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Reviewed consolidated interim results of eXtract Group Limited for the twelve-month period ended 30 June 2017
EXTRACT GROUP LIMITED
(FORMERLY EQSTRA HOLDINGS LIMITED)
(Incorporated in the Republic of South Africa)
(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZA0002223202
REVIEWED CONSOLIDATED INTERIM RESULTS OF EXTRACT GROUP LIMITED
FOR THE TWELVE-MONTH PERIOD ENDED 30 JUNE 2017
SALIENT FEATURES
- enX restructuring agreement became effective on 28 September 2017
- Debt conversion of R1 877 million into equity approved by shareholders on 10 August 2017
- Transformation of the Group from contract miner into an investment fund progressed well
FINANCIAL REVIEW
- The Group reported a loss for the period of R1 903 million (including impairments of R1 499 million)
compared to a loss of R2 253 million in the prior period
- R602 million of mining assets sold during the period
- All mining contracts being exited in order to monetise asset base
- Net asset value post conversion of debt will be positive R402 million at 30 June 2017
INTRODUCTION
The period under review has been both eventful and challenging for eXtract Group Limited ("eXtract" or "Group"), with
the Group transitioning into its new form and subsequently changing the strategic direction of the Group from a contract
miner to an investment fund as led by management and the new board of directors.
The disposal of Fleet Management and Logistics and Industrial Equipment divisions to enX Group Limited ("enX") was
completed and effective from 8 November 2016 and the remaining Group was supported by various mezzanine funding
instruments. ("Corporate disposal Group" /enX transaction").
These instruments were then restructured in line with the new strategy as reported in April 2017 subject to shareholder
approval which was obtained on 10 August 2017 (post period-end). At the date of this report, all suspensive conditions
to the restructure have been met with full implementation expected in early October 2017.
SALE OF END OF LIFE AND EXCESS ASSETS
On 11 July 2016, shareholders approved the sale of specified excess assets (refer to SENS announcement dated 11 July
2016 and related circular dated 10 June 2016). On 10 August 2017, shareholders approved the sale of all remaining assets
in line with the new strategy.
Asset sales have progressed well with R602 million sold during the period to 30 June 2017 with a further R358 million of
sales secured post period-end.
STRATEGIC REVIEW
Over the past 12 months the operating environment for contract mining has been particularly challenging, with the Group
continuing to report operational losses at certain operations.
The difficult operating environment was further impacted by the termination of the Boteti contract in Botswana (refer to
the SENS announcement dated 5 December 2016), together with the PPM contract proving to be suboptimal and Tharisa
Minerals Proprietary Limited ("Tharisa") notifying the Group of its intention to pursue an owner operator model.
As a result, the remaining contracts could not be responsibly sustained due to their short-term nature and therefore a
decision was made to exit or not renew any of the Group's remaining profitable contracts. All contracts are expected to
be concluded by 30 November 2017 and the Group will then focus on the monetisation of its Assets Held for Sale to settle
outstanding debt obligations and transition into a focussed mining fund.
Pursuant to the strategic review process as detailed below, a number of key outcomes have been identified and the
implementation is on track.
Key items implemented to 28 September 2017 include:
- the termination of all mining contracts with only two remaining operational contracts expected to end in November
2017;
- conclusion of the Tharisa asset sale, with funds of R278 million to flow on 5 October 2017;
- the disposal of further excess assets, amounting to R784 million over the next 12 to 18 months;
- significant reduction of eXtract's overhead costs, including a reduction in headcount;
- changes to the Board and management of eXtract; and
- Conversion of R1 877 million of enX debt into equity in mid October 2017.
It is the intention of management to apply all proceeds from asset sales to reduce banking debt, provide seed capital to
the Last Mile Fund ("LMF"), and to pay down the remaining enX debt over the next 12 to 18 months.
FUTURE STRATEGY
As communicated earlier in the year, all surplus cash generated will be utilised in the following manner:
- Initial investment of seed capital to the value of R25 million into the Last Mile Fund ("LMF");
- Settlement of banking debt of R510 million expected by end of November 2017;
- Repayment of R100 million to enX expected by February 2018;
- Further investment of R80 million into the LMF;
- Settlement of the remaining enX debt of R150 million within the next 12 to 18 months; and
- Investment of the remainder of the cash generated into the LMF or other opportunities as the need may arise.
