to a reduction in NAV. Of the capital distributions declared,
R290.1 million was received in June 2017 subsequent to the reporting date (refer to note 8). In addition to the negative fair
value adjustments as a result of capital distributions, SSL incurred restructuring costs of R1.5 million, which resulted in an
unrealised fair value loss of same.
With effect from 31 May 2017, Stellar Specialised Lending standardised its capital structure by converting existing debenture
notes held by its investors into B Units, comprising each a B Note and a B Share. Simultaneously, Stellar Capital
reorganised the manner in which it invests in SSL by subscribing for a preference share in Cadiz Asset Management
Proprietary Limited ("CAM") with a face value of R290.1 million subsequent to the reporting date in June 2017, the
proceeds of which were invested by CAM in B Units issued by SSL of the same value. During June 2017, CAM instructed the
part-redemption of B Units to the value of R90 million which was distributed to Stellar Capital as a return of capital,
effectively reducing Stellar Capital's indirect investment in SSL to R200.1 million subsequent to the reporting date.
As at 31 May 2017, all equity of SSL had been distributed and as such, the direct equity investment has an Rnil fair value.
Stellar International Limited ("Stellar International")
Stellar International has a US Dollar functional currency. As at 31 May 2017 the fair value of the investment in Stellar
International has been estimated by management using the price of recent investment valuation method. Management
considers this to be the most appropriate valuation method as both of Stellar International's investments, LifeQ Global
Limited (denominated in US Dollars) and Tictrac Limited (denominated UK Pounds), are still in the early stages of
development with no current earnings, no positive cash flows nor any anticipated short-term earnings. The respective
acquisition prices, along with the balance of cash, have therefore been converted to Rands using the foreign exchange spot
rates on 31 May 2017.
Level 3 investments
With the exception of Torre, a listed entity, all portfolio companies are classified as Level 3. The Board of Directors has
approved the valuation methodologies used by management for Level 3 investments. The Company receives reports from
portfolio companies at each reporting date, either in the form of audited financial statements or unaudited management
accounts. These are then used in the primary valuation techniques to determine fair value or in the secondary valuation
techniques, which are used as a reasonability checks. The table below shows the reconciliation of Level 3 movements:
31 May 30 November 31 May
R'000 2017 2016 2016
Opening balance 1 219 609 1 149 368 1 149 368
Additions 697 015 1 517 347 340 079
Disposals - (180 353) -
Transfers to Level 1 - (906 970) (906 970)
Realised fair value gains - 37 382 -
Unrealised fair value (losses)/gains (69 140) 39 796 (33 170)
Fair value adjustments resulting from capital distributions (458 689) (436 961) (2 500)
Closing balance 1 388 795 1 219 609 546 807
Transfers to Level 3 occur in instances where management assesses that the quoted market price of a listed investment is
not representative fair value at the measurement date. Similarly, transfers from Level 3 occur where previously management
assessed that the quoted market price of a listed investment was not representative of fair value, but where a change in
factors results in management concluding that the quoted market price is considered to be an appropriate basis for
estimating fair value.
The table below shows the sensitivity analysis of Level 3 investments as at 31 May 2017:
Significant Reasonable Reasonable
R'000 unobservable inputs possible variation possible change
Prescient Sustainable earnings 5% 29 583 – 34 712
P/E multiple 1% 3 179
Cadiz Discount to NAV 10% 13 705
Praxis Sustainable earnings 10% 2 967
P/E multiple 20% 5 934
Stellar Credit Sustainable earnings 10% 880
P/E multiple 10% 880
Amecor Sustainable EBITDA 5% 17 985
EV/EBITDA multiple 5% 17 985
Tellumat Sustainable EBITDA 10% 8 720
EV/EBITDA multiple 5% 4 360
Masimong Technologies Sustainable EBITDA 10% 9 113
EV/EBITDA multiple 5% 4 556
Stellar International n/a n/a n/a
The fair value of IE Rentals has been estimated to be Rnil as at 31 May 2017. Currently the portfolio company has a high
weighted average cost of capital as a result of the average cost of debt being prime plus 11%. Under a refinanced capital
structure assumption with an estimated average cost of debt of prime plus 5%, the fair value of the investment would be
R4.1 million when using a consistent P/E multiple of 10.9 times.
