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Unaudited interim financial results for the six months ended 30 September 2017
Sephaku Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/003306/06)
Share code: SEP
ISIN: ZAE000138459
Unaudited interim financial results for the six months ended 30 September 2017
Cement performance comparatively weaker for the first six months but strong recovery in post period.
Metier revenue flat with increased cost attributable to twelfth plant.
Sephaku Holdings Limited ("SepHold" or "the Company") hereby announces the group's unaudited financial results for
the six months ended 30 September 2017. SepHold, Metier Mixed Concrete Proprietary Limited ("Metier" or "the
subsidiary") and Dangote Cement South Africa Proprietary Limited ("CEMENT" or "the associate") are collectively
referred to as the group.
SALIENT POINTS
- Group net profit decreased by R10,45 million from R25,25 million to R14,80 million
- Basic earnings per share decreased by 5,20 cents from 12,49 cents to 7,29 cents
- Net asset value increased by 25,45 cents per share from 463,04 cents to 488,49 cents
- Metier earnings decreased by R5,86 million from R37,55 million to R31,69 million
- For the six months ended 30 June 2017, CEMENT's* equity accounted earnings reduced by R6,76 million from the prior
year profit of R0,97 million to a loss of R5,79 million
- However, as reported by Dangote Cement PLC, in the subsequent quarter, ending 30 September 2017, CEMENT* recorded a
profit of R32 million.
COMMENTARY
Commenting on the results, Chief Executive Officer, Dr Lelau Mohuba said, "In the first six months of the calendar
year CEMENT had a weak performance recording a loss of R16 million due to a 5% decrease in sales volumes, partially
caused by the heavy rainfalls in February. However, I am pleased to report that there was recovery in the cement
sales volumes during the third quarter as well as increased prices. This, coupled with improved cost control, saw
CEMENT achieving a profit of R32 million for the third quarter, of which SepHold's equity earnings were
approximately R12 million.
On the Metier side, turnover remained flat at R447 million for the 12 plants compared to 11 plants in the previous
year, thereby marginally increasing the overhead costs and decreasing the earnings. The twelfth plant has enabled
the subsidiary to access additional markets in Gauteng."
*CEMENT, as a subsidiary of Dangote Cement PLC, has a December year-end.
Financial review
Group
The group revenue was R447,82 million compared to R447,95 million for the previous interim period ("FY 2017").
Although Metier was able to implement a marginal increase of 1.9% in the unit price of mixed concrete, the volumes
were slightly lower resulting in the flat revenue. The group earnings before interest and tax ("EBIT") was
R33,90 million (FY 2017: R48,63 million) with SepHold operational expenses at R10,83 million (FY 2017: R13,25 million).
The group's net profit for the period was R14,80 million compared to the R25,25 million recorded in the comparative period.
Metier
Metier's gross profit was R184,87 million compared to R190,04 million due to the challenging trading conditions in
which the subsidiary continued to experience intense price competition for supply contracts resulting in limited
ability to improve prices. Metier's earnings before interest, tax, depreciation and amortisation ("EBITDA") margin
decreased to 13.01% (FY 2017: 16.4%) and EBIT from R60,85 million (13.6%) to R50,53 million (11.3%) mainly due to
the lower volumes and marginal increase in overhead expenses from the twelfth plant that commenced production in
March 2017. Therefore, Metier's net profit decreased from R37,55 million to R31,69 million.
CEMENT*
CEMENT's average price per tonne was 1.4% higher, however volumes decreased by 4.9% year on year resulting in the
revenue decreasing by 3.6% to R1,104 billion (FY 2016: R1,145 billion) for the six months ended 30 June 2017. The
associate was successful in increasing prices for both bagged and bulk cement in all markets in February 2017. The
reduction in sales volumes was mainly due to the heavy rainfalls in February and the initial market response to the
price increases due to competitors delaying their increases. Consequently, the EBITDA margin decreased to 17.8%
(FY 2016: 19.3%) and the associate recorded a net loss of R16,09 million (FY 2016: R2,68 million profit) of which a
loss of R5,79 million was equity accounted for by SepHold.
Post - period
Revised CEMENT debt payment profile
On 18 September 2017, CEMENT's lenders consortium collectively agreed to change the repayment profile of the
remaining R1,8 billion on the project loan to increasing capital amounts. The review was subject to a capital
injection of R95 million by the two shareholders, which was settled in full by Dangote Cement PLC ("DCP") on
2 October 2017, in line with the terms of the shareholder relationship agreement between SepHold and DCP. SepHold
has an option to pay DCP its 36% portion of R34,2 million at a future date still to be determined.
