Wrap Text
Condensed Unaudited Interim Financial Results For The Six Months Ended 28 February 2018
enX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
JSE share code: ENX ISIN: ZAE000222253
("enX" or "the Group")
CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS
for the six months ended 28 February 2018
Revenue up R3.6 billion (2017: R2.4 billion)
Profit before taxation Up R182.7 million (2017: R175.2 million)
Adjusted HEPS Up 87.5 cps (2017: 75.1 cps)
Strengthened maturity profile and sufficient liquidity for 2019 repayments
NATURE OF BUSINESS
enX is a diversified industrial group that provides quality branded industrial, petrochemical, and fleet
management and logistics products and services.
enX is organised into the three business segments as follows:
- enX Equipment ("Equipment"):
- EIE Group provides distribution, rental and value added services for industrial and materials
handling equipment in South Africa, other African countries, the United Kingdom and Ireland
("UK"). EIE in South Africa is the market leader in materials handling and the sole distributor of
Toyota Forklifts, BT warehousing equipment and Konecranes heavy duty forklifts and container
handling equipment in sub-Sahara Africa. Its UK operation, Impact, is the exclusive distributor
for Cat Lift Trucks and Konecranes heavy duty forklifts and container handling equipment in the
UK and Ireland ("EIE");
- New Way Power manufactures, installs and maintains diesel generators as well as provides
temporary power through Genmatics. It distributes a range of industrial and marine engines
and components through PowerO2 which is the sole distributor of John Deere and Mitsubishi
industrial engines in South Africa ("Power"); and
- Austro distributes professional woodworking equipment and tooling and provides associated
services such as blade sharpening and equipment maintenance. It is the sole distributor of
Biesse equipment and Leitz tooling in South Africa ("Wood").
- enX Fleet ("Fleet"):
- Eqstra Fleet Management and Logistics business ("EFML") provides a full spectrum of
services including leasing, fleet management, outsourcing solutions, maintenance, warranty
management and vehicle tracking solutions for passenger and commercial vehicles.
Its footprint is in South Africa and sub-Saharan Africa. The EFML's commercial vehicle
operations are supported by a nationwide network of workshops and panel repair shops.
- enX Petrochemicals ("Petrochemicals"):
- Centlube produce and market oil lubricants in South Africa. It is the sole distributor of
ExxonMobil lubricants (excluding marine and aviation). ("Lubricants"); and
- West African International distributes plastics, polymers, rubber and speciality chemicals
into Southern African. They are the sole distributors of ExxonMobil chemicals in South
Africa. ("Chemicals").
enX has a proven track record of acquiring quality industrial assets that have strong market positions,
represent leading global brands with committed customer partnerships. We instill entrepreneurial
management to drive returns through the disciplined allocation of capital. enX was founded in 2007,
operates in fourteen countries and has over 2 400 employees.
OVERVIEW
The board is pleased to present enX's interim results for the six months ended 28 February 2018. These
results include six months of trading for EIE and EFML as compared to the four months of trading
included in the comparative period.
Our strategic focus during the past six months has been on deepening our OEM relationships, expanding
our UK footprint, strengthening our funding profile and bedding down our management structure.
Having separated from the contract mining business, operated our acquired businesses profitably for
a further twelve months, reduced our net debt and re-entered the debt capital markets, the Group has
substantially stabilised relative to the comparative period:
1. EIE and EFML performed satisfactorily. Under enX's ownership the businesses have steadied.
Capital constraints experienced by the EFML business in the past have largely been released,
freeing up the business to refocus on maintaining and growing its leasing book.
2. In line with our strategic intent to expand our footprint in the UK, two forklift businesses were
acquired. Both businesses are similar to our current operations and will be seamlessly integrated
as additional branches. These acquisitions were funded internally by the UK operations and are not
material to the Group.
3. The recapitalisation and unbundling of eXtract Group Limited ("eXtract") was finalised in October
2017 and R175 million of the R250 million remaining debt has been received from eXtract at
reporting date. A further R25 million was received post February, with the remaining R50 million
expected in the next few months. This is well ahead of our original anticipated timing.
