Wrap Text
Unaudited Condensed Consolidated Interim Results
for the 6 month period ended 31 August 2017
VUNANI LIMITED
Incorporated in the Republic of South Africa
Registration number: 1997/020641/06
JSE code: VUN
ISIN: ZAE000163382
Listed on AltX on the JSE Limited ("JSE")
("Vunani" or "the company" or "the group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
for the 6 month period ended 31 August 2017
The Unaudited Condensed Consolidated Interim Results
have been prepared under the supervision of the Chief
Financial Officer, Tafadzwa Mika CA(SA).
SALIENT FEATURES
REVENUE FROM CONTINUING OPERATIONS OF
R160.1 million
compared to R72.7 million at 31 August 2016
PROFIT FOR THE PERIOD OF
R16.2 million
compared to R15.4 million at 31 August 2016
BASIC EARNINGS PER SHARE
8.5c
compared to 13.4c at 31 August 2016
Condensed consolidated statement of comprehensive income
for the 6 month period ended 31 August 2017
Re-presented*
Unaudited Unaudited
31 August 31 August
Figures in R'000 Note 2017 2016
Continuing operations
Revenue 1 160 115 72 743
Other income 1 780 339
Investment revenue 811 1 603
Interest received from investments 38 873
Net profit on disposal of assets - -
Fair value adjustments and impairments 2 6 590 3 010
Equity-accounted earnings (net of income tax) 620 13 250
Operating expenses (147 644) (73 378)
Results from operating activities 22 310 18 440
Finance income 1 906 744
Finance costs (5 940) (893)
Net finance costs (4 034) (149)
Profit before income tax 18 276 18 291
Income tax expense (2 611) (3 951)
Profit from continuing operations 15 665 14 340
Discontinued operations
Profit from discontinued operations (net of income tax) 3 516 1 052
Profit for the period 16 181 15 392
Other comprehensive income
Items that are or may be reclassified to profit or loss
Exchange differences on translating foreign operations (339) (674)
Total comprehensive income for the period 15 842 14 718
Profit from continuing operations attributable to:
Equity holders of Vunani Limited 12 775 13 648
Non-controlling interest 2 890 692
15 665 14 340
Profit for the period attributable to:
Equity holders of Vunani Limited 13 291 14 700
Non-controlling interest 2 890 692
16 181 15 392
Total comprehensive income for the period attributable to:
Equity holders of Vunani Limited 13 084 14 361
Non-controlling interest 2 758 357
15 842 14 718
Basic and diluted earnings per share (cents) ** 8.5 13.4
Basic and diluted earnings per share from continuing operations (cents) 8.2 12.5
Basic and diluted earnings per share from discontinued operations (cents) 0.3 0.9
Basic and diluted headline earnings per share (cents) ** 4 7.8 11.5
Basic and diluted headline earnings per share from continuing operations (cents) 8.2 12.5
Basic and diluted headline loss per share from discontinued operations (cents) (0.4) (1.0)
* Comparatives have been re-presented to show the effect of the discontinued operations (refer to note 3).
** The decrease in earnings per share is attributable to the increase in the weighted average number of shares in issue
of 156.0 million (2016: 109.0 million).
Condensed consolidated statement of financial position
at 31 August 2017
6 months 12 months
Unaudited Audited
31 August 28 February
Figures in R'000 Note 2017 2017
Assets
Property, plant and equipment 9 836 10 535
Goodwill 139 766 139 766
Intangible assets 93 000 98 613
Investments in and loans to associates 84 140 84 242
Other investments 5 39 804 38 109
Deferred tax asset 45 629 47 280
Other non-current assets 29 802 29 802
Total non-current assets 441 977 448 347
Other investments 5 1 121 4 291
Other current assets - 1 712
Taxation prepaid 1 317 1 343
Trade and other receivables 66 526 52 702
Accounts receivable from trading activities 283 420 693 427
Trading securities 356 183
Cash and cash equivalents 34 728 82 284
Total current assets 387 468 835 942
Total assets 829 445 1 284 289
Equity
Stated capital 6 704 438 700 022
Treasury shares (15 480) (15 915)
Share-based payments reserve 18 134 16 100
Foreign currency translation reserve (2 728) (2 521)
Accumulated loss (335 725) (340 886)
Equity attributable to equity holders of Vunani Limited 368 639 356 800
Non-controlling interest (1 681) (4 021)
Total equity 366 958 352 779
Liabilities
Other financial liabilities 5 73 870 107 714
Deferred tax liabilities 27 402 31 311
Total non-current liabilities 101 272 139 025
Other financial liabilities 5 37 794 35 580
Taxation payable 6 733 8 327
Trade and other payables 34 009 57 615
Accounts payable from trading activities 282 679 688 819
Trading securities - 1 934
Bank overdraft - 210
Current liabilities 361 215 792 485
Total liabilities 462 487 931 510
Total equity and liabilities 829 445 1 284 289
Shares in issue (000s) 6 164 056 161 296
Net asset value per share (cents) 224.7 221.2
Net tangible asset value per share (cents) 82.8 73.4
Net asset value per share (cents)
Equity attributable to equity holders of Vunani Limited, divided by the total shares in issue, including treasury
shares.
