CAPEVIN HOLDINGS LIMITED - Unaudited interim results for the six months ended 31 December 2017 and cash dividend declaration

Release Date: 08/03/2018 17:01
Code(s): CVH
 
Wrap Text
Unaudited interim results for the six months ended 31 December 2017 and cash dividend declaration

CAPEVIN HOLDINGS LIMITED
("Capevin Holdings" or "the Company" or "the Group")
(Incorporated in the Republic of South Africa)
Registration number 1997/020857/06
JSE Share code CVH
ISIN ZAE000167714

UNAUDITED INTERIM RESULTS
for the six months ended
31 December 2017 and
CASH DIVIDEND DECLARATION

- Headline earnings per share                                                             33.0 cents
- Intrinsic value per share at 31 December 2017                                                R9.46
- Interim dividend per share                                                             10.95 cents

SUMMARY GROUP STATEMENT OF FINANCIAL POSITION

                                                                          31 December        30 June
                                                                       2017         2016        2017
                                                                      R'000        R'000       R'000
ASSETS                           
                           
Non-current assets                           
Investment in joint venture                                       2 988 121    2 838 244   2 819 439
                           
Current assets                           
Cash and cash equivalents                                           24 305       18 629       23 364
                           
Total assets                                                      3 012 426    2 856 873   2 842 803
                           
EQUITY AND LIABILITIES                           
                           
Equity                           
Ordinary shareholders' interest                                   2 993 567    2 842 683   2 826 961
                           
Current liabilities                                                  18 859       14 190      15 842
Trade payables                                                        1 631           87         382
Unclaimed dividends                                                  17 207       14 080      15 442
Current income tax liability                                             21           23          18
                           
Total equity and liabilities                                      3 012 426    2 856 873   2 842 803
                           
Net asset value per share (cents)                                     340.1        323.0       321.2

SUMMARY GROUP STATEMENT OF COMPREHENSIVE INCOME

                                                                      Six months ended    Year ended
                                                                        31 December          30 June
                                                                    2017          2016          2017
                                                                   R'000         R'000         R'000
Share of profit of joint venture                                 321 461       298 702       347 127
Loss on dilution of interest in joint venture                      (992)         (586)       (1 619)
Investment income                                                    945           666         1 831
Unclaimed dividends forfeited                                        832           652         1 265
Administrative expenses                                          (9 455)       (1 042)       (2 930)
Profit before taxation                                           312 791       298 392       345 674
Taxation                                                           (265)         (186)         (513)
Profit for the period                                            312 526       298 206       345 161


Other comprehensive income                                      (26 226)     (186 752)     (156 138)
Items that may be reclassified subsequently to profit or loss:
  Share of other comprehensive income of joint venture
    Fair value adjustment - available-for-sale assets              1 477       (2 133)         (715)
    Fair value adjustment - cash flow hedges                       2 438             -       (2 439)
    Currency translation differences                            (35 616)     (163 401)     (151 622)
    Reclassified to profit or loss                                  (33)          (66)         (946)
Items that will not be reclassified to profit or loss:
  Share of joint venture's remeasurements of post-employment
    benefits                                                       (279)      (16 195)        11 685
  Other equity movements of joint venture                          5 787       (4 957)      (12 101)

Total comprehensive income for the period                        286 300       111 454       189 023



Profit for the period attributable to:
Owners of the parent                                             312 526       298 206       345 161


Total comprehensive income attributable to:
Owners of the parent                                             286 300       111 454       189 023


Earnings per share (cents)
- Basic                                                             35.5          33.9          39.2
- Diluted                                                           35.5          33.8          39.2

HEADLINE EARNINGS RECONCILIATION

                                                                      Six months ended   Year ended
                                                                        31 December         30 June
                                                                    2017          2016         2017
                                                                   R'000         R'000        R'000
Earnings attributable to ordinary shareholders                   312 526       298 206      345 161
Headline earnings adjustable items
Share of joint venture's adjustments
 Profit on sale of investment                                   (19 391)             -            -
 Impairment of property, plant and equipment                       3 463             -       84 120
 (Profit)/loss on sale of property, plant and equipment          (8 242)           694     (19 058)
 Tax on (profit)/loss on sale of property, plant and equipment     1 523         (128)        3 522
 Impairment of intangible assets and investments                       -        15 741            -
Loss on dilution of interest in joint venture                        992           586        1 619
Headline earnings                                                290 871       315 099      415 364