4. The Lubricants business, having finalised the re-commissioning of a manufacturing plant in
Boksburg to carry the highest global quality standards, concluded a 5 year agreement with
ExxonMobil for the blending of lubricants. The benefits of local blending will largely become evident
in our 2019 financial year. In addition to this, a 3 year extension was signed with ExxonMobil to
continue marketing and distributing their oil lubricants.
5. The Group took a strategic decision to hedge all of its foreign exchange positions ahead of the
political events that took place in South Africa over December 2017. As a result of a subsequent
stronger Rand, foreign exchange losses for the Group of R26.8 million were incurred.
6. Power commenced the year with a healthy order book but difficult trading conditions resulted
in a substantial slow down in new order intake during the period. As a result the business was
restructured to align to the lower sales volumes.
7. Subsequent to the period-end, the Group raised a R315.5 million 3.5 year note specific liquidity
facility and R260 million in the debt capital markets through an auction conducted on 17 April 2018.
Together with the cash held at 28 February 2018 and the funds received from the bonds raised, we
were able to redeem R565.5 million of maturing debt during April 2018. The Group's debt funding
position has been strengthened with a more prudent maturity profile and sufficient liquidity to
address capital repayments to the end of August 2019.
In terms of transformation, the Group has been verified as a level 7 contributor in terms of the amended
B-BBEE codes of good practice. Our main operating segments continue to operate at levels 2 and
4 BBBEE contribution levels. The lower Group rating (previously level 4) was as a result of the corporate
action's resulting dilutionary effect of our empowerment interest. The board remains committed to
transformation and endeavours to improve the rating.
FINANCIAL RESULTS
Overview
Revenue for the period increased to R3.6 billion (2017: R2.4 billion) with the inclusion of EIE and
EFML for six months as compared to their four months inclusion for the prior corresponding period.
Revenues for Petrochemicals increased to R778.4 million (2017: R695.7 million) following good growth
in the Chemicals business. The Group's EBIT improved to R354.1 million (2017: R257.1 million) and PBT
improved to R182.7 million (2017: R175.2 million). Consistent with prior disclosures, management has
elected to disclose adjusted EBIT which provides a more meaningful reflection of sustainable earnings.
Adjusted EBIT increased to R377.9 million (2017: R306.7 million). The restructure and unbundling of
eXtract, culminating in an in specie dividend having been made to shareholders in October 2017, resulted
in the Group's NAV and NTAV dropping to 1 459.7 cents (2017: 1 820.6 cents) and 993.7 cents (2017:
1 367.8 cents) respectively. If eXtract was excluded from the 2017 comparative number the NAV would
have been at 1 323.7, a period on period increase of 10.3% and the TNAV would have been at 870.9, a
period on period increase of 14.1%.
The effective tax rate for the period was 22.9% (2017: 33.33%). The lower charge is primarily due to the
lower effective tax rate in the UK and Botswana and the impact of the deemed interest income. Looking
forward we anticipate the tax rate to normalise.
Earnings
Headline earnings increased by 20.9% to R138.0 million (2017: R114.1 million). This translates into
headline earnings per share ("HEPS") of 77.4 cents (2017: 73.6 cents). Adjusted headline earnings
increased by 33.9% to R156.0 million (2017: R116.5 million) and translated into adjusted HEPS of
87.5 cents (2017: 75.1 cents). The weighted average number of shares (net of treasury shares) in issue
during the current reporting period was 178 332 559 as compared to the previous reporting period's
weighting of 155 154 559, following the shares issued for the acquisition of EIE and EFML and the capital
raise in November 2016.
Capex
Capital expenditure increased to R823.2 million (2017: R492.8 million). The increase was due to the
longer trading period and was employed primarily to maintain and grow leasing fleets.
Funding
The Group's net interest-bearing debt (including deferred vendor consideration and cash) decreased to
R4 345.5 million (August 2017: R4 572.3 million). As announced on SENS on 7 December 2017, the Group
raised a term loan of R200 million the proceeds of which, together with the loan repayments received
from eXtract, are included in our cash balances at 28 February 2018. These cash balances were utilised
in April 2018 to settle maturing bonds.
