Wrap Text
Unaudited unreviewed condensed interim financial results for the six months ended 30 September 2017
RECM and Calibre Limited
Incorporated in the Republic of South Africa
(Registration number 2009/012403/06)
Preference share code: RACP
ISIN: ZAE000145041
(“RAC” or “the Company”)
UNAUDITED UNREVIEWED CONDENSED INTERIM FINANCIAL RESULTS
for the six months ended 30 September 2017
COMMENTARY
At 30 September, RAC's NAV per share (ordinary and participating
preference) came to R27,86. This represents a gain of 1,9% over
the first six months of the financial year, and 24,3% over the
last 12 months. This compares to gains of 8,5% and 10,2% for the
All Share Total Return index over the same periods.
As at 30 September 2017, the make-up of our NAV on a look-through
basis consists of:
Direc- %
tors’ of
% fair net
owner- Cost value asset
ship Rm Rm value
Core investments 729,4 1 257,5 88,2
Goldrush 53,3 386,9 896,4 62,9
Trans Hex 25,5 103,2 74,6 5,2
JB Private Equity
Investors Partnership 90,0 83,3 112,9 7,9
West Coast Resources 27,2 39,7 48,6 3,4
Outdoor Investment
Holdings 28,3 41,1 59,9 4,2
College SA 88,1 75,2 65,1 4,6
Portfolio investments 209,3 264,6 18,6
Conduit 3,0 20,9 39,2 2,8
La Concorde 5,1 32,3 35,1 2,5
Excellerate 6,2 14,7 34,6 2,4
DAWN 16,8 100,6 112,7 7,9
RECM Flexible Value
Hedge Fund 40,8 43,0 3,0
Non-core investments 326,5 337,9 23,7
Receivables 0,9 0,1
Cash and money market fund 62,0 4,3
Liabilities (mainly CGT) (134,5) (9,4)
Preference shares issued
to ABSA (363,2) (25,5)
Net asset value 1 425,2 100,0
NAV per share (“R”) 27,86
INCREASE IN NAV
The NAV per share growth of 1,9% for the 6 months equates to an
increase of R26,4m. The composition of the increase on a look-
through basis is as follows:
Unaudited Unaudited
Six months Six months
ended ended
30 September 30 September
2017 2016
R R
Opening NAV 1 398 789 332 983 101 316
Increase in NAV 26 446 481 136 140 558
Interest and dividends 10 517 774 4 984 797
Realised profits on sale of
assets and other income 9 676 517 4 314 384
Adjustments to fair value
of assets 49 785 371 152 332 460
Less: Tax paid (9 131 918) (2 107 543)
Less: Tax provided for (10 727 371) (5 345 765)
Less: Financing expenses (13 119 686) (7 857 640)
Less: Operating expenses (10 554 206) (10 180 135)
Share Issue – 50 996 000
Closing NAV 1 425 235 813 1 170 237 874
We have not changed our valuation method. All listed assets are
held at market price, while unlisted assets are held at their OTC
price – where one exists – or at fair value. For assets where
there is no visible market price, we perform a valuation
exercise, which culminates in a range of fair values, as required
by International Financial Reporting Standards (“IFRS”). Due to
the inherent uncertainty of valuing large stakes in unlisted,
untraded assets, this range is necessarily quite wide. For some
of our unlisted investments, this range includes the original
cost price. Where we have purchased the investment in the last 12
months and believe the cost price still approximates fair value,
we continue to carry the investment at cost.
Where we have held the investment for longer than 12 months, we
tend to value the investment towards the lower end of our fair
value range.
We explicitly take account of the impact of capital gains tax,
where applicable. We properly account for, and disclose this very
real reduction in net realisable value in our intrinsic value
calculation. As an aside, our gains include the associated tax
effects, while the gains on the index we use for comparative
purpose (the JSE ALSI total return index), doesn’t. Please bear
in mind that we regard tax as a significant cost of doing
business. As with all other costs we manage our exposure very
carefully.
Investors should also take our fee structure into account when
estimating RAC’s value. RAC pays 1,14% (including VAT) p.a. of
the portfolio value for investment management services. There are
many views in the marketplace as to the capital value of such a
contractual payment. We suggest you deduct your own estimate of
this value from your opinion of our overall value – bearing in
mind our consistently conservative approach to establishing a
fair value for our assets.
