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Audited consolidated results of eXtract Group Limited for the fourteen-month period ended 31 August 2017
eXtract Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZAE000246013
AUDITED CONSOLIDATED RESULTS OF EXTRACT GROUP LIMITED
FOR THE FOURTEEN-MONTH PERIOD ENDED 31 AUGUST 2017
FINANCIAL REVIEW
- The Group reported a loss for the period of R2 013 million (including
impairments of R1 494 million) compared to a loss of R2 253 million in
the prior period
- R602 million of mining assets sold during the period
- All mining contracts being exited in order to monetise asset base
- Net asset value post conversion of debt is positive R357 million at
31 August 2017
SALIENT FEATURES
- enX restructuring implemented on 12 October 2017
- Settlement of external banking debt in November 2017
- Initial investment in Last Mile Fund ("LMF") completed post period end
INTRODUCTION
The period under review has been both eventful and challenging for eXtract
Group Limited ("eXtract" or "Group"), with the Group transitioning into its new
form and subsequently changing the strategic direction of the Group from a
contract miner to an investment fund as led by management and the new
board of directors.
The disposal of the Fleet Management and Logistics and Industrial Equipment
divisions to enX Group Limited ("enX") was completed and effective from
8 November 2016 and the remaining Group was supported by various
mezzanine funding instruments ("Corporate disposal Group" or "enX
transaction").
These funding instruments were subsequently restructured in line with the new
strategy, as reported in April 2017, subject to shareholder approval which was
obtained on 10 August 2017. At the date of this report, all suspensive conditions
to the restructure were met and the restructure had been fully implemented.
SALE OF END OF LIFE AND EXCESS ASSETS
On 11 July 2016, shareholders approved the sale of specified excess assets
(refer to SENS announcement dated 11 July 2016 and related circular dated
10 June 2016). On 10 August 2017, shareholders approved the sale of all
remaining assets in line with the new strategy.
Asset sales have progressed well with R725 million sold during the period to
31 August 2017 and a further R441 million of sales secured post period-end to
October 2017.
STRATEGIC REVIEW
Over the past 14 months the operating environment for contract mining has
been particularly challenging, with the Group continuing to report operational
losses at certain operations.
The difficult operating environment was further impacted by the termination
of the Boteti contract in Botswana (refer to the SENS announcement dated
5 December 2016), together with the PPM contract proving to be suboptimal
and Tharisa Minerals Proprietary Limited ("Tharisa") notifying the Group of its
intention to pursue an owner operator model.
As a result, the remaining contracts could not be responsibly sustained due
to their short-term nature and therefore a decision was made to exit or not
renew any of the Group's remaining profitable contracts. All contracts will
be concluded by 30 November 2017 and the Group will then focus on the
monetisation of its assets held for sale to settle outstanding debt obligations
and transition into a focused mining fund.
Pursuant to the strategic review process as detailed below, a number of key
outcomes have been identified and the implementation is on track.
Key items implemented to date include:
- the termination of all mining contracts with only two remaining operational
contracts which will end in November 2017;
- conclusion of the Tharisa asset sale, with funds of R278 million flowing on
5 October 2017;
- the disposal of further excess assets (R441 million post period end);
- significant reduction of eXtract's overhead costs, including a reduction
in headcount;
- changes to the Board and management of eXtract; and
- conversion of R1 877 million of enX debt into equity in October 2017.
It is the intention of management to apply all proceeds from asset sales to
reduce banking debt, provide seed capital to the LMF, and to pay down the
remaining enX debt over the next 12 to 18 months.
FUTURE STRATEGY
As communicated earlier in the year, all surplus cash generated will be
utilised in the following manner:
- Initial investment of seed capital to the value of R25 million into the
LMF (completed);
- Settlement of SA banking term debt of R330 million (completed);
- Repayment of R100 million to enX expected by February 2018;
- Further investment of R80 million into the LMF;
- Settlement of the remaining enX debt of R150 million within the next 12 to
18 months; and
- Investment of the remainder of the cash generated into the LMF or other
opportunities as the need may arise.
The LMF is a fund created by Mr Bernard Swanepoel and Mr Clinton Halsey,
eXtract Group and African Rainbow Capital ("ARC") with the purpose of
making high return investments within the resources and supply sectors.