Cash flow
Cash flows from the Group were positive over the period. The key drivers being cash flow from operating
activities after capital expenditure on leasing assets of R1 094.8 million and the R175 million cash
received from eXtract in respect of amounts due. The cash paid for the 'Business combinations' was
settled out of existing cash resources and funding facilities available to the Group.
BASIS OF PREPARATION
The condensed unaudited interim financial results for the six months ended 28 February 2018 have been
prepared in accordance with International Financial Reporting Standards ("IFRS") and complies with
IAS 34 – Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Board, the Financial Pronouncements as issued by the Financial Reporting Standards Council,
the requirements of the Companies Act, No. 71 of 2008 of South Africa and the Listings Requirements
of the JSE Limited. The accounting policies used in the preparation of the condensed unaudited interim
financial results for the six months ended 28 February 2018, are consistent with those applied in the
audited financial statements for the year ended 31 August 2017.
During the current period, the Group adopted those standards and interpretations in issue and effective
for the period. The adoption of these new and amended standards and interpretations has not had a
significant impact on the Group's adopted accounting policies.
These results have been compiled under the supervision of Irwin Lipworth CA(SA), the Financial Director.
The condensed interim financial results have not been reviewed or reported on by the Group auditors.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
28 February 2018 28 February 2017 31 August 2017
R'000 R'000 R'000
ASSETS
Non-current assets 6 439 158 6 480 481 6 557 215
Property, plant and equipment 387 849 379 753 374 470
Leasing assets 5 045 852 5 115 365 5 077 814
Goodwill 530 352 480 930 504 510
Intangible assets 415 485 442 408 428 943
Trade and other receivables 5 339 11 697 3 140
Investment in associate – 1 149 –
Other investments and loans 19 556 12 007 142 908
Deferred taxation 34 725 37 172 25 430
Current assets 3 138 090 3 846 976 3 093 649
Inventories 1 339 986 1 207 683 1 229 624
Trade, other receivables and derivatives 1 162 666 1 115 834 1 213 608
Other investments and loans 73 739 – 94 415
Taxation receivable 11 576 12 143 26 020
Bank and cash balances 550 123 376 026 317 806
Assets held for sale – eXtract – 1 135 290 212 176
Total assets 9 577 248 10 327 457 9 650 864
EQUITY AND LIABILITIES
Total shareholders' interests 2 646 822 3 273 993 2 715 250
Stated capital 3 103 366 3 087 083 3 087 083
Other reserves (950 561) (10 599) (725 389)
Accumulated profits 460 525 167 019 322 145
Equity attributable to equity holders of
the parent 2 613 330 3 243 503 2 683 839
Non-controlling interests 33 492 30 490 31 411
Non-current liabilities 4 573 459 4 832 483 4 534 345
Interest-bearing liabilities 4 054 000 4 307 191 4 002 506
Deferred vendor consideration – 42 588 24 186
Deferred taxation 519 459 482 704 507 653
Current liabilities 2 356 967 2 220 981 2 401 269
Interest-bearing liabilities 795 517 453 170 820 125
Deferred vendor consideration 25 922 23 840 26 898
Trade, other payables and provisions 1 477 934 1 536 798 1 500 073
Taxation payable 37 380 144 022 37 824
Bank overdrafts 20 214 63 151 16 349
Total equity and liabilities 9 577 248 10 327 457 9 650 864
Supplementary information:
Number of shares in issue 181 317 732 180 439 427 180 439 427
Number of shares in issue (net of
treasury shares) 179 036 174 178 156 727 178 156 727
Net asset value per share (cents) 1 459.7 1 820.6 1 506.4
Net tangible asset value per share (cents) 993.7 1 367.8 1 047.7
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
for the six for the six for the year
months ended months ended ended
28 February 2018 28 February 2017 31 August 2017
R'000 R'000 R'000
Stated capital 3 103 366 3 087 083 3 087 083
Balance at beginning of the period 3 087 083 634 565 634 565
Increase through the issue of shares (net
of costs) 16 283 2 494 201 2 494 201
Treasury shares – (41 683) (41 683)
Other reserves (950 561) (10 599) (725 389)
Balance at beginning of the period (725 389) (40) (40)
Foreign currency translation reserve (14 368) (10 559) 4 108
Share-based payment expense 1 372 – 7 106
Transfer from accumulated
profits (eXtract) (212 176) – (736 563)
Accumulated profits 460 525 167 019 322 145