Net tangible asset value per share (cents)
Equity attributable to equity holders of Vunani Limited, excluding goodwill and intangible assets divided by the total
shares in issue, including treasury shares.
Condensed consolidated statement of changes in equity
for the 6 month period ended 31 August 2017
Total
Share- Foreign attribu-
based currency table Non-
Stated Treasury payment translation Accumulated to equity controlling Total
Figures in R'000 capital shares reserve reserve loss holders interest equity
Balance as at 29 February 2016 - Audited 624 888 (15 571) 12 871 (1 233) (365 474) 255 481 1 670 257 151
Total comprehensive income for the period
Profit for the period - - - - 14 700 14 700 692 15 392
Other comprehensive income for the period - - - (339) - (339) (335) (674)
Total comprehensive income for the period - - - (339) 14 700 14 361 357 14 718
Transactions with owners, recorded directly in equity
Share-based payments - - 1 587 - - 1 587 - 1 587
Dividends paid - - - - (503) (503) - (503)
Capitalisation share issue award 6 802 (344) - - (6 458) - - -
Acquisition of non-controlling interests - - - - (6 455) (6 455) 1 006 (5 449)
Total transactions with owners 6 802 (344) 1 587 - (13 416) (5 371) 1 006 (4 365)
Balance as at 31 August 2016 - Unaudited 631 690 (15 915) 14 458 (1 572) (364 190) 264 471 3 033 267 504
Total comprehensive income for the period
Profit for the period - - - - 23 381 23 381 1 265 24 646
Other comprehensive income for the period - - - (949) - (949) (620) (1 569)
Total comprehensive income for the period - - - (949) 23 381 22 432 645 23 077
Transactions with owners, recorded directly in equity
Share-based payments - - 1 642 - - 1 642 - 1 642
Issue of shares 68 332 - - - - 68 332 - 68 332
Acquisition of non-controlling interests - - - - (77) (77) 77 -
Business combination - - - - - - (7 775) (7 775)
Total transactions with owners, recorded directly in equity 68 332 - 1 642 - (77) 69 897 (7 698) 62 199
Balance as at 28 February 2017 - Audited 700 022 (15 915) 16 100 (2 521) (340 886) 356 800 (4 021) 352 779
Total comprehensive income for the period
Profit for the period - - - - 13 291 13 291 2 890 16 181
Other comprehensive income for the period - - - (207) - (207) (132) (339)
Total comprehensive income for the period - - - (207) 13 291 13 084 2 758 15 842
Transactions with owners, recorded directly in equity
Share-based payments - - 2 469 - - 2 469 - 2 469
Dividends paid - - - - (8 241) (8 241) (524) (8 765)
Transfer between reserves - 435 (435) - 435 435 - 435
Issue of shares 4 416 - - - - 4 416 - 4 416
Transactions with equity holders - - - - (218) (218) - (218)
Acquisition of non-controlling interests - - - - (106) (106) 106 -
Total transactions with owners, recorded directly in equity 4 416 435 2 034 - (8 130) (1 245) (418) (1 663)
Balance as at 31 August 2017 - Unaudited 704 438 (15 480) 18 134 (2 728) (335 725) 368 639 (1 681) 366 958
DIVIDENDS
Unaudited Audited
31 August 29 February
Figures in R'000 2017 2017
Ordinary dividend paid
Ordinary dividend number 3 of 5.2 cents per share 8 241 -
(net of treasury shares held) paid to shareholders
on 28 July 2017 (2016: Nil)
Capitalisation share issue award (with cash
alternative)
A scrip dividend of 4 shares for every 100 shares - 6 458
held (4.3 million shares) was issued on 26 August
2016 (net of treasury shares)
As an alternative to the capitalisation share issue award, shareholders were able to elect to - 503
receive a gross dividend of 6c per share. For those shareholders electing to receive cash the
dividend was paid to ordinary shareholders on 29 August 2016 (net of treasury shares held)
8 241 6 961
Condensed consolidated statement of cash flows
for the 6 month period ended 31 August 2017
6 months 12 months 6 months
Unaudited Audited Unaudited
31 August 28 February 31 August
Figures in R'000 Note 2017 2017 2016
Cash flows from operating activities