It is expected that the funding of such opportunities may also result in eXtract
being able to utilise select assets held for sale which may yield a better return
in-use than outright sale.
ARC will seed the fund with an initial R92.5 million, eXtract with an initial
R25 million, and a combined R12.5 million by Mr Swanepoel and Mr Halsey.
ARC has approved matching financing as and when eXtract's monetisation of
assets process releases additional cash over the next 12 to 18 months.
eXtract will continue to focus on the following in the short to medium term:
- Reduction of external debt;
- Responsible exit of all operations; and
- Monetisation of assets held for sale.
In its goal of creating shareholder value, the Board will in parallel look
to further transform the Company should any attractive opportunities arise.
SUBSEQUENT EVENTS
Subsequent to period-end, the following material events occurred:
- enX debt conversion agreement became unconditional on 28 September 2017;
- Tharisa asset sale was unconditionally approved on 22 September 2017;
- Confirmation of the exit of the Mogalakwena and Aganang contracts at
end November 2017;
- Sales of assets of R441 million to end of October 2017; and
- Settlement of the SA banking term debt of R330 million.
SOLVENCY AND LIQUIDITY
The board is satisfied that after the conversion of the enX mezzanine debt
and preference share instruments into equity the Group is solvent for the
foreseeable future, even though the liabilities are greater than the assets at
31 August 2017. The conversion agreement was unconditional at 28 September
2017 and fully implemented in November 2017.
The board is further satisfied that the strategies to address the liquidity and
refinancing risks, including the de-gearing strategy, are on track and are being
effectively addressed.
Management has been proactive in addressing the immediate liquidity
concerns and the achievement of the strategic plan which is critical to the
Group meeting its repayment obligations.
DIVIDEND
The board has not declared a dividend given the Group's performance and
change in strategy. It is noted that a dividend in specie was paid in
November 2016 relating to the enX transaction.
GOING CONCERN
The results presented for the eXtract Group have been prepared on the
assumption that the eXtract Group, as a whole, will continue to operate as a
going concern. This assumption is aligned with the unconditional agreement
relating to the enX conversion of debt which results in the Group returning to
a positive net asset value position of R357 million and the current cash flow
projections around asset sales and revenues. The Group has sufficient cash
resources and banking facilities to settle debts as they arise.
DIRECTOR CHANGES
There have been no changes to the board since 30 June 2017, other than the
resignation of DAG Chadinha effective 31 December 2017.
By order of the board
ZB Swanepoel CS Halsey
Executive Chairman Interim CEO
28 November 2017
AUDITED SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at
31 August 30 June
2017 2016
Rm Rm
ASSETS
Non-current assets - 2 201
Intangible assets - 37
Property, plant and equipment - 77
Leasing assets - 2 044
Deferred tax assets - 41
Finance lease receivables - 1
Other investments and loans - 1
Current assets 1 267 9 321
Finance lease receivables - 1
Inventories 15 87
Trade and other receivables 313 952
Taxation in advance - 6
Cash and cash equivalents 109 148
Assets held for sale(2) 830 8 127
Total assets 1 267 11 522
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 891 1 839
Other reserves 325 449
Accumulated loss (3 736) (688)
(Deficit)/equity attributable to owners of the
parent (1 520) 1 600
Non-controlling interests - 29
Total (deficit)/equity (1 520) 1 629
Non-current liabilities 1 891 2 588
Interest-bearing borrowings(3) 1 877 2 539
Deferred tax liabilities 14 49
Current liabilities 896 7 305
Current portion of interest-bearing
borrowings(3) - 92
Trade, other payables and provisions 226 675
Current tax liabilities - 15
Liabilities associated with assets held for
sale(2) 670 6 523
Total equity and liabilities 1 267 11 522
AUDITED SUMMARISED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the for the
14 months 12 months
ended ended
31 August 30 June
2017 2016
Rm Rm
Loss for the period (2 013) (2 253)
Total other comprehensive (loss)/income for
the period, net of taxation
Items that may be reclassified subsequently
to profit or loss (72) 132