Earnings per share (cents)
- Basic                                                             35.5          33.9         39.2
- Diluted                                                           35.5          33.8         39.2

Headline earnings per share (cents)
- Basic                                                             33.0          35.8         47.2
- Diluted                                                           33.0          35.7         47.1

Number of shares (thousands)
- In issue                                                       880 103       880 103      880 103
- Weighted average                                               880 103       880 103      880 103

SUMMARY GROUP STATEMENT OF CHANGES IN EQUITY

                                                                     Six months ended    Year ended
                                                                        31 December         30 June
                                                                    2017          2016         2017
                                                                   R'000         R'000        R'000
Ordinary shareholders' equity at the beginning of the      
 period                                                        2 826 961     2 856 204    2 856 204
Total comprehensive income                                       286 300       111 454      189 023
Dividends paid                                                 (119 694)     (124 975)    (218 266)
Ordinary shareholders' equity at the end of the period         2 993 567     2 842 683    2 826 961

Dividend per share (cents)
- Interim                                                          10.95         10.60        10.60
- Final                                                                                       13.60


SUMMARY GROUP STATEMENT OF CASH FLOWS
     
                                                                     Six months ended    Year ended
                                                                       31 December          30 June
                                                                    2017          2016         2017
                                                                   R'000         R'000        R'000
Cash flows from operating activities       
Dividends received                                                83 561       125 563      222 374
Dividends paid                                                 (119 694)     (124 975)    (218 266)
Interest received                                                    945           666        1 831
Administrative expenses                                          (9 455)       (1 042)      (2 930)
Taxation paid                                                      (262)         (205)        (537)
Increase/(decrease) in trade and other payables and      
  unclaimed dividends                                              3 846         2 751        5 021
                                                                (41 059)         2 758        7 493
Cash flows from investing activities      
Repayment of shareholder's loan by joint venture                  42 000             -            -
Net increase in cash and cash equivalents                            941         2 758        7 493
Cash and cash equivalents at the beginning of the       
 period                                                           23 364        15 871       15 871
Cash and cash equivalents at the end of the period                24 305        18 629       23 364

NOTES TO THE GROUP INTERIM FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION AND ACCOUNTING POLICIES
     The summary group interim financial statements as at and for the six months ended 31 December 2017
     have been prepared in accordance with the Listings Requirements of the JSE Limited (JSE) and the
     requirements of the Companies Act (No. 71 of 2008), as amended, applicable to summary financial
     statements. The JSE requires summary financial statements to be prepared in accordance with the
     framework concepts and the measurement and recognition requirements 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 and to also, as a minimum, contain the information required by IAS 34: Interim Financial
     Reporting.

     The directors are responsible for the preparation of the summary group interim financial statements,
     prepared under supervision of the financial director, Mr P R Louw CA(SA), an employee of the
     Company's appointed manager, Remgro Management Services Limited. The summary group interim
     financial statements have not been audited or reviewed by the Company's auditors.

     The accounting policies applied in the preparation of these summary group interim financial statements
     are in terms of IFRS and are consistent with those applied in the previous group annual financial
     statements.

     Capevin Holdings applied all new and amended accounting pronouncements issued by the International
     Accounting Standards Board that are effective for the financial years commencing from 1 July 2017. None
     of these pronouncements had a material impact on the reported results.

2.   GROUP STRUCTURE
     The sole investment of Capevin Holdings is an effective interest of 26.74% (31 December 2016: 26.75%
     and 30 June 2017: 26.74%) in the issued share capital of Distell Group Limited (Distell), held via its 50%
     interest in Remgro-Capevin Investments Proprietary Limited (RCI).