CORE INVESTMENTS
GOLDRUSH
The past six months saw the opening of the Menlyn Maine Casino –
the second largest casino in South Africa by number of slot
machines, in Pretoria. This impacted our three Pretoria
properties significantly – as expected. During this period, we
closed down one of these properties (Centurion Lake) and moved
the license to the Morula complex. In the process we incurred
some relocation expenses as the license was phased in at its new
location. However, the relocation has now been completed and
Goldrush at Morula, with 460 machines, is trading well. The other
two Pretoria properties are still feeling the effect of the
Casino.
The acquisition of Boss Gaming, a predominantly Eastern Cape
operator with six operational Bingo properties became fully
unconditional during the period. The business and team has been
integrated into Goldrush and has already contributed to the
group.
The other significant development since our last communication
has been that the KZN Provincial Government passed legislation
late in September, which allows for the operation of Electronic
Bingo Terminals in the Province. This opens up another large
growth opportunity for Goldrush.
Goldrush is currently in the process of rolling out more than 30
new Bingo and Sports betting properties. The rollout of LPM
machines continues at a steady pace, although slower than the
other parts.
TRANSHEX/WEST COAST RESOURCES
Transhex’s (TSX) main mining asset, the Lower Orange River
Operations, which include the Baken and Bloedrif mines have come
to the end of their useful life. The mines are being placed on
care and maintenance at significant cost. Rehabilitation costs
have been provided for. At West Coast Resources (WCR), recoveries
have improved, but are not yet at desired levels. The mine is
receiving a lot of attention from management. RAC has agreed to
sell its stake in WCR to TSX, in return for additional TSX
shares. The transaction should close over the next few months.
After this, RAC will still have a loan outstanding to WCR, but
its main mining exposure will be through TSX. Somiluana, the
operation in Angola in which TSX has a 33% interest, is doing
well. Cash repatriation has become somewhat easier, but still not
completely frictionless.
THE JB PRIVATE EQUITY PARTNERSHIP
The JB Private Equity Partnership (JB PE), of which RAC owns 90%,
has Unicorn Capital Partners Limited (previously Sentula Mining
Limited) as its only asset. JB PE added to its holding during the
period under review, and it now owns 37,4% of Unicorn. Unicorn’s
operating subsidiaries are performing in line with expectations
while the last remnants of its contract mining operations have
been exited successfully. Nkomati Anthracite remains on track to
complete the re-opening of its underground mine and commissioning
of its new wash plant in Q1 2018. Following the successful
restructuring and ring-fencing of the operating subsidiaries,
management will concentrate on growing and expanding Unicorn’s
investment portfolio.
OUTDOOR INVESTMNENT HOLDINGS
Outdoor Investment Holdings (OIH) and its subsidiaries Safari
Outdoor, Formalito and Inyathi Sporting Supplies have been
trading well in a very challenging environment. The roll out of
Safari’s fourth mega store was successfully concluded and this
group’s profitability continues to improve. Safari will continue
its drive to open more stores with two additional stores planned
for the next 18 months.
COLLEGE SA
This group can be split roughly into three divisions:
– SA College of Home Study (Pty) Ltd (College SA), a registered
private Technical and Vocational Education and Training (TVET)
college offers qualifications and courses across a broad range
of subjects via distance-learning. Over the past six months we
have focused on cleaning up course material, strengthening the
academic team, and increasing the efficiency of the sales and
support teams. Students are feeling the pinch of a struggling
economy, which has affected student completion rates.
– Tabaldi Online Accounting Classroom, houses the tuition support
and teaching for students studying towards professional
accountancy designations. We have built and trained an
experienced academic team for successful online course delivery
and support. The business will roll out its first full suite of
products for the 2018 academic year.
– IASeminars, specialises in international accounting training
for senior executives in financial centers across the globe
(including IFRS, IPSAS, US GAAP). Business has been strong with
high recurring business, and given increasing first time
adoption of IPSAS (public accounting standards) across the
world.
RAC continues to build on this business organically and has
invested more capital into the business during the period under
review.
PORTFOLIO INVESTMENTS
Conduit Capital continues in its efforts to build a high quality
diversified insurance business, supported by a value orientated,
non-insurance related investment portfolio over the long-term. In
this regard, it has recently announced a rights offer of R350m to
fund its vision.