Net cash utilised by operating activities 7 (4 944) (171) (6 976)
Investment revenue received 811 1 624 1 603
Finance income received 1 906 2 784 768
Finance costs paid (3 904) (1 220) (289)
Dividends paid to shareholders (8 241) (503) (503)
Dividends paid to non-controlling interest (524) - -
Income tax paid (3 859) (10 278) (1 908)
Net cash utilised by operating activities (18 755) (7 764) (7 305)
Cash flows from investing activities
Proceeds on disposal of business 1 050 494 494
Acquisition of property, plant and equipment (1 212) (2 161) (846)
Proceeds on disposal of property, plant and equipment - 6 -
Proceeds from repayment of loans to associates 936 606 481
Increase in investment and loans to associates (213) (1 664) (271)
Proceeds from repayment of loans in other non-current assets 1 712 8 8
Acquisition of other investments (2 000) (298) (1 332)
Proceeds on disposal of other investments 8 510 6 990 6 724
Net cash inflow from investing activities 8 783 3 981 5 258
Cash flows from financing activities
Proceeds on issues of shares - 51 066 -
Increase in other financial liabilities 1 024 70 17
Repayments of other financial liabilities (38 398) (2 064) -
Net cash (outflow)/inflow from financing activities (37 374) 49 072 17
Net (decrease)/increase in cash and cash equivalents (47 346) 45 289 (2 030)
Cash acquired in business combination - 20 013 -
Cash disposed of during the year - (323) -
Cash and cash equivalents at the beginning of the period 82 074 17 095 17 095
Total cash and cash equivalents at end of the period 34 728 82 074 15 065
Segmental reporting
for the 6 month period ended 31 August 2017
The fund management, advisory services and private equity segments are geographically located in South Africa and, on a
smaller scale, in Zimbabwe and Malawi. The institutional securities broking and private wealth and investments segments
are geographically located in South Africa.
Reportable
segment
profit/(loss) Total Total
Revenue after tax assets liabilities
Unaudited Unaudited Unaudited Unaudited
31 August 31 August 31 August 31 August
Figures in R'000 2017 2017 2017 2017
Continuing operations
Fund management 31 964 1 469 64 012 (15 920)
Asset administration 60 892 4 651 234 713 (115 215)
- Advisory services 2 396 (141) 2 644 (794)
Investment
- Institutional securities broking 26 263 (1 478) 300 416 (298 003)
Private equity 38 600 11 164 226 389 (31 453)
160 115 15 665 828 174 (461 385)
Discontinued operations
Private wealth and investments* 1 296 516 1 271 (1 102)
Total 161 411 16 181 829 445 (462 487)
Reportable
segment
profit/(loss) Total Total
Revenue after tax assets liabilities
Unaudited Unaudited Unaudited Unaudited
31 August 31 August 31 August 31 August
Figures in R'000 2016 2016 2016 2016
Continui
Fund management 33 042 5 007 27 232 (4 954)
Asset administration - 2 148 56 744 (5 448)
- Advisory services 2 973 (412) 3 352 (1 461)
Investment banking -
- Institutional securities broking 32 364 2 461 710 352 (716 952)
Private equity 4 364 5 136 234 937 (36 298)
72 743 14 340 1 032 617 (765 113)
Discontinued operations
Private wealth and investments* 2 262 1 052 - -
Total 75 005 15 392 1 032 617 (765 113)
* During the period, management sold the private wealth and investments business. The segment has been classified as a discontinued operation.
Notes to the condensed consolidated interim financial statements
(all figures in R´000)
BASIS OF PREPARATION
The condensed consolidated interim financial statements are prepared in accordance with International Financial
Reporting Standard, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council, the Listings
Requirements of the JSE Limited and the requirements of the Companies Act of South Africa. The accounting policies
applied in the preparation of these interim financial statements are in terms of International Financial Reporting
Standards and are consistent with those applied in the previous annual financial statements.