Financial results for third quarter to 30 September 2017
Following the DCP results released on 19 October 2017 for the nine months ended 30 September 2017, CEMENT increased
its quarterly revenue by 14.2% to R656,59 million (FY 2016: R574,89 million) for the three months ending September
2017. The increase in revenue was as a result of a 9.6% increase in quarterly volumes and the average price
increase per tonne of 2% - 3% implemented in August that has sustained in most markets. The EBITDA achieved was
22.7% at R149 million and these CEMENT quarterly results will be equity accounted in the SepHold audited financial
results for the twelve months ending 31 March 2018.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 30 September 2017
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 September 2017 30 September 2016 31 March 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment 141 632 135 254 142 798
Goodwill 223 422 223 422 223 422
Investment in associate 738 048 720 005 743 843
Other non-current assets 18 682 5 735 17 800
Total non-current assets 1 121 784 1 084 416 1 127 863
Current assets
Inventories 16 289 11 683 16 972
Trade and other receivables 132 987 113 257 121 614
Cash and cash equivalents 26 490 38 301 44 757
Other current assets 864 13 726 -
Total current assets 176 630 176 967 183 343
Total assets 1 298 414 1 261 383 1 311 206
Equity and liabilities
Equity attributable to equity holders of the parent 1 003 699 939 822 983 880
Non-current liabilities
Other financial liabilities 180 660 214 116 180 133
Deferred income 1 895 - 2 233
Deferred taxation 21 255 19 620 19 697
Total non-current liabilities 203 710 233 736 202 063
Current liabilities
Other financial liabilities 18 386 6 625 35 803
Trade and other payables 67 842 75 875 84 272
Other current liabilities 4 777 5 325 5 188
Total current liabilities 91 005 87 825 125 263
Total liabilities 294 715 321 561 327 326
Total equity and liabilities 1 298 414 1 261 383 1 311 206
Net asset value per share (cents) 488,49 463,04 484,74
Tangible net asset value per share (cents) 378,35 350,92 372,83
Ordinary shares in issue 205 469 487 202 969 487 202 969 487
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 6 months ended 12 months ended
30 September 2017 30 September 2016 31 March 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 447 822 447 945 839 985
Cost of sales (262 950) (257 903) (483 668)
Gross profit 184 872 190 042 356 317
Other income 1 740 1 195 2 429
Operating expenses (146 912) (143 573) (273 996)
Operating profit 39 700 47 664 84 750
Investment income 2 191 3 445 7 172
Profit/(loss) from equity accounted investments (5 795) 966 24 804
Finance costs (11 646) (14 126) (26 695)
Profit before taxation 24 450 37 949 90 031
Taxation (9 645) (12 701) (21 892)
Profit for the period 14 805 25 248 68 138
Total comprehensive income for the period 14 805 25 248 68 138
Basic earnings per share (cents) 7,29 12,49 33,63
Diluted earnings per share (cents) 7,25 12,41 33,36
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months ended 6 months ended 12 months ended
30 September 2017 30 September 2016 31 March 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 22 653 56 299 96 979
Interest income 2 191 4 057 7 172
Finance costs (11 009) (14 315) (24 320)
Taxation paid (9 459) (11 728) (19 049)
Net cash from operating activities 4 376 34 313 60 782
Cash flows from investing activities
Purchase of property, plant and equipment (7 021) (14 191) (28 535)
Sale of property, plant and equipment 957 1 070 1 852
Loans repaid 949 1 158 349
Investment increase in associate - (48 572) (48 572)
Government grant received - 556 1 153
Net cash (utilised in) investing activities (5 115) (59 979) (73 753)
Cash flows from financing activities
Proceeds on share issue - 2 453 2 453
Facility raising fee paid - - (761)
Repayment of other financial liabilities (17 538) (29 200) (35 195)
Increase in loans with group companies - (517) -
Net cash (utilised in) financing activities (17 528) (27 264) (33 503)
Total cash movement for the period (18 267) (52 930) (46 474)
Cash at beginning of period 44 757 91 231 91 231
Cash at end of period 26 490 38 301 44 757
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total share Total Retained Total
capital Reserves earnings equity
R'000 R'000 R'000 R'000
Balance at 31 March 2016 - Audited 632 950 18 911 258 731 910 592
Total comprehensive income for the period - - 25 248 25 248
Issue of shares 2 453 - - 2 453
Employees' share option scheme - (189) 1 718 1 529
Balance at 30 September 2016 - Unaudited 635 403 18 722 285 697 939 822
Total comprehensive income for the period - - 42 890 42 890
Issue of shares - - - -
Employees' share option scheme - 540 628 1 168
Balance at 31 March 2017 - Audited 635 403 19 262 329 215 983 880
Total comprehensive income for the period - - 14 805 14 805
Issue of shares 6 700 - - 6 700
Employees' share option scheme - 1 479 (3 165) (1 686)
Balance at 30 September 2017 - Unaudited 642 103 20 741 340 855 1 003 699
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
Basis of preparation
The condensed consolidated interim financial results for the six months ended 30 September 2017 ("interim reporting
period") have been prepared in accordance with IAS 34: Interim Financial Reporting, the requirements of the
JSE Limited Listings Requirements, the Companies Act, 2008, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards
Council. The interim financial results are prepared in accordance with International Financial Reporting Standards
("IFRS"). The results have been prepared on a historical cost basis, except for the measurement of land at revalued
amounts. The fair value and useful life of this asset will be assessed at the 2018 year-end. The accounting
policies for the interim reporting period are consistent with those applied in the annual financial statements for
the group for the year ended 31 March 2017.