La Concorde Holdings (LCH) has become a cash shell since it sold
its operating assets for in excess of R16 per share. Its ultimate
holding company, HCI, recently proposed a transaction where it
will inject Golden Arrow Bus Services (GABS) into this shell, in
return for cash and shares. The GABS asset represents R10 per LCH
share, while a dividend of up to R7 per LCH share will be paid as
part of the transaction. LCH also paid a R1 dividend to
shareholders recently. We value LCH at R10 per share, as per the
OTC market price. The proposed transaction indicates an
appreciably higher value.
Excellerate Holdings, the private facilities management business
continues to generate good results. In its financial year to June
2017, earnings per share grew by 28% (aided by a 20% share
buyback earlier in the year). We value our holding at R2,90 per
share, the price of the last known transaction – the buyback. At
this price, Excellerate is valued on a P/E of five times.
RAC acquired a 17% shareholding in listed building support
company DAWN by underwriting an emergency rights issue earlier
this year. DAWN is a turnaround situation, similar to
Sentula/Unicorn. Since we acquired the stake, new management has
been appointed, the company has sold some assets, used the
proceeds to repay the majority of debt and a restructuring
process has been implemented. We think the turnaround process,
like most others will be difficult, and take longer than
expected. RAC acquired its shares at a price which we believe
discounts these risks. We value DAWN at its listed market price
of R1,12 per share. We are not sure what DAWN is worth, but the
listed price is almost certainly wrong.
Since year-end, RAC also invested in a new hedge fund managed by
RECM, the RECM Flexible Value Prescient QI Hedge Fund. This is a
deep value fund which is able to take long or short positions.
RAC obtained its units by vending its holdings of ELB
Engineering, KLK Landbou, York Timbers and Putprop, for units in
the fund. This is in line with RAC’s strategy of focusing on
acquiring influential stakes in unlisted businesses, and
disposing of passive minority holdings. The fund is off to a good
start, gaining 5,3% during its first five months of operation.
PROSPECTS
For almost the first time since listing, we are seeing more
investment opportunities than we have available capital. This is
due to the negative sentiment surrounding the political and
economic situation in South Africa.
Our investment strategy remains simple. We aim to buy good
businesses, managed by good people, at good prices. If you are
involved in any business that meets these criteria, and it needs
expansion or replacement capital, please give us a call. We can’t
promise to add management expertise to your business (we most
likely have none) but we can promise to be solid partners. And,
if the phone were to ring, we definitely can promise a quick
answer.
Signed on behalf of the board
Piet Viljoen Jan van Niekerk
Cape Town
20 November 2017
DIRECTORS: PG Viljoen (Chairman), T de Bruyn, Z Matlala,
T Rossini, JG Swiegers, JC van Niekerk
COMPANY SECRETARY: G Simpson
FINANCIAL RESULTS PREPARER: D Schweizer CA(SA)
REGISTERED OFFICE: 6th Floor Claremont Central, 8 Vineyard Road,
Claremont, 7700 South Africa
TRANSFER SECRETARIES: Link Market Services South Africa (Pty)
Ltd, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein,
2004
SPONSOR: Questco Corporate Advisory (Pty) Ltd, First Floor,
Yellowwood House, Ballywoods Office Park, 33 Ballyclare Drive,
Bryanston
STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
30 September 31 March 30 September
2017 2017 2016
Notes R R R
ASSETS
Non-current
assets 1 424 074 846 1 396 876 924 1 168 035 386
Investments 2 1 424 074 846 1 396 876 924 1 168 035 386
Current assets 1 572 553 2 681 458 2 861 324
Investments 2 1 341 591 2 409 514 2 704 177
Loans and other
receivables – – 75 530
Current tax
receivable 218 802 223 307 –
Cash and cash
equivalents 12 160 48 637 81 617
Total assets 1 425 647 399 1 399 558 382 1 170 896 710
EQUITY AND
LIABILITIES
Equity
Share capital
– ordinary
shareholders 4 18 206 250 18 206 250 50 000 000
Share capital
– preference
shareholders 4 506 296 000 506 296 000 450 000 000
Other equity
reserve – – 50 996 000