The unaudited condensed consolidated interim financial statements have been presented on the historical cost basis,
except for other investments and certain other financial liabilities, which are fair valued. These unaudited condensed
consolidated interim financial statements are presented in South African Rand, rounded to the nearest thousand, which is
the functional and presentation currency of the parent company.
The unaudited condensed consolidated interim financial statements of the group at and for the period ended 31 August
2017 comprise the company and its subsidiaries (the 'group') and the group's interests in associates. Results of
subsidiaries and associates are included from the effective date of acquisition up to the effective date of disposal.
All significant transactions and balances between group enterprises are eliminated on consolidation.
Comparatives on the statement of comprehensive income have been re-presented to show the effect of the discontinued
operations (refer to note 3).
NOTES
1. Revenue
Revenue includes trading revenue and fees earned from advisory services, brokerage, asset management, asset
administration and client service fees.
Fair value adjustments and impairments
Unaudited Unaudited
31 August 31 August
2. Figures in R'000 2017 2016
Fair value adjustment on financial assets and liabilities designated at fair value through profit or loss 6 590 2 527
Impairment reversal of loans in other non-current assets - 8
Impairment reversal on loans to associates - 475
6 590 3 010
3. Discontinued operations
A strategic decision was made in June 2017 to dispose of the group's private wealth and investments business. This
culminated in the group disposing of the client book that was held in Vunani Wealth and Investments Proprietary Limited
("VWI"). The sale of the business included the transfer of VWI's executive management's employment contracts to the
purchaser. As the disposal related to a separate line of the group's business, the related activities have been
presented as a discontinued operation.
The comparative information in the August 2016 consolidated statement of comprehensive income has been re-presented to
disclose the discontinued operations separately from continuing operations.
Unaudited Unaudited
31 August 31 August
2017 2016
Revenue 1 296 2 262
Profit on disposal of assets 1 500 2 806
Operating expenses (2 280) (4 016)
Profit before income tax 516 1 052
Income tax expense - -
Profit for the period 516 1 052
Profit for the period attributable to:
Equity holders of Vunani Limited 516 1 052
Effect on basic and diluted earnings per share (cents) 0.3 0.9
Effect on basic and diluted headline loss per share (cents) (0.4) (1.0)
Cash flows from discontinued operations
Net cash utilised by operating activities (313) -
Net cash inflow from investing activities 1 050 -
Net cash outflow from financing activities (835) -
Net cash outflow for the period (98) -
4. Reconciliation of headline earnings for the period
Unaudited Unaudited
31 August 31 August
Figures in R'000 2017 2016
Profit for the period attributable to equity holders of Vunani 13 291 14 700
Adjusted for:
Discontinued operations
Profit on disposal of discontinued operations (1 500) (2 806)
Taxation 336 629
12 127 12 523
Headline earnings per share (cents) 7.8 11.5
Basic and diluted headline earnings per share from continuing 8.2 12.5
operations
Basic and diluted headline loss per share from discontinued (0.4) (1.0)
operations
5. Other investments and other financial liabilities
Unlisted investments are fair valued annually by the directors. Listed investment prices are determined with reference
to the share price at period-end.
Both listed and unlisted investments are designated at fair value through profit or loss. Financial liabilities are
either accounted for at amortised cost or designated at fair value through profit or loss. The group designates certain
financial liabilities at fair value through profit or loss upon initial recognition.
Ring-fenced special purpose entities have historically been used to house the group's geared equity investments and any
financial liabilities that relate to such investments. Financial assets and liabilities that arise in terms of these
ring-fenced structures are both fair valued through profit or loss in terms of IAS 39 Financial instruments: Recognition
and measurement.
The reason for the above designation was to reduce the measurement inconsistency on ring-fenced liabilities relative to
the assets that they funded. Because the liability to lenders is limited to the fair value of the assets, if the assets
were fair valued through profit or loss and the liabilities carried at amortised cost, inconsistency would arise that
would not reflect the true liability of the group. In order to eliminate this inconsistency on ring-fenced structures,
these specific liabilities are designated at fair value through profit or loss on initial recognition. Financial
liabilities at fair value include capitalised interest and attributable profit participation.
6. Authorised and issued stated capital
The authorised stated capital at 31 August 2017 was 500 million ordinary shares of no par value (2016: 200 million
ordinary shares of no par value). 164 055 728 shares were in issue at 31 August 2017 (2016: 161 296 081).