Balance at beginning of the period 322 145 52 895 52 895
Total comprehensive income/(losses) for
the period 138 380 114 124 (467 313)
Dividend in specie (212 176) – –
Transfer to other reserves (eXtract) 212 176 – 736 563
Non-controlling interests 33 492 30 490 31 411
Balance at beginning of the period 31 411 – –
At acquisition of subsidiary – 27 812 27 812
Total comprehensive income for the period 2 430 2 678 6 186
Dividends paid to minority shareholders (349) – (2 587)
Balance at end of the period 2 646 822 3 273 993 2 715 250
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
for the six for the six for the year
months ended months ended ended
28 February 2018 28 February 2017 31 August 2017
R'000 R'000 R'000
Cash flows from operating activities 888 013 765 398 1 640 721
Cash generated from operations before
working capital movements 935 987 698 495 1 699 545
Working capital movements 177 821 163 068 391 735
Interest received 6 684 65 542 71 803
Interest paid (202 151) (143 996) (356 864)
Taxation paid (30 328) (17 711) (165 498)
Cash flows from investing activities (688 629) (1 750 885) (2 636 043)
Capital expenditure (823 217) (492 761) (1 384 740)
Proceeds on disposal of assets 3 103 6 038 12 859
Business combinations (43 515) (1 315 228) (1 315 228)
Proceeds from other investments
and loans 175 000 51 066 51 066
Cash flows from financing activities 37 367 1 290 365 1 288 782
Net increase/(decrease) in
interest-bearing borrowings 47 198 (114 824) (109 193)
Deferred vendor consideration paid (9 482) (36 808) (40 989)
Payments on transactions with
non-controlling interest (349) – (2 587)
Net proceeds from shares issued – 1 441 997 1 441 551
Net increase in cash and
cash equivalents 236 751 304 878 293 460
Exchange rate translation on cash and
cash equivalents (8 299) – –
Cash and cash equivalents at beginning
of the period 301 457 7 997 7 997
Cash and cash equivalents at end of
the period 529 909 312 875 301 457
CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
Unaudited Unaudited Audited
for the six for the six for the year
months ended months ended ended
28 February 2018 28 February 2017 31 August 2017
R'000 R'000 R'000
Revenue 3 624 391 2 399 978 6 218 342
Net operating expenses (2 662 802) (1 707 749) (4 485 094)
Profit from operations before
depreciation and amortisation 961 589 692 229 1 733 248
Depreciation and amortisation (577 152) (409 852) (1 026 379)
Profit/(loss) on disposal of property, plant
and equipment 524 (30) 27
IFRS 2 charges (4 086) (2 319) (6 708)
Foreign exchange losses (26 770) (8 173) (27 085)
Operating profit 354 105 271 855 673 103
Fair value adjustment of investments – (12 506) (736 563)
Profit/(loss) before interest and taxation 354 105 259 349 (63 460)
Net finance costs (171 385) (81 929) (291 679)
Interest received 33 871 65 542 71 803
Interest paid (205 256) (147 471) (363 482)
Share of losses from associates – (2 226) (2 620)
Net profit/(loss) before taxation 182 720 175 194 (357 759)
Taxation (41 910) (58 392) (103 368)
Net profit/(loss) after taxation 140 810 116 802 (461 127)
Attributable to:
Equity holders of the parent 138 380 114 124 (467 313)
Non-controlling interests 2 430 2 678 6 186
Net profit/(loss) after taxation 140 810 116 802 (461 127)
Other comprehensive income/(loss) net
of taxation:
Net profit/(loss) after taxation 140 810 116 802 (461 127)
Items that may be reclassified
subsequently to profit or loss:
– Foreign currency translation reserve (14 368) (10 559) 4 108
Total comprehensive income/(loss) 126 442 106 243 (457 019)
Attributable to:
Equity holders of the parent 124 012 103 565 (463 205)
Non-controlling interests 2 430 2 678 6 186
Total comprehensive income/(loss) 126 442 106 243 (457 019)
Supplementary information:
Basic earnings/(loss) per share (cents) 77.6 73.6 (301.2)
Headline earnings per share (cents) 77.4 73.6 (301.2)
Adjusted headline earnings per share
(cents) # 87.5 75,1 181.2
Diluted earnings per share (cents) ^ 72.8 ^
Diluted headline earnings per
share (cents) ^ 72.8 ^
EBIT 354 370 257 123 (66 080)
Adjusted EBIT # 377 937 306 749 735 626
Adjusted headline earnings 155 989 116 492 281 072
Number of shares in issue 181 317 732 180 439 427 180 439 427
Weighted average number of shares in
issue (net of treasury shares) 178 332 559 155 154 559 155 154 559
Diluted number of shares in issue ^ 156 867 245 ^
^ Dilutionary instruments in issue do not have a dilutionary effect.