Retained income 900 733 563 874 287 082 619 241 874
Total equity 1 425 235 813 1 398 789 332 1 170 237 874
Liabilities
Current
liabilities 411 586 769 050 658 836
Trade and
other payables 411 586 769 050 658 836
Total equity
and liabilities 1 425 647 399 1 399 558 382 1 170 896 710
Net asset value
Net asset value
attributable to
ordinary
shareholders 104 489 429 102 550 538 112 091 750
Net asset value
attributable to
preference
shareholders 1 320 746 384 1 296 238 794 1 058 146 124
Net asset value
per ordinary
share (cents) 6 2 786 2 735 2 242
Net asset value
per preference
share (cents) 6 2 786 2 735 2 242
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
Notes R R R
Revenue 65 508 30 163 291 3 568 701
Operating
expenses (797 877) (1 517 457) (1 144 154)
Operating
(loss)/profit (732 369) 28 645 834 2 424 547
Fair value
gains on
subsidiary 27 197 922 362 590 140 133 748 602
Profit before
taxation 26 465 553 391 235 974 136 173 149
Taxation 5 (19 072) (50 208) (32 591)
Profit after
taxation 26 446 481 391 185 766 136 140 558
Other
comprehensive
income for the
period net of
taxation – – –
Total
comprehensive
income 26 446 481 391 185 766 136 140 558
Earnings and
headline
earnings per
share
Per share
information
(ordinary and
preference)
Basic and
diluted
earnings per
share (cents) 7 52 765 271
Headline and
diluted
headline
earnings per
share (cents) 7 52 765 271
STATEMENT OF CHANGES IN EQUITY
Preference Ordinary Other
share share equity
capital capital reserve
R R R
Balance at
31 March 2016 450 000 000 50 000 000 –
Profit – – –
Equity reserve – – 50 996 000
Balance at
30 September 2016 450 000 000 50 000 000 50 996 000
Profit – – –
Share issue 56 296 000 – (50 996 000)
Share buy back – (31 793 750) –
Balance at
31 March 2017 506 296 000 18 206 250 –
Profit – – –
Other comprehensive
income – – –
Balance at
30 September 2017 506 296 000 18 206 250 –
Notes 4 4
STATEMENT OF CHANGES IN EQUITY (continued)
Total
Retained shareholders’
income equity
R R
Balance at
31 March 2016 483 101 316 983 101 316
Profit 136 140 558 136 140 558
Equity reserve – 50 996 000
Balance at
30 September 2016 619 241 874 1 170 237 874
Profit 255 045 208 255 045 208
Share issue – 5 300 000
Share buy back – (31 793 750)
Balance at
31 March 2017 874 287 082 1 398 789 332
Profit 26 446 481 26 446 481
Other comprehensive
income – –
Balance at
30 September 2017 900 733 563 1 425 235 813
STATEMENT OF CASH FLOWS
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Cash flows from
operating activities
Cash utilised in
operations (1 155 341) (2 252 759) (1 989 670)
Interest income 431 169 541 68 701
Dividends received – 3 500 000 3 500 000
Tax paid (14 567) (339 784) (174 390)
Net cash (outflow)/
inflow from
operating
activities (1 169 477) 1 076 998 1 404 641
Cash flows from
investing activities
Sale of investments 1 133 000 – –
Purchase of
investments – (2 409 514) (2 704 177)
Net cash inflow/
(outflow) from
investing
activities 1 133 000 (2 409 514) (2 704 177)
Total cash movement
for the period (36 477) (1 332 516) (1 299 536)
Cash at beginning
of period 48 637 1 381 153 1 381 153
Total cash and cash
equivalents at
end of period 12 160 48 637 81 617
NOTES TO THE CONDENSED INTERIM RESULTS
for the period ended 30 September 2017
GROUP STRUCTURE
RAC was established in 2009 as a closed-end investment entity
that makes long-term investments, with the objective of
generating high real returns. Investments can be listed or
unlisted, public or private, and there are no limits as to the
geographic location.
Given that the investment infrastructure of RAC has been set up
to facilitate investments and funding in the most efficient
manner, investments are made either through a fully owned
subsidiary incorporated in South Africa, RAC Investment Holdings
(Pty) Ltd, (RIH) or directly. Currently, the majority of
investments are held through RAC Investment Holdings (Pty) Ltd.
Given this structure, RAC has provided the fair value disclosure
in two parts in note 2. Note 2.1 discloses the investment in RIH
as required by IFRS as well as additional disclosures that the
directors deem useful by looking through RIH to the underlying
investments at the directors fair values. All fair value
movements on the investment in RIH are recognised in profit or
loss.