Unaudited Audited Unaudited
31 August 28 February 31 August
Weighted average number of ordinary shares (000s) 2017 2017 2016
Issued ordinary shares at the beginning of the period 161 296 114 665 114 665
Effect of share issue 318 17 203 35
Effect of own shares held (5 567) (5 473) (5 366)
Weighted average number of shares in issue during the period 156 047 126 395 109 334
Number of shares in issue at the end of the period (000s) 164 056 161 296 118 916
Dilutive weighted average number of ordinary shares (000s)
Issued ordinary shares at the beginning of the period 161 296 114 665 114 665
Effect of share issue 318 17 203 35
Effect of own shares held (5 567) (5 473) (5 366)
Effect of dilutive shares 1 080 669 246
Diluted weighted average number of shares in issue during the period 157 127 127 064 109 580
Number of shares in issue at the end of the period (000s) 164 026 161 296 118 916
The shares issued as part of the employee share incentive scheme could potentially dilute basic earnings in the future.
In the current period, the employee shares have a dilutive effect. The impact of the potential dilutive shares is
immaterial.
7. Net cash utilised by operating activities
6 months 12 months 6 months
Unaudited Audited Unaudited
31 August 28 February 31 August
Figures in R'000 2017 2017 2016
Profit before income tax expense from continuing operations 18 276 48 676 18 291
Profit before income tax expense from discontinued operations 516 - 1 052
Adjusted for:
Depreciation of property, plant and equipment 1 603 1 297 387
Profit on disposal of subsidiaries (1 500) (2 806) (2 806)
Profit on disposal of associates - (12 153) -
Equity-accounted earnings (net of income tax) (620) (23 305) (13 250)
Profit on disposal of assets - (47) -
Fair value adjustments and impairments (6 590) (9 247) (3 010)
Derecognition of deferred payment - (3 580) -
Movement in impairment allowance - 1 097 -
Amortisation of intangible assets 5 612 2 055 -
Share-based payments expense 2 034 3 229 1 587
Foreign currency translation loss 30 541 316
Lease straight-line adjustment (124) (301) (161)
Interest received from investments and finance income (1 944) (4 430) (1 617)
Investment revenue (811) (1 624) (1 603)
Finance costs 5 940 3 866 893
Changes in working capital:
(Decrease)/increase in trading securities (2 107) 1 882 (158)
Increase in trade and other receivables (11 830) (22 944) (12 862)
(Decrease)/increase in trade and other payables (18 878) 18 139 4 164
Decrease/(increase) in accounts receivable and payable from trading activities 5 449 (516) 1 801
Cash utilised by operating activities (4 944) (171) (6 976)
8. Financial instruments carried at fair value
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the
transfer of a liability in an orderly transaction between market participants at the measurement date. Underlying the
definition of fair value is a presumption that an entity is a going concern without any intention or need to liquidate,
to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is not,
therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distressed
sale.
The existence of published price quotations in an active market is the best evidence of fair value and, where they
exist, they are used to measure the financial asset or financial liability. A market is considered to be active if
transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. Financial
instruments fair valued using quoted prices would generally be classified as level 1 in terms of the fair value
hierarchy.
Where a quoted price does not represent fair value at the measurement date or where the market for a financial
instrument is not active, the group establishes fair value by using valuation techniques. These valuation techniques
include reference to the value of the assets of the underlying business, earnings multiples (e.g. unlisted investments),
discounted cash flow analysis (e.g. unlisted investments, loans and advances) and various option pricing models.
Inputs typically used in valuation techniques include discount rates, expected future cash flows, dividend yields,
earnings multiples, volatility, equity prices and commodity prices.
Valuation methodologies and techniques applied for level 3 financial instruments include a combination of discounted
cash flow analysis, application of earnings multiples on sustainable after tax earnings and current and projected net
asset values to determine overall reasonability. The valuation technique applied to specific financial instruments
depends on the nature of the financial instrument and the most appropriate valuation technique is determined on that
basis.
After the valuations of the unlisted financial assets and liabilities are performed, these are presented to the group's
investment committee for independent review. All significant valuations are approved by the investment committee.
The valuation methodologies, techniques and inputs applied to the fair value measurement of the financial instruments
have been applied in a manner consistent with that of the previous financial period.