Exchange differences on translation of
foreign subsidiaries (72) 124
Net fair value gain on cash flow hedges
and other fair value reserves - 8
Total comprehensive loss for the period,
net of taxation (2 085) (2 121)
Attributable to:
Owners of the parent (2 087) (2 125)
Non-controlling interests 2 4
(2 085) (2 121)
DISCONTINUED AUDITED SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
for the for the
14 months 12 months
ended ended
31 August 30 June
2017 2016*
Rm Rm
Discontinued operations
Revenue 5 418 9 530
Profit from operations before depreciation
and amortisation 635 2 457
Depreciation and amortisation (330) (1 906)
Profit on disposal of property, plant and
equipment - 6
Operating profit 305 557
Net foreign exchange (losses)/gains (36) 1
Fair value gains recycled from equity 44 -
Net impairment of assets(6) (1 494) (1 498)
IFRS 5 adjustment (448) (719)
Loss before net finance costs (1 629) (1 659)
Net finance costs(8) (340) (606)
Finance costs (353) (651)
Finance income 13 45
Loss before taxation (1 969) (2 265)
Income tax 22 12
Loss for the period (1 947) (2 253)
Loss on sale of subsidiaries (3) -
Deconsolidation of subsidiary(7) (63) -
Total loss for the period from discontinued
operations (2 013) (2 253)
Attributable to:
Owners of the parent (2 015) (2 257)
- Loss for the period from continuing
operations - -
- Loss for the period from discontinued
operations (2 015) (2 257)
Non-controlling interests 2 4
Loss for the period (2 013) (2 253)
Cents Cents
Loss per share from discontinued operations(11)
- Basic and diluted loss per share (423.2) (576.8)
* Amounts represented to show all operations in comparative results as
discontinuing operations.
AUDITED SUMMARISED CONSOLIDATED STATEMENT OF DISCONTINUED CASH FLOWS
for the for the
14 months 12 months
ended ended
31 August 30 June
2017 2016
Rm Rm
Cash flows from operating activities
Cash generated from operations before
working capital movements 740 2 606
Working capital movements 594 827
Cash generated from operations 1 334 3 433
Finance income 13 45
Finance costs (353) (651)
Taxation paid (45) (101)
Net cash flows from operating activities 949 2 726
Cash flows from investing activities
(Acquisition)/disposal of businesses (11) 42
Net capital disposals (211) (2 295)
Movement in finance lease receivables 36 (6)
Proceeds on disposal of other investments
and loans - 2
Net cash flows from investing activities (186) (2 257)
Cash flows from financing activities
Repurchase of non-controlling interest - (16)
Issue of shares 37 -
Conversion of treasury shares 15 -
Dividends paid to minorities (2) (7)
Net decrease in interest-bearing borrowings (995) (324)
Net cash flows from financing activities (945) (347)
Net (decrease)/increase in cash and cash
equivalents (182) 122
Effect of exchange rate translation on cash
and cash equivalents (20) 9
Derecognition of cash and cash equivalents (23) -
Cash and cash equivalents at beginning of
period 334 203
Cash and cash equivalents at end of period 109 334
AUDITED SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Stated Other Retained controlling
capital reserves (loss)/income interest Total
Rm Rm Rm Rm Rm
Balance at 1 July 2015 1 839 330 1 569 32 3 770
Total comprehensive loss for the period - 132 (2 257) 4 (2 121)
Loss for the period - - (2 257) 4 (2 253)
Other comprehensive income for the period,
net of taxation - 132 - - 132
Net share-based payment movement - 5 - - 5
Dividends paid - - - (7) (7)
Vesting of share incentive scheme - (1) - - (1)
Goodwill reserve arising on additional
interest in subsidiary - (16) - - (16)
Deferred taxation directly in equity - (1) - - (1)
Balance at 30 June 2016 1 839 449 (688) 29 1 629
Total comprehensive loss for the period - (72) (2 015) 2 (2 085)
Loss for the period - - (2 015) 2 (2 013)
Other comprehensive loss for the period,
net of taxation - (72) - - (72)
Vesting of share incentive scheme - (4) - - (4)
New issue of stated capital* 37 - - - 37
Conversion of treasury shares 15 - - - 15
Dividend paid - - - (2) (2)
Dividend in specie - - (1 022) - (1 022)
Realisation of translation reserve - (32) - - (32)
Reversal of share-based payment reserve - (17) 17 - -
Transfer within categories of reserves - 23 (23) - -
Disposal of subsidiary - (27) - (29) (56)
Deferred taxation directly in equity - 5 (5) - -
Balance at 31 August 2017 1 891 325 (3 736) - (1 520)
* On 16 November 2016 101 400 000 shares were issued at R1 each. These were fair valued at R37 million.