1. ACCOUNTING POLICIES – PRESENTATION OF CONDENSED INTERIM
FINANCIAL STATEMENTS
BASIS OF ACCOUNTING PREPARATION
The accounting policies applied for the six months are
consistent, in all material respects, with those used in the
Annual Financial Statements for the year ended 31 March 2017
and are in accordance with the recognition and measurement
criteria of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting
Standards Council. In addition, these interim results have
been prepared in accordance with the presentation and
disclosure requirements of International Accounting Standard
34, Interim Financial Reporting, as well as the Listings
Requirements of the JSE and the Companies Act of South
Africa.
The interim results have been prepared in accordance with
the IFRS and IFRIC interpretations at the time of the
preparation of the information. As these standards and
interpretations are the subject of ongoing review, they may
be amended between the date of this report and the
finalisation of the annual financial statements for the year
ending 31 March 2018.
ASSESSMENT AS INVESTMENT ENTITY
Entities that meet the definition of an investment entity
within IFRS 10 are required to measure their subsidiaries at
fair value rather than consolidate them. The criteria which
define an investment entity are, as follows:
– an entity that obtains funds from one or more investors
for the purpose of providing those investors with
investment services;
– an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
– an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis
(refer to note 2 for additional disclosures relating to
fair value).
- Based on the above, the Company is considered to meet all
three conditions of the definition and, hence, qualifies
as an investment entity. Consolidated Financial Statements
are therefore not prepared.
In line with RAC carrying its investment in RIH at fair
value, RAC has also elected the exemption in IAS 28 to
carry any interests in associates and joint ventures at
fair value through profit or loss. Such election is
applied consistently due to the fact that the Company is
an investment entity and evaluates its investments on a
fair value basis. The Company reports to its investors via
annual and semi-annual results and to its management, via
internal management reports, on a fair value basis. All
investments are reported at fair value to the extent
allowed by IFRS in the Company’s annual reports.
The Board of Directors (the Board) has also concluded that
the Company meets the additional characteristics of an
investment entity, in that it has exposure, directly or
indirectly, to more than one investment; the investments
are predominantly in the form of equities and similar
securities; and its investors are not related parties.
These conclusions will be reassessed on an annual basis,
if any of these criteria or characteristics change.
SEGMENTAL ANALYSIS
The Board considered the implications of IFRS 8 Operating
Segments and are of the opinion that the operations of the
Company are substantially similar and that the risks and
returns of these operations are likewise similar. Resource
allocation and the management of the operations are
performed on an aggregated basis, and as such the company
is considered to be a single aggregated business and
therefore there is no additional reporting requirements in
terms of IFRS 8.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
2. INVESTMENTS
Fair value
hierarchy of
financial assets
Level 2
Class 4 –
Unit trust
– money market
fund 1 341 591 2 409 514 2 704 177
1 341 591 2 409 514 2 704 177
Level 3
Class 5 –
Unlisted
shares –
Unquoted –
fair value
through profit
and loss
– RIH 1 424 074 846 1 396 876 924 1 168 035 386
1 424 074 846 1 396 876 924 1 168 035 386
Total
financial
assets at
fair value 1 425 416 437 1 399 286 438 1 170 739 563
Non-current
assets 1 424 074 846 1 396 876 924 1 168 035 386
Current
assets 1 341 591 2 409 514 2 704 177
Total
investments 1 425 416 437 1 399 286 438 1 170 739 563
AVAILABLE CASH
Cash is held both directly and indirectly on call, along
with indirectly through a money market unit trust
investment.
The cash holdings are reflected in Class 4 above, where
applicable.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Level 3
reconci-
liation
Opening
balance 1 396 876 924 983 290 784 983 290 784
Acquisitions
(including
capital
contribution
to RIH) – 50 996 000 50 996 000
Gains on
investments
recognised in
profit and
loss 27 197 922 362 590 140 133 748 602
Closing
balance 1 424 074 846 1 396 876 924 1 168 035 386
LEVEL 1
Class 1 financial assets are valued at the listed price per
the exchange on which they trade.
Class 2 financial assets are valued at the quoted price
based on the latest over the counter trades.
LEVEL 2
Class 3 financial assets are valued based on the price of
the underlying assets.
Class 4 financial assets are valued by taking the following
market observable data into account and applying them to the
holdings:
– credit spread of the institution at which the funds are
held;
– any difference in the interest rate earned and what is
available in the market.