Unaudited Audited
31 August 28 February
2017 2017
Fair values Carrying Carrying
Figures in R'000 amount Fair value amount Fair value
Financial assets measured at fair value
Designated at fair value through profit or loss on initial recognition 67 045 67 045 68 520 68 520
Trading securities 356 356 183 183
Financial assets not measured at fair value
Loans to associates 22 831 17 570 22 953 20 761
Loans in other non-current assets 3 682 3 993 5 394 5 168
93 914 88 964 97 050 94 632
Financial liabilities measured at fair value
Designated at fair value through profit or loss on initial recognition (6 610) (6 610) (6 610) (6 610)
Trading securities - - (1 934) (1 934)
Financial liabilities not measured at fair value
Other financial liabilities (105 054) (102 457) (136 684) (139 172)
(111 664) (109 067) (145 228) (147 716)
Total (17 750) (20 103) (48 178) (53 084)
The carrying amounts of cash and cash equivalents, accounts receivable from trading activities, trade and other
receivables, bank overdraft, accounts payable from trading activities and trade and other payables reasonably
approximate their fair values, due to their short-term nature.
Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair
value measurements are categorised into different levels in the fair value hierarchy based on inputs to the valuation
techniques used.
The different levels are defined as follows:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Unaudited 31 August 2017
Figures in R'000 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value through profit or loss 23 105 - 43 940 67 045
Financial assets measured at fair value 356 - - 356
Financial assets at amortised cost - - 21 563 21 563
Financial liabilities designated at fair value through profit or loss - - (6 610) (6 610)
Financial liabilities at amortised cost - - (102 457) (102 457)
23 461 - (43 564) (20 103)
Audited 28 February 2017 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value through profit or loss 33 910 - 34 610 68 520
Financial assets measured at fair value 183 - - 183
Financial assets at amortised cost - - 25 929 25 929
Financial liabilities designated at fair value through profit or loss (1 934) - (6 610) (8 544)
Financial liabilities at amortised cost - - (139 172) (139 172)
32 159 - (85 243) (53 084)
Unaudited Audited
31 August 28 February
Figures in R'000 2017 2017
Level 3 comprises:
Balance at beginning of period 28 000 23 314
Total gains or losses in profit or loss (disclosed in fair value adjustments and impairments) 9 008 4 686
Purchases, transfers, sales, issues and settlements 322 -
Balance at end of the period 37 330 28 000
A change of 10% in the unobservable inputs of the investment and liability at the reporting date would have
increased/(decreased) equity and profit or loss by the amount shown below. This analysis assumes that all other
variables remain constant.
Unaudited Audited
31 August 28 February
Effect on statement of comprehensive income (profit/(loss)) and equity before taxation 2017 2017
Net asset value
10% increase 2 281 666
10% decrease (2 191) (1 492)
Free cash flow
10% increase (3 905) (6 477)
10% decrease 4 274 6 850
Foreign exchange movement
10% increase 799 1 333
10% decrease (512) (190)
9. Events after reporting date
On 7 September 2017, Vunani Limited approved the issue of 1.1 million Vunani ordinary shares for cash. The shares were
issued at a price of 252 cents per share. The gross proceeds amounted to R2.7 million. The ordinary shares were issued
and allotted on 12 September 2017.
10. Dividends
Ordinary dividend
A dividend of 5.2 cents (4.16 cents net of dividend withholding tax) per share was paid to ordinary shareholders on 28
July 2017. Total cash of R8.2 million (net of treasury shares held) was paid to ordinary shareholders.
11. Going concern
The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns
and have no reason to believe the businesses will not continue as going concerns for the foreseeable future.
OVERVIEW AND PROSPECTS
The reporting period was dominated by the country going into a technical recession after two consecutive quarters of negative
economic growth. The economy did recover slightly in the second quarter of the year as the gross domestic product grew a
seasonally-adjusted 2.5% quarter-on-quarter. The recovery was due to increased economic activity in the agriculture, finance
and mining sectors. The agricultural sector has seen bumper maize and wheat crops, which have resulted in lower prices during
the period. As a result of the improved inflation outlook the Reserve Bank reduced interest rates by twenty-five basis points.
The Rand however remains vulnerable to further ratings downgrades, global risks and political uncertainty.
Despite difficult market conditions, Vunani performed considerably well for the 6-month period to 31 August 2017.
Vunani generated total comprehensive income for the period of R15.8 million (2016: R14.7 million), while total comprehensive
income attributable to equity holders of the company amounted to R13.1 million (2016: R14.4 million).