HEADLINE EARNINGS RECONCILIATION
Unaudited Unaudited Audited
for the six for the six for the year
months ended months ended ended
28 February 2018 28 February 2017 31 August 2017
R'000 R'000 R'000
Net profit/(loss) after taxation
attributable to equity holders of
the parent 138 380 114 124 (467 313)
Adjusted for:
(Profit)/loss on disposal of property, plant
and equipment (524) 30 (27)
Taxation effect on adjustments 147 (8) 8
Headline earnings attributable to
ordinary shareholders 138 003 114 146 (467 332)
Adjusted for:
IFRS 2 charges 4 086 2 319 6 708
Restructuring and
IFRS 3 transaction costs 2 953 22 203 28 720
Interest received - eXtract* – (60 800) (60 800)
Amortisation of intangible assets 16 793 10 194 27 311
Fair value adjustment of investments and
associate losses - eXtract – 14 910 738 967
Taxation effect on adjustments (5 846) 13 520 7 498
Adjusted headline earnings attributable
to ordinary shareholders # 155 989 116 492 281 072
EBIT RECONCILIATION
Earnings before interest, taxation,
depreciation and amortisation 931 257 670 662 967 869
Depreciation and amortisation (577 152) (413 539) (1 033 949)
EBIT 354 105 257 123 (66 080)
IFRS 2 charges 4 086 2 319 6 708
Restructuring and
IFRS 3 transaction costs 2 953 22 203 28 720
Amortisation of intangible assets 16 793 10 194 27 311
Fair value adjustment of investments and
associate losses - eXtract – 14 910 738 967
Adjusted EBIT # 377 937 306 749 735 626
Adjusted EBIT % 10 13 12
* Interest earned from our investments in eXtract Group Limited of R60.8million has been removed from the
28 February 2017 adjusted headline earnings to align with the headline earnings presented at 31 August 2017.
The eXtract Investments were subsequently restructured and unbundled in October 2017.
# Adjusted headline earnings per share and adjusted EBIT takes into account all the profits and losses from
operational, trading, and funding activities for the period and excludes adjustments in line with those of the
comparitive period.