Class 6 financial assets are unlisted shares valued at the
last traded price between third parties if the transaction
occurred within the last 6 months.
LEVEL 3
Class 5 financial assets are valued using a number of
valuation techniques based on the following unobservable
market data for each investment:
- Net profit of investee
- Equity and net debt of investee
- Return on capital
- Price/Earnings ratio
- Expected cash flows; and
- NAV of the investee if it recognises its assets and
liabilities at fair value.
Management uses the above information in multiple valuation
techniques by comparing the investee information to similar
type entities in the listed market. The nature of the fair
value calculations means that fair values range greatly and
are sensitive to indirect and direct quantifiable and
unquantifiable inputs.
There have been no significant changes to the inputs to the
fair valuation calculations of the investments to which RAC
is exposed. RIH has continued to be valued based on its NAV
which is driven by the valuation of the underlying
investments.
In terms of IFRS, RAC is an Investment Entity, and therefore
no consolidated results are required to be prepared. IFRS
requires the fair value disclosure to be prepared at the
Unit of Account Level (i.e. at the level of shares that RAC
owns and those are shown above). The Board of Directors has
decided to provide the following voluntary disclosures
looking through the 100% held subsidiary, RIH, to the
underlying investments. In addition, a summary of the NAV of
RIH as well as the underlying valuation techniques and
sensitivities have been provided.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Fair value
hierarchy of
financial
assets held
by RIH
Level 1
Class 1 –
Listed shares
– Quoted 219 552 537 205 119 811 193 708 663
Class 2 –
Unlisted shares
– Quoted 35 099 830 55 550 183 68 046 300
254 652 367 260 669 994 261 754 963
Level 2
Class 3 –
Derivative
instruments 337 931 666 130 879 183 –
Class 4 –
Money market
fund 56 680 906 158 886 872 44 291 111
Class 6 –
Unlisted
shares – last
traded price
– available for
sale 34 629 034 34 031 981 –
Class 6 –
Unlisted
shares – last
traded price
– fair value
through profit
or loss – 49 736 932 –
Class 3 –
Hedge Fund 42 958 457 – –
472 200 063 373 534 968 44 291 111
Level 3
Class 5 –
Unlisted shares
– Unquoted
– available-
for-sale 4 306 964 4 038 769 45 081 286
Class 5 –
Unlisted shares
– Unquoted – fair
value through
profit and
loss 1 107 545 096 993 249 079 1 082 827 457
1 111 852 060 997 287 848 1 127 908 743
Total
financial
assets at
fair value 1 838 704 490 1 631 492 810 1 433 954 817
Non-current
assets 1 782 023 584 1 472 605 938 1 250 889 389
Current
assets 56 680 906 158 886 872 183 065 428
Total
investments 1 838 704 490 1 631 492 810 1 433 954 817
Summary of net
asset value of
RIH
Total
investments
from
above 1 838 704 490 1 631 492 810 1 433 954 817
Loans and
receivables 78 705 924 56 749 640 103 802 715
Cash and cash
equivalents 3 951 779 4 665 742 4 767 304
Deferred tax (130 797 666) (117 389 895) (80 807 975)
Accruals and
contingent
consideration – (22 123 176) (143 063 047)
Loans and
payables (3 250 772) (6 518 197) (618 428)
Preference
shares (363 238 909) (150 000 000) (150 000 000)
Net asset
value of
RIH 1 424 074 846 1 396 876 924 1 168 035 386
DESCRIPTION OF SIGNIFICANT UNOBSERVABLE INPUTS AND THEIR
SENSITIVITIES
30 September 2017
2.1 DESCRIPTION OF SIGNIFICANT UNOBSERVABLE INPUTS AND
SENSITIVITIES OF RAC (LEVEL 3 INVESTMENT)
Signifi-
Valua- cant
tion Fair unobser-
tech- value vable Input
nique R’m inputs value Sensitivity
RAC NAV 1 424,1 Earnings n/a A change in the
Invest- and multiple of the
ment multiple underlying
Holdings of the investment by 1
underlying would result in
investments an increase or
(refer to decrease in fair
the break- value of
down below) approximately
R107m.
The below table shows the sensitivities per underlying
investment as if these were held directly by RAC (level 3
investment)
Retail: Multi- 49,9 EBITDA, 4 – 8 A change in
Safari ples Sales, PE multiple up by
and 1 would result
Outdoor in an increase
(excluding in fair value of
non-equity approximately
investments) R14m.