The group's reportable segments are as follows:
Fund management
Asset administration
Investment banking - Advisory services
- Institutional securities broking
Private equity
Private wealth and investments
Fund management
The fund management segment includes the group's investments in Vunani Fund Managers Proprietary Limited ("VFM"), Purpose
Vunani Asset Management (Private) Limited ("PVAM") and Alliance Capital Limited ("Alliance"). The segment reported revenue
of R32.0 million for the period (2016: R33.0 million), which is a decrease of 3%. The reportable segment profit amounted to
R1.5 million for the period compared to a profit of R5.0 million at 31 August 2016.
VFM's performance and profitability reduced during the period because of lower performance fees being earned. VFM's assets
under management increased from R15.9 billion at 29 February 2017 to R18.3 billion at 31 August 2017. This 15% increase in
assets under management is key to improving the profitability of VFM.
PVAM's performance improved during the period despite the ongoing challenging economic conditions in Zimbabwe. PVAM's assets
under management increased to $42.5 million at 31 August 2017 from $31.1 million at 29 February 2017. The increase in assets
under management and diversification of product offering has ensured that PVAM remains profitable.
Alliance, a 45% owned Malawian based asset management business continues to perform well. Alliance contributed R0.7 million
equity accounted earnings to the group for the period. Alliance assets under management increased to MWK213.7 million at
31 August 2017 from MWK176.5 million at 28 February 2017.
Asset administration
The asset administration segment includes the group's investment in Fairheads Beneficiary Services Proprietary Limited
("Fairheads"). Fairheads is making good progress in increasing its assets under administration, which amounted to
R6.2 billion at 31 August 2017 (28 February 2017: R6.2 billion). The segment contributed R4.7 million to the group's
results for the period ended 31 August 2017 compared to R2.1 million in the prior period.
Advisory services
The segment has been affected by the tough economic environment, which has meant longer lead times to finalise mandates.
This has resulted in a 23% decrease in revenue earned from R3.0 million in the prior period to R2.3 million to 31 August 2017.
While the segment reported a marginal loss for the period of R0.1 million (2017: R0.4 million), the division is working on a
good pipeline of transactions which is expected to improve profitability by year-end.
Institutional securities broking
This segment includes equity, derivative and capital market trading services to institutional clients. Revenue decreased by 19%
compared to 31 August 2016. The decrease in revenue is due to the decrease in trading volumes in the market. The segment reported
a loss for the period of R1.5 million (31 August 2016: profit of R2.5 million). The focus for the period was on revenue growth
through the expansion of the client base and exploring diversified products, which is progressing well.
Private equity
The segment has refined its focus into three investment sub-categories, namely resources, property and African investments.
We are also pursuing our strategy of taking up stakes in private equity management companies. The segment holds the remaining
listed investments in its portfolio. It is the group's intention to dispose of the listed investment portfolio overtime. The
return on the investments and optimal use of capital is monitored to ensure that an efficient structure is maintained. Resources
is focused primarily on coal processing and we look for partnerships with well-capitalised and strategic associates. The coal
processing related operations generated revenue of R35.1 million for the period to 31 August 2017 compared to R0.9 million
in 2016.
The group is progressing with its effort to create a property portfolio, which has seen the group identify interesting
opportunities. The strategy involves partnering with investors who have experience in the property sector and several
opportunities are currently being explored. The segment reported a profit of R11.2 million for the period
(31 August 2016: R5.1 million).
Discontinued operations - Private wealth and investments
During the period, the private wealth and investments business was disposed of to a third party. As a result, the segment
is now accounted for as a discontinued operation. The segment reported a profit of R0.5 million for the period ended
31 August 2017 (2016: R1.0 million).
Financial performance
Revenue from continuing operations increased by 120% to R160.1 million (2016: R72.7 million) for the period ended
31 August 2017. The increase is attributable to the consolidation of Fairheads' into the group's results and increased
revenue from the private equity segment.
Other income increased by 425% to R1.8 million (2016: R0.4 million) for the period ended 31 August 2017. The increase
is due to once off non-operational revenue earned by the group.
Investment income is received in the form of dividends. Total investment income for the current period amounted to
R0.8 million as compared to R1.6 million for the period ended 31 August 2016.
Positive fair value adjustments and impairments of R6.6 million (2016: R3.0 million) relate to a net increase in the
value of the group's listed and unlisted investment portfolio that has been designated at fair value through profit
or loss.