The preparation of the interim financial results has been supervised by NR Crafford-Lazarus CA (SA).
These interim results have not been reviewed or reported on by the group's auditors.
Net asset value per share and earnings per share
6 months ended 6 months ended 12 months ended
30 September 2017 30 September 2016 31 March 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Net asset value and tangible net asset value per share
Total assets 1 298 414 1 261 383 1 311 206
Total liabilities (294 715) (321 561) (327 326)
Net asset value attributable to equity holders of parent 1 003 699 939 822 983 880
Goodwill (223 422) (223 422) (223 422)
Intangible assets (4 015) (5 735) (5 162)
Deferred tax raised on intangible assets 1 124 1 605 1 445
Tangible net asset value 777 386 712 270 756 741
Shares in issue 205 469 487 202 969 487 202 969 487
Net asset value per share (cents) 488,49 463,04 484,74
Tangible net asset value per share (cents) 378,35 350,92 372,83
Reconciliation of basic earnings to diluted earnings and headline earnings:
Basic profit and diluted profit from total operations
attributable to equity holders of the parent 14 805 25 248 68 138
(Profit)/loss on sale of non-current assets (524) (374) (743)
Total taxation effect of adjustments 147 105 208
Headline earnings attributable to equity holders of the parent 14 428 24 979 67 603
Reconciliation of weighted average number of shares:
Basic weighted average number of shares 203 072 227 202 080 131 202 609 094
Diluted effect of share options 1 150 742 1 304 252 1 641 560
Diluted weighted average number of shares 204 222 969 203 384 383 204 250 654
Basic earnings per share (cents) 7,29 12,49 33,63
Diluted earnings per share (cents) 7,25 12,41 33,36
Headline earnings per share (cents) 7,10 12,36 33,37
Diluted headline earnings per share (cents) 7,06 12,28 33,10
Segment information
The segments identified are based on the operational and financial information reviewed by management for
performance assessment and resource allocation. There has been no change in the basis of operational segmentation
or in the basis of measurement of segment profit or loss since the 2017 annual financial statements.
Ready-mixed Head office Group
concrete and consolidation totals
R'000 R'000 R'000
for the 6 months ended 30 September 2017 - Unaudited
Segment revenue - external revenue 447 822 - 447 822
Segment cost of sales (262 950) - (262 950)
Segment expenses (136 086) (10 826) (146 912)
Profit from equity-accounted investment - (5 795) (5 795)
Segment profit/(loss) after taxation 31 689 (16 884) 14 805
Taxation (9 966) 321 (9 645)
Interest received 2 190 1 2 191
Interest paid (11 643) (3) (11 646)
Depreciation and amortisation (7 718) (1 183) (8 901)
Segment assets 439 952 858 462 1 298 414
Investment in associate included in the above
total segment assets - 738 048 738 048
Capital expenditure included in segment assets 6 998 23 7 021
Segment liabilities (293 538) (1 177) (294 715)
for the 6 months ended 30 September 2016 - Unaudited
Segment revenue - external revenue 447 945 - 447 945
Segment cost of sales (257 903) - (257 903)
Segment expenses (130 324) (13 249) (143 573)
Profit from equity-accounted investment - 966 966
Segment profit/(loss) after taxation 37 545 (12 297) 25 248
Taxation (13 183) 482 (12 701)
Interest received 3 388 57 3 445
Interest paid (14 126) - (14 126)
Depreciation and amortisation (12 392) (1 755) (14 147)
Segment assets 415 396 845 987 1 261 383
Investment in associate included in the above
total segment assets - 720 005 720 005
Capital expenditure included in segment assets 13 822 369 14 191
Segment liabilities (318 404) (3 157) (321 561)
During 2017, the group streamlined the allocation of segment expenses between the different business segments. The
effects of the reclassification on the comparative figures for the period ended 30 September 2016 are as follows:
Segment Segment profit/(loss)
expenses after taxation
R'000 R'000
Decrease in Ready-mixed concrete segment 3 874 3 874
Increase in Head office segment (3 874) (3 874)
The only commodity actively managed by Metier is ready-mixed concrete. The group does not rely on any single
external customer or group of entities under common control for 10% or more of the group's revenue as disclosed in
the interim financial results. CEMENT is an associate of SepHold. No segment report has been presented for CEMENT
as the amounts attributable to CEMENT have been included in the "head office segment".