3.   RELATED PARTY INFORMATION
     During the period under review the Group received dividends from RCI (a joint venture) of R83.6 million
     (31 December 2016: R125.6 million; 30 June 2017: R222.4 million), as well as the repayment of a
     shareholder's loan of R42.0 million. The Group also paid administrative fees of R0.6 million
     (31 December 2016: R0.5 million; 30 June 2017: R1.0 million) to Remgro Management Services Limited
     (a subsidiary of an investor with significant influence over the Group).

     Directors' emoluments paid during the six months ended 31 December 2017 amounted to R0.8 million
     (31 December 2016: R Nil; 30 June 2017: R0.2 million).

4.   SEGMENT REPORT
     Capevin Holdings is an investment holding company, with its sole investment being an effective interest
     in Distell. The directors have not identified any other segment to report on.

5.   THE PROPOSED RESTRUCTURING OF DISTELL'S OWNERSHIP STRUCTURE
     As approved at the Capevin Holdings and Distell scheme meetings on 27 October 2017, the shareholding
     structure of Distell will be simplified through various schemes of arrangement. Currently Distell has a
     multi-tiered ownership structure, in which Remgro Limited (Remgro) and Capevin Holdings own a
     material interest via RCI. Remgro and Capevin Holdings each hold 50% in RCI, and RCI has a 52.8%
     direct interest (on a fully diluted basis) in Distell.

     A new entity, Distell Group Holdings Limited (DGHL), will effectively acquire RCI's and all other
     shareholders' direct and indirect interests in Distell in exchange for shares directly in DGHL. DGHL will
     be listed on the JSE and Distell and Capevin Holdings will be delisted. The finalisation of the restructuring
     is expected to occur in April 2018, once all regulatory approvals have been obtained.


COMMENTARY

FINANCIAL RESULTS
For the six months ended 31 December 2017, Distell's revenue increased by 9.3% to R13.4 billion on a sales
volume increase of 3.7%. Reported headline earnings and headline earnings per share for the six months ended
31 December 2017 decreased by 5.1% to R1 117.3 million and 509.2 cents, respectively. Forex adjusted
normalised headline earnings, which exclude once-off losses and impairments in Tanzania Distilleries Limited
following a sachet ban and excise dispute, as well as an adjustment for interest income in the comparative period
on the settlement of an excise dispute, increased by 3.2% to R1 243.2 million (2016: R1 204.3 million). The
financial results for the period were again supported by efficiency improvements and cost containment
initiatives, but negatively affected by the stronger rand.

Capevin Holdings' headline earnings per share for the six months ended 31 December 2017 decreased by 7.8%
to 33.0 cents (2016: 35.8 cents), mainly due to Distell's lower headline earnings contribution, as well as
expenses incurred pertaining to the corporate restructuring referred to earlier.

Pro forma financial information
Capevin Holdings' directors are responsible for calculating the intrinsic value per share, which constitutes pro
forma financial information that were prepared for illustrative purposes. The intrinsic value per share was
determine with reference to Distell's closing share price at the reporting date in order to illustrate the underlying
value supporting the Company's share price. Because of the nature of pro forma information, it may not fairly
present the Group's financial position, changes in equity, results of operation or cash flows.

                                                                  31 December          30 June
                                                                         2017             2017
                                                                        R'000            R'000
Equity attributable to owners of the parent (net asset value)       2 993 567        2 826 961
Less: Carrying value of investment in joint venture               (2 988 121)      (2 819 439)
Add: Fair value of investment in joint venture                      8 322 907        8 038 925
Intrinsic net asset value                                           8 328 353        8 046 447
   
Number of shares in issue (thousands)                                 880 103          880 103
Net asset value per share (R)                                            3.40             3.21
Net intrinsic value per share (R)                                        9.46             9.14
    
Number of Distell shares held by RCI (thousands)                      117 348          117 348
Closing price (R)                                                      141.85           137.01
Capevin Holdings' share                                                   50%              50%

Capevin Holdings' intrinsic value per share increased by 3.5% from R9.14 on 30 June 2017 to R9.46 on
31 December 2017, based on Distell's last traded share price of R141.85 at that date (excluding capital gains
tax), while the discount to intrinsic value has widened from 1.0% to 4.5%. On 26 February 2018, Distell's share
price decreased to R137.79, while Capevin Holdings' decreased to R8.80 (31 December 2017: R9.04).