Refer to note 10 for details of the cession and pledge of assets.
8. OTHER FINANCIAL ASSETS
31 May 30 November 31 May
R'000 2017 2016 2016
Distribution receivable 290 149 - -
South Easter fixed interest hedge fund 21 891 20 965 -
Retention funds 2 705 2 632 -
Fixed income annuities 462 1 449 -
Loan to Sheerprops 156 Proprietary Limited - - 31 500
Total 315 207 25 046 31 500
Non-current portion 225 031 23 864 -
Current portion 90 176 1 182 31 500
Total 315 207 25 046 31 500
Distribution receivable
With effect from 31 May 2017, Stellar Specialised Lending standardised its capital structure by converting existing debenture
notes held by its investors into B Units, comprising each a B Note and a B Share. Simultaneously, Stellar Capital reorganised
the manner in which it invests in SSL by receiving a capital distribution from SSL and subscribing for a preference share in
CAM with a face value of R290.1 million, the proceeds of which were invested by CAM in B Units issued by SSL of the same
value.
As at 31 May 2017 the proceeds of the capital distribution from SSL had not yet been received and as a result the balance
is recognised as a receivable in other financial assets. During June 2017, CAM instructed the part-redemption of B Units to
the value of R90 million which was distributed to Stellar Capital as a return of capital, effectively reducing Stellar Capital's
indirect investment in SSL to R200.1 million subsequent to the reporting date.
9. ORDINARY SHARE CAPITAL
The Company issued a total of 7 014 882 ordinary shares during the period under review. 5 425 131 ordinary shares were
issued in respect of the acquisition of Prescient and 1 589 751 ordinary shares were issued in respect of an additional
shareholding in Torre (refer to note 7).
10. OTHER FINANCIAL LIABILITIES
In order to finance a portion of the Prescient acquisition during February 2017, Stellar Capital entered into a bridge facility
agreement with Rand Merchant Bank (a division of FirstRand Bank Limited) ("RMB") in the amount of R225 million, of which
R22m was repaid in March 2017 and a further R103 million was repaid in June 2017. During June 2017, Stellar Capital entered
into an addendum to the Bridge Facility Agreement, to extend the repayment date of the remaining R100 million
outstanding under the bridge facility, to 30 December 2017 ("Bridge Extension"). The Bridge Extension was approved by a
special majority of preference shareholders in accordance with the preference share offering circular ("Circular").
Primarily as a result of the Bridge Extension itself and due to an unrealised downward fair value adjustment in relation to the
Torre investment, two financial covenants set out in the Circular, being the asset cover ratio and net asset value minimum
threshold, have not been satisfied as at 30 June 2017. In anticipation of the non-satisfaction of the aforementioned financial
covenants, Stellar Capital during June 2017 obtained waivers of compliance with all preference share financial covenants
at 30 June 2017, from preference shareholders holding 581 of 600 preference shares (97%) or R581 million of R600 million,
including RMB. The next preference share financial covenant measurement date is 31 December 2017.
As security for the bridge facility, Stellar Capital ceded in securitatem debiti and pledged the following:
- Shares in Prescient, Cadiz, Stellar Credit, Torre, Amecor, Tellumat, Stellar Specialised Lending and Stellar
Management Services;
- Any shareholder or loan claims;
- Proceeds from insurances;
- Bank accounts;
- Trade and other receivables; and
- Any intellectual property rights.
Interest of 1-month JIBAR plus 2.75% is charged on the bridge facility (refer to note 14).