Cost of sales
Discounts received from suppliers have been reclassified to cost of sales to allow for more accurate reporting.
The effect of the reclassification on the comparative figures for the period ended 30 September 2016 are as
follows:
Profit or Loss GROUP
6 months ended 6 months ended
30 September 2017 30 September 2016
unaudited unaudited
R'000 R'000
Decrease in cost of sales - 9 442
Decrease in other income - (9 442)
Statement of going concern
The interim financial results have been prepared on the basis of accounting policies applicable to a going concern.
This basis presumes that funds will be available to finance future operations and that the realisation of assets
and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of
business.
Stated capital
Prior to 30 September 2017, the company issued 2 500 000 shares at a price of R2.68 per share for no cash
consideration, in respect of options in terms of the Sephaku Share Incentive Scheme that were deemed to expire on
15 October 2017. Due to the company being in a closed period on date of expiry, the option holders are entitled to
exercise their rights within 90 days thereafter, at which date the cash consideration of R2.68 per share will be
received by the company.
Events after the interim reporting period
The directors are not aware of any material fact or circumstance arising between the end of the interim reporting
period and the date of this report that would require adjustments to or disclosure in the interim financial
results.
Change to the board of directors
In compliance with paragraph 3.59(b) of the Listings Requirements of the JSE Limited, the SepHold board of
directors hereby advises shareholders that Ms. Basani Maluleke ("Ms. Maluleke"), an independent non-executive
director, resigned from the board with immediate effect on 30 October 2017, as a result of taking on additional
executive responsibilities at her current employer, African Bank. Ms. Maluleke was appointed to the board on
9 November 2016 and served as a member of the audit and risk committee as well as the social and ethics committee.
Although Ms. Maluleke's tenure was short, she contributed immensely to the group. The board would like to thank
Ms. Maluleke for her contribution to the company and wishes her well in her future endeavours.
Change to the Company Secretary
There were no changes to the Company Secretary during the interim reporting period under review.
Company information
Directors
B Williams> (chairman)
MJ Janse van Rensburg>
PM Makwana>
MM Ngoasheng>
B Maluleke>
J Pitt> ~
Dr L Mohuba* (chief executive officer)
NR Crafford-Lazarus* (financial director)
RR Matjiu^
KJ Capes*
PF Fourie^
*Executive >Independent ~Alternate ^Non-executive
Company secretary
Acorim Proprietary Limited
Telephone: +27 11 325 6363
Registered office
Southdown Office Park
First floor, Block A
Corner Karee and John Vorster Streets
Irene, X54, 0062
Telephone: +27 12 612 0210
Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
PO Box 61051, Marshalltown, 2017, South Africa
Telephone: +27 11 370 5000
JSE sponsor
Questco Corporate Advisory Proprietary Limited
Telephone: +27 11 011 9200
Analyst results presentation conference call
A presentation conference call for analysts will be held on 9 November 2017 at 1100hs CAT.
The results presentation can also be downloaded from the Company website: www.sephakuholdings.com.
Registration is required to get access code to the call through the link below.
SEPHAKU HOLDINGS FY 2018 INTERIM RESULTS PRESENTATION FOR THE PERIOD ENDED 30 SEPTEMBER 2017
HD Webphone
South Africa toll free: 0 800 203 599
Conference Replay: 011 305 2030
Playback code: 18697
On behalf of the board
Pretoria
Chief executive officer Financial director
Dr. Lelau Mohuba Neil Crafford Lazarus
9 November 2017
Enquiries contact:
Sakhile Ndlovu
Sephaku Holdings
Investor Relations
Telephone: 012 612 0210
Sponsor to Sephaku Holdings: Questco Corporate Advisory (Pty) Ltd
About Sephaku Holdings Limited
Sephaku Holdings Limited is a building and construction materials company with a portfolio of investments in the
cement sector in South Africa. The company's core investments are a 36% stake in Dangote Cement SA (Pty) Ltd and
100% in Metier Mixed Concrete (Pty) Ltd. SepHold's strategy is to generate growth and realise value for
shareholders through the production of cement and ready mixed concrete in Southern Africa.
www.sephakuholdings.com
Date: 09/11/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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