The LMF is a fund created by Mr. Bernard Swanepoel and Mr. Clinton Halsey, eXtract Group and African Rainbow Capital
(ARC) with the purpose of making high return investments within the resources, supply and BBBEE sectors. It is expected
that the funding of such opportunities may also result in eXtract being able to utilise select assets held for sale
which may yield a better return in-use than outright sale.
ARC will seed the fund with an initial R92.5 million, eXtract with an initial R25 million, and a combined R12.5 million
by Mr Swanepoel and Mr Halsey. ARC has approved and earmarked matching financing as and when
eXtract's monetisation of assets process releases additional cash over the next 12 to 18 months.
eXtract will continue to focus on these commitments in the short to medium term:
- Reduction of external debt;
- Responsible exit of all operations; and
- Monetisation of Assets Held for Sale.
In its goal of creating shareholder value, the Board will in parallel look to further transform the company should any
attractive opportunities arise.
POST-BALANCE SHEET EVENTS
Subsequent to period-end, the following material subsequent events occurred:
- Shareholders approved the sales of all remaining assets and the conversion of the enX debt amounting to R1 877
million on 10 August 2017;
- enX conversion agreement became unconditional on 28 September 2017;
- Tharisa asset sale was unconditionally approved on 22 September 2017;
- Confirmation of the exit of the Mogalakwena and Aganang contracts at end November 2017 ;and
- Conditional support received from ARC for matching finance towards the LMF for selective
value accretive projects.
SOLVENCY AND LIQUIDITY
The board of directors is satisfied that after the conversion of the enX mezzanine debt and preference share instruments
into equity the Group is solvent for the foreseeable future, even though the liabilities are greater than the assets at
30 June 2017. The conversion agreement was unconditional at 28 September 2017 and will be implemented during early
October 2017.
The board of directors is further satisfied that the strategies to address the liquidity and refinancing risks,
including the de-gearing strategy, are on track and are being effectively addressed.
Management has been proactive in addressing the immediate liquidity concerns and the achievement of the strategic plan
which is critical to the Group meeting its repayment obligations.
DIVIDEND
The board of directors has not declared a dividend given the Group's performance and change in strategy. It is noted
that a dividend in specie was paid in November 2016 relating to the enX transaction.
GOING CONCERN
The interim results presented for the eXtract Group have been prepared on the assumption that the eXtract Group as a
whole will continue to operate as a going concern. This assumption is aligned with the unconditional agreement relating
to the enX conversion of debt which results in the Group returning to a positive net asset value position of R402
million and the current cash flow projections around asset sales and revenues. The Group has sufficient cash resources
and banking facilities to settle debts as they arise.
DIRECTOR CHANGES
The following director change has occurred since 10 April 2017:
- CK McClain was appointed as independent non-executive director
By order of the board of directors
ZB Swanepoel CS Halsey
Executive Chairman Interim CEO
28 September 2017
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at Reviewed Audited
30 June 30 June
2017 2016
Rm Rm
ASSETS
Non-current assets - 2 201
Intangible assets - 37
Property, plant and equipment - 77
Leasing assets - 2 044
Deferred tax assets - 41
Finance lease receivables - 1
Other investments and loans - 1
Current assets 1 524 9 321
Finance lease receivables - 1
Inventories 37 87
Trade and other receivables 459 952
Taxation in advance - 6
Cash and cash equivalents 136 148
Assets held for sale(2) 892 8 127
Total assets 1 524 11 522
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 891 1 839
Other reserves 326 449
Accumulated loss (3 692) (688)
(Deficit) equity attributable to owners of the parent (1 475) 1 600
Non-controlling interests - 29
Total (deficit) equity (1 475) 1 629
Non-current liabilities 1 907 2 588
Interest-bearing borrowings(3) 1 877 2 539
Deferred tax liabilities 30 49
Current liabilities 1 092 7 305
Current portion of interest-bearing borrowings(3) - 92
Trade, other payables and provisions 274 675
Current tax liabilities 13 15
Liabilities associated with assets held for sale(2) 805 6 523
Total equity and liabilities 1 524 11 522
DISCONTINUED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed
for the twelve Audited
months ended year-end
30 June 30 June
2017 2016*
Rm Rm
Discontinued operations
Revenue 5 146 9 530
Profit from operations before depreciation and 677 2 457
amortisation
Depreciation and amortisation (327) (1 906)
Profit on disposal of property, plant and - 6
equipment
Operating profit 350 557
Net foreign exchange (losses) gains (33) 1