11. FAIR VALUE ADJUSTMENTS
31 May 30 November 31 May
R'000 2017 2016 2016
Fair value adjustments on listed investments (303 052) (404 071) (427 117)
Unrealised losses (303 052) (404 071) (427 117)
Fair value adjustments on unlisted investments (68 897) 92 529 (18 808)
Realised gains – portfolio companies - 37 382 -
Unrealised (losses)/gains – portfolio companies (69 140) 53 822 (19 144)
Realised gains – other financial assets 15 1 930 336
Unrealised gains/(losses) – other financial assets 228 (605) -
Fair value adjustments resulting from capital distributions (458 689) (436 961) (2 500)
Total (830 638) (748 503) (448 425)
12. DIVIDEND REVENUE
31 May 30 November 31 May
R'000 2017 2016 2016
Capital distributions of cash 458 689 276 708 2 500
Cadiz 2 500 42 208 -
Stellar Credit - 2 500 2 500
Stellar Specialised Lending 456 189 232 000 -
Capital distributions-in-specie - 160 253 -
Cadiz - 160 253 -
Earnings distributions 30 044 43 002 6 138
Torre - 9 858 6 138
Amecor 6 000 - -
Stellar Specialised Lending 24 044 33 144 -
Other dividends received - 62 -
Total 488 733 480 025 8 638
Capital distributions 456 189 436 961 2 500
Earnings distributions 30 044 43 002 6 138
Other dividends received - 62 -
Total 488 733 480 025 8 638
13. INTEREST REVENUE
31 May 30 November 31 May
R'000 2017 2016 2016
Loan investments - 16 255 16 255
Loans to portfolio companies 356 51 728 41 960
Other financial assets 861 2 260 1 822
Cash and cash equivalents 8 641 27 945 11 712
Total 9 858 98 188 71 749
14.FINANCE COSTS
31 May 30 November 31 May
R'000 2017 2016 2016
Preference share liability interest accrual 36 770 71 543 35 193
Bridge facility interest expense 5 501 - -
Total 42 271 71 543 35 193
Interest on the preference share liability accrues at 115% of the prime interest rate. Interest of 1-month JIBAR plus 2.75% is
charged on the bridge facility.
15. RELATED PARTY TRANSACTIONS
Related party transactions are entered into in the ordinary course of business and comprise (i) transactions with portfolio
companies, including loans advanced/repaid, interest income, dividends received and amounts received or paid in respect
of services provided; and (ii) management fee expenses paid to Thunder Securitisations Proprietary Limited.
16. CONTINGENT LIABILITIES
At the reporting date, the Company has issued limited corporate guarantees in favour of the creditors of Praxis for
R47.5 million. The guarantees will expire on 30 September 2017.
17. EVENTS AFTER THE REPORTING PERIOD
The Board of Directors are not aware of any events after the reporting date and until the date of approval, which have a
material impact on the condensed consolidated interim financial statements as presented.
By order of the Board
DD Tabata
Chairman of the Board
31 August 2017
FORWARD-LOOKING STATEMENTS
Any forward-looking statements included in this results announcement involve known and unknown risks, uncertainties
and other factors, which may cause the actual results, performance or achievements of the Group to differ materially from
any future results, performance or achievements expressed or implied by such forward-looking statements. Any reference
to forecast information included in this results announcement does not constitute an earnings forecast and has not been
reviewed or reported on by the Group's external auditors.
DIRECTORS
DD Tabata (Chairman)*, CE Pettit (Chief Executive Officer),
CB de Villiers (Chief Financial Officer), MM Ngoasheng*,
L Potgieter*, CJ Roodt*, HC Steyn^, PJ van Zyl^, MVZ Wentzel*
^Non-executive
*Independent non-executive
COMPANY SECRETARY
Sean Graham
REGISTERED OFFICE
3rd Floor, The Terraces, 25 Protea Road,
Claremont, Cape Town, 7708
POSTAL ADDRESS
Suite 229, Private Bag X1005,
Claremont,
Cape Town,
7735
TRANSFER SECRETARIES
Computershare Investor Services Propietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
SPONSOR
Rand Merchant Bank (a division of First Rand Bank Limited)
15th Floor, 1 Merchant Place
Cnr Rivonia Road and Fredman Drive
Sandton, Johannesburg
2196
Date: 31/08/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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