Equity-accounted earnings for the period amounted to R0.6 million (2016: R13.2 million). The group's investment in
Fairheads was classified as an associate in the prior period and as such, its earnings were equity accounted. In the
current period, the Fairheads results were fully consolidated by the group after increasing its stake in Fairheads.
Furthermore, Vunani's investment in Workforce Holdings Limited ("Workforce") is structured such that Vunani's interest
is a joint venture and accordingly, the fluctuations in the fair value of Workforce are accounted for as equity
accounted earnings.
Operating expenses increased by 101% from R73.4 million to R147.6 million. The increase is attributable to the consolidation
of Fairheads' operating expense in the current period and the increase in costs from coal trading. Share based payment
expense also increased in the period as a result of additional awards made to staff. The group remains focused on cost
containment and monitors spending on an ongoing basis.
Finance income increased to R1.9 million for the period ending 31 August 2017 compared to R0.7 million for the period ended
31 August 2016. Finance costs increased from R0.9 million for the period ended 31 August 2016 to R5.9 million for the period
ended 31 August 2017, as result of an increase in financial liabilities from the consolidation of Fairheads.
The decrease in other investments was due to the disposal of a small portion of the group's listed investment portfolio
during the period as well positive fair value adjustments to the investments.
During the period, the group issued shares to finance the acquisition in Alliance which resulted in an increase in stated
capital of R4.4 million. The group declared a cash dividend of R8.2 million in April 2017 which was then paid in July 2017.
The share-based payments reserve movement of R2.0 million is attributable to the current period IFRS 2 charge (2016: charge
of R1.6 million). Furthermore, during the period, the group acquired the entire non-controlling interest of 32.3% in VWI
and thus, VWI is now a 100% held subsidiary.
Prospects
Despite the tough economic environment, Vunani's executive believe that with the right amount of effort and due diligence the
group can identify the right opportunities that will enable it to further grow the business and enhance shareholder value.
The improved profitability on the operating businesses is a key strategy to solidify the group as a formidable financial
services player and ultimately ensure the long-term success of Vunani. Vunani's staff are critical to the success of these
business and it is therefore critical that these businesses are run by high-calibre staff who are strong leaders. Vunani is
cautiously optimistic that it can build on the performance of the first six months of the year to ensure that it can finish
the second half of the year on a high note.
External audit
Vunani Limited and its subsidiaries are audited by KPMG Inc. ("KPMG"). The Vunani Group Audit and Risk Committee
("ARC") met with KPMG CEO, Nhlamu Dlomu to better understand the issues, as well as measures that led to the departure of the
former CEO and other key personnel as well as the implications of the public furor over its professional conduct. The results of these discussions were discussed at the group board meeting held on the 11th of
October 2017 and the board resolved to maintain the existing audit engagement pending the outcome of the independent
investigations initiated by KPMG.The board of Vunani Limited views the various allegations in a serious light. Should the outcome of the investigations not sufficiently
allay these concerns, the board reserves the right to review the audit engagement, which may entail a termination of the engagement, should
the results not be satisfactory.
FORWARD-LOOKING STATEMENTS AND DIRECTORS' RESPONSIBILITY
Statements made throughout this announcement regarding the future financial performance of Vunani have not been reviewed
or audited by the company's external auditors. The company cannot guarantee that any forward-looking statement will
materialise and accordingly, readers are cautioned not to place undue reliance on any forward-looking statements. The company
disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information
becomes available as a result of future events or for any other reason, other than as required by the JSE Listings Requirements.
The directors take full responsibility for the preparation of the condensed consolidated interim results.
Signed on behalf of the board of directors by E Dube and T Mika on 12 October 2017.
CORPORATE INFORMATION
Executive directors
E Dube (Chief Executive Officer)
T Mika (Chief Financial Officer)
BM Khoza
NM Anderson
Non-executive directors
LI Jacobs - independent chairman
XP Guma - independent
NS Mazwi - independent
G Nzalo - independent
JR Macey - independent
S Mthethwa
M Golding
Company secretary
CIS Company Secretaries Proprietary Limited
Designated adviser
Grindrod Bank Limited
Financial communications adviser
Singular Systems Proprietary Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
RESULTS PRESENTATION
Vunani will be hosting the interim results presentation by CEO Ethan Dube and CFO Tafadzwa Mika, followed by a question
and answer session on Thursday, 12 October 2017, at 11:00 via a web/audio cast. The web/audio cast link is as follows:
http://www.corpcam.com/Vunani12102017.
Date: 12/10/2017 08:10:00 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
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