Fair value gains recycled from equity 44 -
Net impairment of assets(6) (1 499) (1 498)
IFRS 5 adjustment (439) (719)
Loss before net finance costs (1 577) (1 659)
Net finance costs(8) (333) (606)
Finance costs (344) (893)
Finance income 11 287
Loss before taxation (1 910) (2 265)
Income tax 7 12
Loss for the period (1 903) (2 253)
Loss on sale of subsidiaries (3) -
Deconsolidation of subsidiary(7) (63) -
Total loss for the period from discontinued (1 969) (2 253)
operations
Attributable to:
Owners of the parent (1 971) (2 257)
- Loss for the period from continuing operations - -
- Loss for the period from discontinued operations (1 971) (2 257)
Non-controlling interests 2 4
Loss for the period (1 969) (2 253)
Cents Cents
Loss per share from discontinued operations(11)
- Basic and diluted loss per share (430.4) (576.8)
* Amounts re-presented to show all operations in comparative results as discontinuing operations.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Reviewed
for the twelve Audited
months ended year-end
30 June 30 June
2017 2016
Rm Rm
Loss for the period (1 969) (2 253)
Total other comprehensive (loss) income for the period, net of taxation
Items that may be reclassified subsequently to profit or loss (71) 132
Exchange differences on translation of foreign subsidiaries (71) 124
Net fair value gain on cash flow hedges and other fair value reserves - 8
Total comprehensive loss for the period, net of taxation (2 040) (2 121)
Attributable to:
Owners of the parent (2 042) (2 125)
Non-controlling interests 2 4
(2 040) (2 121)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Retained Non-
Stated Other (loss) controlling
capital reserves income interest Total
Rm Rm Rm Rm Rm
Balance at 1 July 2015 (Audited) 1 839 330 1 569 32 3 770
Total comprehensive loss for the period - 132 (2 257) 4 (2 121)
Loss for the period - - (2 257) 4 (2 253)
Other comprehensive income for the period, net of taxation - 132 - - 132
Net share-based payment movement - 5 - - 5
Dividends paid - - - (7) (7)
Vesting of share incentive scheme - (1) - - (1)
Goodwill reserve arising on additional interest in subsidiary - (16) - - (16)
Deferred taxation directly in equity - (1) - - (1)
Balance at 30 June 2016 (Audited) 1 839 449 (688) 29 1 629
Total comprehensive loss for the period - (71) (1 971) 2 (2 040)
Loss for the period - - (1 971) 2 (1 969)
Other comprehensive loss for the period, net of taxation - (71) - - (71)
Vesting of share incentive scheme - (4) - - (4)
New issue of stated capital* 37 - - - 37
Conversion of treasury shares 15 - - - 15
Dividend paid - - - (2) (2)
Dividend in specie - - (1 022) - (1 022)
Realisation of translation reserve - (32) - - (32)
Reversal of share-based payment reserve - (16) 16 - -
Transfer within categories of reserves - 22 (22) - -
Disposal of subsidiary - (27) - (29) (56)
Deferred taxation directly in equity - 5 (5) - -
Balance at 30 June 2017 (Reviewed) 1 891 326 (3 692) - (1 475)
* On 16 November 2016 101 400 000 shares were issued at R1 each. These were fair valued at R37 million.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed
for the twelve Audited
months ended year-end
30 June 30 June
2017 2016
Rm Rm
Cash flows from operating activities
Cash generated from operations before working capital movements 814 2 606
Working capital movements 173 827
Cash generated from operations 987 3 433
Finance income 11 45
Finance costs (344) (651)
Taxation paid (46) (101)
Net cash flows from operating activities 608 2 726
Cash flows from investing activities
(Acquisition) disposal of businesses (11) 42
Net capital expenditure (6) (2 295)
Movement in finance lease receivables 36 (6)
Proceeds on disposal of other investments and loans - 2
Net cash flows from investing activities 19 (2 257)
Cash flows from financing activities
Repurchase of non-controlling interest - (16)
Issue of shares 37 -
Conversion of Treasury Shares 15 -
Dividends paid to minorities (2) (7)
Net decrease in interest-bearing borrowings (833) (324)
Net cash flows from financing activities (783) (347)
Net (decrease) increase in cash and cash equivalents (156) 122
Effect of exchange rate translation on cash and cash equivalents (19) 9
Derecognition of cash and cash equivalents (23) -
Cash and cash equivalents at beginning of period 334 203
Cash and cash equivalents at end of period 136 334
NOTES
(1) Basis of preparation
The reviewed condensed consolidated interim financial statements for the twelve months ended 30 June 2017 have been
prepared in accordance with and containing the information required by IAS 34: Interim Financial Reporting, as well as
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by Financial Reporting Standards Council, the JSE Limited Listings Requirements and the South African Companies
Act. The accounting policies and their application are consistent, in all material respects, with those detailed in
eXtract's (previously Eqstra Holdings Limited) 2016 annual consolidated financial statements, except for the adoption on