NOTES
(1) Basis of preparation
The audited provisional consolidated financial statements for the fourteen
months ended 31 August 2017 have been prepared in accordance
with and containing the information required by IAS 34: Interim Financial
Reporting, as well as the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Pronouncements as
issued by Financial Reporting Standards Council, the JSE Limited Listings
Requirements and the South African Companies Act. The accounting
policies and their application are consistent, in all material respects, with
those detailed in eXtract's (previously Eqstra Holdings Limited) 2016 annual
consolidated financial statements, except for the adoption on 1 July
2016 of those new, revised and amended standards and interpretations
detailed therein.
The adoption of the new and amended statements of generally accepted
accounting practice, interpretations of statements of generally accepted
accounting practice, and improvements project amendments did not
have a material impact on the Group.
Audited Audited
31 August 30 June
2017 2016
Rm Rm
(2) Assets classified as held for sale
Property, plant and equipment 52 -
Leasing assets 778 809
Corporate transaction disposal group - 7 318
830 8 127
Liabilities directly associated with assets
held for sale
Interest-bearing borrowings 375 238
Current taxation liabilities 45 74
enX mezzanine debt 250 -
Corporate transaction disposal group - 6 211
670 6 523
Assets held for sale comprise assets in South Africa of R696 million (June
2016: R298 million) and assets in Mozambique of R134 million (June 2016:
R511 million).
Of the R830 million of assets held for sale, sales amounting to R441 million
have been concluded post period-end to end October 2017. Management
believe that the sales of the remainder of the assets are highly probable
within the next 12 months.
Audited corporate transaction disposal statement of financial position
Disposal
statement
of financial
position
8 November 30 June
2016 2016
Rm Rm
ASSETS
Intangible assets 3 -
Property, plant and equipment 257 273
Leasing assets 5 056 5 573
Other investments and loans 30 12
Finance lease receivables 2 36
Inventories 853 819
Trade and other receivables and
derivatives 646 883
Operating assets 6 847 7 596
Taxation in advance 58 23
Cash and cash equivalents 75 186
Unallocated loss on sale from the
corporate transaction (487) (487)
Total assets 6 493 7 318
LIABILITIES
Trade and other payables and
derivatives 1 153 1 194
Interest-bearing borrowings 6 575 6 854
Loans due from Contract Mining entities (2 853) (2 403)
Operating liabilities 4 875 5 645
Deferred tax liabilities 411 498
Current tax liabilities 114 68
Total liabilities 5 400 6 211
The sale of the Fleet Management and Logistics division and the Industrial
Equipment division to enX took place on 8 November 2016. The disposal
balance sheet is disclosed above.
As part of the corporate transaction, subsidiaries of eXtract in the Fleet
Management and Logistics and Industrial Equipment divisions were
transferred to enX on the effective date. The assets and associated
liabilities were disclosed as held for sale at 30 June 2016.
(3) Interest-bearing borrowings
Audited Audited
31 August 30 June
2017 2016
Rm Rm
Facility breakdown
External debt - 236
enX mezzanine debt 1 277 -
Preference shares 600 -
Intercompany loans - 2 395
1 877 2 631
The enX transaction was executed for a consideration of ordinary share
capital of R101 million (R37 million fair value), preference share capital
of R600 million and subordinated mezzanine debt of R1 656 million.
The total debt and preference share capital at 31 August 2017 amounts
to R2 127 million, of which R1 877 million was approved for conversion
to equity on 10 August 2017. The remaining debt will be settled from
asset sales.
Audited Audited
31 August 30 June
2017 2016
Rm Rm
(4) Capital commitments - 429
- Contracted - 50
- Authorised by directors but
not contracted - 379
Guarantees 2 10
(5) Fair value hierarchy disclosures
There are no financial asset and liabilities that are recognised and
subsequently measured at fair value, analysed by valuation technique.
Audited Audited
31 August 30 June
2017 2016*
Rm Rm
(6) Impairment of assets
Impairment of leasing assets 1 411 1 351
Impairment of intangible assets 32 11
Impairment of restricted cash 18 -
Impairment of property, plant and
equipment 33 77
Impairment of investments and loans - 59
Total impairments 1 494 1 498
* Amounts represented to show comparative results from discontinued
operations.