Goldrush Multi- 896,4 EBITDAR 6,5 A change in the
Group ples EBITDAR multiple
by 1 would
result in an
increase or
decrease in fair
value of
approximately
R86,5m.
JB Private NAV 102 n/a n/a The NAV of the JB
Equity Private Equity
Investors Investors
Partnership Partnership is
directly linked
to the underlying
investment in
Unicorn Capital
Partners Limited
(previously
called Sentula
Mining Limited)
which is listed
on the JSE and is
not currently
significantly
impacted by any
fair value
adjustment to
trade and other
payables and
therefore NAV of
the JB Private
Equity Investors
Partnership is
considered to be
fair value. A 10%
movement in the
Unicorn Capital
share price would
have a R8.8m
impact on the
Partnership NAV.
Mining: NAV 19,7 Valua- 19% A multi-period
West Coast tion of excess earnings
resources mining method was used
(excluding rights to calculate the
non-equity mining rights in
investments) WCR. A change in
the value of the
mining rights by
10% would result
in a R33m change
in the NAV of
WCR.
Educa- Multi- 39,6 EBIT, 0,8 – 5 A change in
tion: ples Sales, multiple up by 1
SA College PE would result in
(excluding an increase in
non-equity fair value of
investments) approximately
R37m.
Other 4,3
level 3
investments
Total 1 111,9
30 September 2017
2.2 DESCRIPTION OF SIGNIFICANT UNOBSERVABLE INPUTS AND
SENSITIVITIES OF RAC (LEVEL 3 INVESTMENT)
Signifi-
Valua- cant
tion Fair unobser-
tech- value vable Input
nique R’m inputs value Sensitivity
RAC NAV 1 397 Earnings n/a A change in the
Investment and multiple of the
Holdings multiple underlying
of the investment by 1
underlying would result in
investments an change in
(refer to value of R106m.
breakdown
below)
The below table shows the sensitivities per underlying
investment as if these were held directly by RAC (level 3
investment)
Retail: Multi- 49,9 EBITDA, 4 – 8 A change in
Safari ples Sales, multiple up by 1
and PE would result in
Outdoor an increase in
(excluding fair value of
non-equity approximately
investments) R14m.
Goldrush Multi- 816,4 EBITDAR 6,5 An increase or
Group ples decrease in the
EBITDAR multiple
by 1 would
result in a
change in fair
value of
approximately
R122m.
JB Private NAV 100,9 n/a n/a The NAV of the
Equity JB Private
Investors Equity Investors
Partnership Partnership is
directly linked
to the
underlying
investment in
Sentula Mining
Limited which is
listed on the
JSE and is not
currently
significantly
impacted by any
fair value
adjustment to
trade and other
payables and
therefore NAV of
the JB Private
Equity Investors
Partnership is
considered to be
fair value. A
10% movement in
the Sentula
share price
would have a
R8,7m impact on
the Partnership
NAV.
Mining: NAV 26,1 Valuation 9% A multi-period
West Coast of mining discount excess earnings
resources rights rate method was used
(excluding to calculate the
non-equity mining rights in
investments) WCR. A change in
the value of the
mining rights by
10% would result
in a R24,7m
change in the
NAV of WCR.
Other 4,0
level 3
investments
Total 997,3
Factors that were taken into account by management in all
valuations include the current market conditions, the
invested market segment and interest rate certainty. The
market for these instruments often has significant barriers
to entry making the comparison pool of similar entities very
shallow. Specifically, the hunting equipment industry has few
market entrants with little reliable comparative data. The
nature of the fair value calculations means that the
calculated fair values could range greatly and are sensitive
to indirect and direct quantifiable and unquantifiable
inputs. Where we have influence over our investee companies
we plan to play an active role in the long-term strategy of
the company, ensuring that our interests are aligned.
3. RELATED PARTY TRANSACTIONS
There were no significant changes to related parties or
related party transactions since the year ended 31 March
2017.
4. SHARE CAPITAL
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Authorised
5 000 000
ordinary
shares of
R0,01 each 50 000 50 000 50 000
200 000 000
non-cumulative
redeemable
participating
preference shares
of no par value – – –
250 000 000
redeemable
preference
shares of no
par value – – –
1 500 000 000
perpetual
preference
shares of no
par value – – –
50 000 50 000 50 000
The 250 000 000 redeemable preference shares will have
the rights and privileges, restrictions and conditions as
determined by the Directors upon issue thereof, but which
are intended to rank in priority to the participating
preference shares, the perpetual preference shares and
ordinary shares in respect of dividends and on winding up.