1 July 2016 of those new, revised and amended standards and interpretations detailed therein.
The adoption of the new and amended statements of generally accepted accounting practice, interpretations of statements
of generally accepted accounting practice, and improvements project amendments did not have a material impact on the Group.
Reviewed Audited
30 June 30 June
2017 2016
Rm Rm
(2) Assets classified as held for sale
Property, plant and equipment 65 -
Leasing assets 827 809
Corporate transaction disposal group - 7 318
892 8 127
Liabilities directly associated with assets held for sale
Interest-bearing borrowings 510 238
Current taxation liabilities 45 74
enX Mezzanine debt 250 -
Corporate transaction disposal group - 6 211
805 6 523
Assets held for sale comprise assets in South Africa of R767 million (June 2016: R298 million) and assets in Mozambique
of R125 million (June 2016: R511 million).
Of the R892 million of assets held for sale, sales amounting to R358 million have been concluded post period end, based
on shareholder's approval obtained on 10 August 2017. Management believe that the sales of the remainder of the assets
are highly probable within the next 12 months.
Corporate transaction disposal statement of financial position
Reviewed
disposal
statement
of financial
position Audited
8 November 30 June
2016 2016
Rm Rm
ASSETS
Intangible assets 3 -
Property, plant and equipment 257 273
Leasing assets 5 056 5 573
Other investments and loans 30 12
Finance lease receivables 2 36
Inventories 853 819
Trade and other receivables and derivatives 646 883
Operating assets 6 847 7 596
Taxation in advance 58 23
Cash and cash equivalents 75 186
Unallocated loss on sale from the corporate transaction (487) (487)
Total assets 6 493 7 318
LIABILITIES
Trade and other payables and derivatives 1 153 1 194
Interest-bearing borrowings 6 575 6 854
Loans due from Contract Mining entities (2 853) (2 403)
Operating liabilities 4 875 5 645
Deferred tax liabilities 411 498
Current tax liabilities 114 68
Total liabilities 5 400 6 211
The sale of the Fleet Management and Logistics division and the Industrial Equipment division to enX Group Limited took
place on 8 November 2016. The disposal balance sheet is disclosed above.
As part of the corporate transaction, subsidiaries of eXtract in the Fleet Management and Logistics and Industrial
Equipment divisions were transferred to enX on the effective date. The assets and associated liabilities were disclosed
as held for sale at 30 June 2016.
(3) Interest-bearing borrowings
Reviewed Audited
30 June 30 June
2017 2016
Rm Rm
Facility breakdown
External debt - 236
enX Mezzanine debt 1 277 -
Preference shares 600 -
Intercompany loans - 2 395
1 877 2 631
The enX transaction was executed for a consideration of ordinary share capital of R101 million (R37 million fair value),
preference share capital of R600 million and subordinated mezzanine debt of R1 656 million. The total debt and
preference share capital at 30 June amounts to R2 127 million, of which R 1 877 million was approved for conversion to
equity on 10 August 2017. The remaining debt will be settled from asset sales.
Reviewed Audited
30 June 30 June
2017 2016
Rm Rm
(4) Capital commitments - 429
- Contracted - 50
- Authorised by directors but not contracted - 379
Guarantees 10 10
(5) Fair value hierarchy disclosures
There are no financial asset and liabilities that are recognised and subsequently measured at fair value, analysed by
valuation technique.