PROSPECTS
Distell's board believes that growth across advanced economies and most emerging markets points to a more
favourable global economic outlook. However, risks continue to face the domestic economy in the short term.
The strengthening of the rand, higher grape prices and water shortages will have a negative impact on the
business.

Distell intends to defend and grow its market share through an optimised brand portfolio and innovation. It will
look to continue and lead in the recovery of the brandy category and drive its wine strategy. Competition
increased in the local cider market and Distell will increase investment in the renovation of its Hunter's brand.

Distell is making good progress in its programme to create a more agile and efficient business by restructuring
its brand portfolio, asset base and operating models. Distell has a portfolio of strong, divers and appealing
brands, as well as the capacity to trade across a spectrum of markets. Accordingly, it is well positioned to
capture trading opportunities in both domestic and foreign markets.

Refer to www.distell.co.za for Distell's comprehensive interim results.

DIRECTORATE
There was no change in the Company's directorate during the period under review.

DECLARATION OF CASH DIVIDEND
In terms of the dividend policy of Capevin Holdings, dividends received from its indirect interest in Distell,
after providing for administrative expenses, will be distributed to shareholders. The directors have consequently
resolved to approve and declare an interim gross cash dividend (dividend number 27) of 10.95 cents
(2016: 10.60 cents) per share for the six months ended 31 December 2017. The dividend has been declared
from income reserves.

A dividend withholding tax rate of 20% or 2.19 cents per share will be applicable, resulting in a net dividend
of 8.76 cents per share, unless the shareholder concerned is exempt from paying dividend withholding tax or is
entitled to a reduced rate in terms of the applicable double-tax agreement.

The number of issued ordinary shares as at 8 March 2018 is 880 103 265. The Company's income tax number
is 9599/656/71/8.

Dates of importance:

Last day to trade in order to participate in the dividend                       Tuesday, 3 April 2018
Shares trade ex dividend                                                      Wednesday, 4 April 2018
Record date                                                                      Friday, 6 April 2018
Payment date                                                                     Monday, 9 April 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 4 April 2018, and Friday,
6 April 2018, both days inclusive.

In terms of the Company's Memorandum of Incorporation (MOI), dividends will only be transferred
electronically to the bank accounts of shareholders, as dividend cheques are no longer issued. In the instance
where shareholders do not provide the Transfer Secretaries with their banking details, the dividend will not be
forfeited, but will be marked as "unclaimed" in the share register until the shareholder provides the Transfer
Secretaries with the relevant banking details for payout.

In terms of the Company's MOI, the Board declared all dividends that are not claimed by shareholders after a
three-year period forfeited in terms of the applicable prescription laws.

Signed on behalf of the Board of Directors.


Chris Otto                                                                        Pieter Louw
Chairman                                                                          Financial Director

Stellenbosch
8 March 2018

DIRECTORATE

Non-executive directors
C A Otto* (Chairman),
A E v Z Botha*, J J Durand, R M Jansen*, E G Matenge-Sebesho*
(*Independent)

Executive director
P R Louw (Financial Director)

CORPORATE INFORMATION

Secretary
Remgro Management Services Limited

Listing
JSE Limited
Sector: Consumer - Food and Beverage - Beverages - Distillers & Vintners

Business address and registered office
Millennia Park, 16 Stellentia Avenue, Stellenbosch 7600
(PO Box 456, Stellenbosch 7599)

Transfer Secretaries
Computershare Investor Services Proprietary Limited,
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
(PO Box 61051, Marshalltown 2107)

Auditors
PricewaterhouseCoopers Inc.
Stellenbosch

Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)

Website
www.capevin.com



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