(7) Deconsolidation of subsidiary
Discontinued operations
Gain on deconsolidation of subsidiary 156 -
Provision for liabilities (net of expected
proceeds) (67) -
Impairment of inter-company loans (152) -
Total (63) -
The Karowe (Boteti) contract in Botswana was terminated and money
withheld which resulted in the Botswana entity being placed into
liquidation. The Group is therefore no longer in control of the subsidiary
and it has been deconsolidated.
A deconsolidation gain was offset by the relevant impairment on
inter-company loans and provision for liabilities for which guarantees
were provided.
(8) Segmental disclosures
The results consist of two segments being the Contract Mining division and
the corporate disposal group being the previous Eqstra entities (Eqstra
Fleet Management and Eqstra Industrial Equipment).
Audited Audited
31 August 30 June
2017 2016*
Rm Rm
Revenue 5 418 9 530
Contract Mining 3 505 2 964
Corporate Disposal Group 1 913 6 566
Operating profit 305 557
Contract Mining (239) 151
Corporate Disposal Group 575 406
Loss before taxation (1 969) (2 265)
Contract Mining (1 946) (620)
Corporate Disposal Group - (1 645)
The remaining balance sheet consists of only the Contract Mining division.
(9) Discontinued operations
All operations have been classified as discontinued in line with the
Group strategy.
Cents Cents
(10) Net (deficit)/asset value per share
attributable to owner of the parent (299.9) 394.6
(11) Headline loss per share
Reconciliation of discontinued headline
earnings per share
Basic and diluted loss per share (423.2) (576.8)
Profit on sale of property, plant and
equipment and leasing assets - (1.5)
Net impairments of assets 313.7 382.8
IFRS 5 fair value adjustment 94.1 183.7
Loss on sale of subsidiaries 0.7 -
Deconsolidation of subsidiary 13.3 -
Taxation effect (13.3) (18.1)
Headline loss per share (14.7) (29.9)
Million Million
(12) Weighted average number of shares in
issue for the period
Number of ordinary shares
- in issue 506.9 405.5
- in issue (net of treasury shares) 498.6 391.3
Weighted average number of ordinary
shares in issue during the period 476.2 391.3
- opening shares (net of treasury shares) 391.3 391.1
- additional shares issued 80.3 -
- disposal of treasury shares 4.6 0.2
Basic and diluted weighted average
number of ordinary shares 476.2 391.3
(13) Significant judgements and estimates
The valuation of the equipment impaired was based on market values on
a normalised sales basis and reflects management's best estimate of the
recoverable amount.
(14) Summarised Report
This summarised report is extracted from audited information but is not
itself audited. The directors take full responsibility for the preparation of
the summarised report and for ensuring that the financial information
has been correctly extracted from the underlying audited annual
financial statements.
(15) The auditors
Deloitte & Touche have issued their unqualified audit report on the
audited provisional consolidated financial statements for the 14 months
ended 31 August 2017. The audit was conducted in accordance with
International Standards on Audit Engagements.
A copy of their audit report is available for inspection at eXtract's
registered office. Any reference to future financial performance included
in this announcement, has not been audited or reported on by eXtract's
auditors.
NAME AND REGISTRATION NUMBER EXECUTIVE DIRECTORS
EXTRACT GROUP LIMITED ZB Swanepoel (Executive chairman)
1998/011672/06 CS Halsey (Interim CEO)
JSE share code: EXG DAG Chadinha (CFO)(1) CA(SA)
ISIN: ZAE000246013 ((1)Preparer of financial results)
REGISTERED OFFICE AND BUSINESS COMPANY SECRETARY
ADDRESS L Möller
61 Maple Street, Pomona, Kempton Park,
1619 PO Box 1050, Bedfordview, 2008 TRANSFER SECRETARIES
Computershare Investor Services
NON-EXECUTIVE DIRECTORS Proprietary Limited
JL Serfontein Rosebank Towers, 15 Biermann Avenue
SA Nkosi*, OM Matloa*, CK McClain* Rosebank, 2196
(*Independent) PO Box 61051, Marshalltown, 2107
SENS Release date: SPONSOR
29 November 2017 Java Capital
www.extractgroup.co.za
Date: 29/11/2017 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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