The 1 500 000 000 perpetual preference shares will have
the rights and privileges, restrictions and conditions as
determined by the Directors upon issue thereof, but which
are intended to rank in priority to the participating
preference shares and ordinary shares in respect of
dividends and on winding up.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Issued
3 750 000
(March 2017:
3 750 000,
Sepember 2016:
5 000 000)
ordinary shares
of R0,01 each 37 500 37 500 50 000
Share premium 18 168 750 18 168 750 49 950 000
18 206 250 18 206 250 50 000 000
47 400 000
(March 2017:
47 400 000,
September 2016:
45 000 000)
non-cumulative
redeemable
participating
preference
shares 506 296 000 506 296 000 450 000 000
506 296 000 506 296 000 450 000 000
5. CURRENT AND DEFERRED TAXATION
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Taxation expense
Current taxation (19 072) (50 208) (32 591)
Taxation expense (19 072) (50 208) (32 591)
Deferred tax has not been recognised on the fair value
gains on the investment in RIH as the manner of expected
recovery of the investment is unlikely to result in future
tax consequences. Temporary differences not recognised in
terms of IAS 12 amount to R535 449 932 (March 2017:
R508 252 010, September 2016: R279 410 472).
Deferred tax has been recognised in RIH on the
investments that it expects to incur taxes on when
realising their value.
6. NET ASSET VALUE
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Net asset value
attributable to
ordinary
shareholders 104 489 429 102 550 538 112 091 750
Net asset value
attributable
to preference
share-
holders 1 320 746 384 1 296 238 794 1 058 146 124
Number of
shares in
issue
Ordinary
shares 3 750 000 3 750 000 5 000 000
Preferences
shares 47 400 000 47 400 000 47 200 000
Net asset
value per
ordinary share
(cents) 2 786 2 735 2 242
Net asset value
per preference
share (cents) 2 786 2 735 2 242
7. EARNINGS AND HEADLINE EARNINGS PER SHARE
Earnings and headline earnings per share are based on the
profit attributable to ordinary and preference shareholders
in issue during the year.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2017 2017 2016
R R R
Number of
shares in
issue
Ordinary shares 3 750 000 4 606 164 5 000 000
Preferences
shares 47 400 000 46 534 795 45 183 333
Earnings
Net profit
after tax 26 446 481 391 185 766 136 140 558
Headline
earnings 26 446 481 391 185 766 136 140 558
Basic and
diluted
earnings per
ordinary and
preference
share (cents) 52 765 271
Headline and
diluted
headline earnings
per ordinary
and preference
share (cents) 52 765 271
The Company has no dilutive instruments in issue as at
30 September 2017.
8. EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any matter or circumstance
arising since the end of the reporting period that needs to
be disclosed in the interim results.
9. DIVIDENDS
No dividend has been declared.
10. GUARANTEE, CESSION AND PLEDGE
During the current period, RIH issued another 200 preference
shares at R1m each to ABSA Bank Limited (“ABSA”). As at 30
September 2017 the capital balance of R350m was outstanding.
A preference dividend is payable on the preference shares on
31 March and 30 September each year at a rate equivalent to
115% of the prime overdraft rate and they are redeemable in
R50m tranches during December 2018, May 2019, August 2019,
July 2020, August 2020, September 2020 and October 2020.
RAC and RIH provided the following securities to ABSA in
terms of the Preference Share Agreement:
– RAC pledged its shares held in RIH to ABSA
– RAC provided a guarantee in favour of ABSA for the full,
complete and punctual payment and performance by RIH of all
its obligations under the Preference Share Agreement
– RIH pledged its shares held in Goldrush to ABSA
The securities will remain in full force until such time as
the preference shares issued to ABSA have been fully redeemed
and all payments made.
As at 30 September 2017, both the value of RAC’s pledged
shares in RIH as well as RIH’s pledged shares in Goldrush
exceeded the value of the preference shares issued to ABSA.
The directors of RAC foresee the possibility of RAC needing
to make any payments under the guarantee as being highly
remote.
RIH may not pay any distribution in excess of R1,5m to RAC
without the prior consent of ABSA.
Date: 20/11/2017 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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