Reviewed Audited
30 June 30 June
2017 2016*
Rm Rm
(6) Impairment of assets
Impairment of leasing assets 1 433 1 351
Impairment of intangible assets 42 11
Impairment of restricted cash 18 -
Impairment of property, plant and equipment 6 77
Impairment of investments and loans - 59
Total impairments 1 499 1 498
* Amounts re-presented to show comparative results from discontinued operations.
(7) Deconsolidation of subsidiary
Discontinued operations
Gain on deconsolidation of subsidiary 156 -
Provision for liabilities (Net of expected proceeds) (67) -
Impairment of inter-company loans (152) -
Total (63) -
The Karowe contract in Botswana was terminated and money withheld which resulted in the Botswana entity being placed
into liquidation. The Group is therefore no longer in control of the subsidiary and it has been deconsolidated.
A deconsolidation gain was offset by the relevant impairment on inter company loans and provision for liabilities for
which guarantees were provided.
(8) Segemental disclosures
The results consist of two segments being the Contract Mining division and the corporate disposal group being the
previous Eqstra entities being Eqstra Fleet management and Eqstra Industrial Equipment.
Revenue 5 146 9 530
Contract Mining 3 233 2 964
Corporate Disposal Group 1 913 6 566
Operating profit 350 557
Contract Mining (225) 151
Corporate Disposal Group 575 406
Loss before taxation (1 910) (2 265)
Contract Mining (1 910) (620)
Corporate Disposal Group - (1 645)
The remaining balance sheet consists of only the Contract Mining division.
(9) Discontinued operations
All operations have been classified as discontinued in line with the Group Strategy.
Cents Cents
(10) Net (deficit) asset value per share attributable to owner of the parent (322.0) 394.6
(11) Headline loss per share
Discontinued operations
- Basic and diluted headline loss per share (6.6) (29.9)
Reconciliation of discontinued headline operations
Basic and diluted loss per share (430.4) (576.8)
Profit on sale of property, plant and equipment and leasing assets - (1.5)
Net impairments of assets 327.2 382.8
IFRS 5 fair value adjustment 95.8 183.7
Loss on sale of subsidiaries 0.7 -
Deconsolidation of subsidiary 13.8 -
Taxation effect ( 13.7) (18.1)
Discontinued headline loss per share (6.6) (29.9)
Million Million
(12) Weighted average number of shares in issue for
the period
Number of ordinary shares
- in issue 506.9 405.5
- in issue (net of treasury shares) 498.6 391.3
Weighted average number of ordinary shares in 458.1 391.3
issue during the period
- opening shares (net of treasury shares) 391.3 391.1
- additional shares issued 63.1 -
- disposal of treasury shares 3.7 0.2
Basic and diluted weighted average number of 458.1 391.3
ordinary shares
(13) Significant judgements and estimates
The valuation of the equipment impaired was based on market values on a normalised sales basis and reflects management's
best estimate of the recoverable amount.
(14) The auditors
Deloitte & Touche have issued their unmodified review report on the second reviewed condensed consolidated interim
financial statements for the interim period for the twelve months ended 30 June 2017. The review was conducted in
accordance with International Standards on Review Engagements.
A copy of their ISRE 2410 review report is available for inspection at eXtract's registered office. Any reference to
future financial performance included in this announcement, has not been reviewed or reported on by eXtract's auditors.
REGISTERED OFFICE AND BUSINESS ADDRESS
61 Maple Street, Pomona, Kempton Park, 1619. PO Box 1050, Bedfordview, 2008
NON-EXECUTIVE DIRECTORS
JL Serfontein
SA Nkosi*, OM Matloa*, CK McClain*
(*Independent)
EXECUTIVE DIRECTORS
ZB Swanepoel (Executive chairman),
CS Halsey (Interim CEO),
DAG Chadinha (CFO)1 CA(SA)
((1)Preparer of financial results)
COMPANY SECRETARY
L Moller
TRANSFER SECRETARIES
Computershare Investor Services
Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
PO Box 61051, Marshalltown, 2107
SPONSOR
Java Capital
Date: 28/09/2017 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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