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Equipment Fleet Petrochemicals
Unaudited Unaudited Audited Unaudited Unaudited Audited Unaudited Unaudited
for the six for the six for the for the six for the six for the for the six for the six
months ended months ended year ended months ended months ended year ended months ended months ended
28 February 28 February 31 August 28 February 28 February 31 August 28 February 28 February
2018 2017 2017 2018 2017 2017 2018 2017
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue 1 835 005 1 160 989 3 062 983 1 032 268 554 848 1 649 884 778 441 695 716
– South Africa 1 335 888 871 724 2 322 261 934 159 481 543 1 453 546 717 448 660 5215
– Rest of world 494 808 287 869 736 944 87 545 63 127 175 169 54 543 35 195
– Intercompany 4 309 1 396 3 778 10 564 10 178 21 169 6 450 –
EBITDA# 485 699 335 500 858 530 444 506 341 422 807 432 40 806 48 450
Depreciation and amortisation (304 070) (202 445) (515 328) (251 045) (196 745) (482 684) (4 839) (3 777)
EBIT 181 629 133 055 343 202 193 461 144 677 324 748 35 967 44 673
– South Africa 138 979 108 877 293 027 171 930 124 899 293 097 25 607 40 054
– Rest of world 42 650 24 178 50 175 21 531 19 778 31 651 10 360 4 619
Adjusted EBIT 182 959 133 885 345 706 194 881 145 269 326 760 36 233 44 744
Net finance costs (86 354) (58 929) (149 047) (91 340) (62 286) (145 735) (9 828) (12 702)
Adjusted PBT 96 605 74 956 196 659 103 541 82 983 181 025 26 405 32 042
Total assets 4 404 417 4 413 519 4 320 170 2 988 357 3 280 261 3 117 237 825 319 649 423
– Goodwill and intangibles 27 496 50 106 13 235 22 571 9 251 8 391 3 671 17 177
– Leasing assets 2 550 585 2 497 207 2 494 411 2 495 267 2 618 158 2 583 403 – –
– Inventory 868 318 805 761 810 449 30 681 28 662 27 630 440 987 373 260
– Trade and other receivables 574 469 508 249 612 183 314 754 344 498 290 651 278 569 244 910
– Other assets 383 549 552 196 389 892 125 084 279 692 207 162 102 092 14 076
Total liabilities 3 385 100 3 373 528 3 341 322 2 469 371 2 927 531 2 482 791 591 539 405 432
– Interest-bearing liabilities and overdraft 2 370 268 2 479 231 2 474 841 1 886 450 2 252 360 1 884 969 224 153 14 454
– Deferred vendor consideration 4 695 8 927 9 413 – – – 21 227 57 501
– Other liabilities 210 484 191 985 210 933 278 633 288 584 278 167 7 256 5 020
Net capital expenditure 400 922 305 354 736 540 400 349 174 321 615 677 18 836 6 952
Number of employees 1 857 1 779 1 736 600 552 611 102 96
GEOGRAPHICAL SEGMENTATION
Total assets 4 404 417 4 413 519 4 320 170 2 988 357 3 280 261 3 117 237 825 319 649 423
– South Africa 3 166 154 3 224 819 3 134 732 2 639 497 2 919 016 2 777 549 794 606 621 459
– Rest of world 1 238 263 1 188 700 1 185 438 348 860 361 245 339 688 30 713 27 964
Total liabilities 3 385 100 3 373 528 3 341 322 2 469 371 2 927 531 2 482 791 591 539 347 931
– South Africa 2 407 028 2 409 876 2 402 197 2 364 790 2 743 762 2 381 130 570 981 319 732
– Rest of world 978 072 963 652 939 125 104 581 183 769 101 661 20 558 28 199
Group, financing and consolidation Total
Audited Unaudited Unaudited Audited Unaudited Unaudited Audited
for the for the six for the six for the for the six for the six for the
year ended months ended months ended year ended months ended months ended year ended
31 August 28 February 28 February 31 August 28 February 28 February 31 August
2017 2018 2017 2017 2018 2017 2017
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue 1 538 666 (21 323) (11 575) (33 191) 3 624 391 2 399 978 6 218 342
– South Africa 1 449 123 23 856 37 295 72 785 3 011 351 2 051 083 5 297 715
– Rest of world 81 299 – – – 636 896 386 191 993 412
– Intercompany 8 244 (45 179) (48 870) (105 976) (23 856) (37 296) (72 785)
EBITDA# 108 767 (39 754) (54 710) (806 860) 931 257 670 662 967 869
Depreciation and amortisation (10 870) (17 198) (10 572) (25 067) (577 152) (413 539) (1 033 949)
EBIT 97 897 (56 952) (65 282) (831 927) 354 105 257 123 (66 080)
– South Africa 84 891 (56 952) (65 282) (831 927) 279 564 208 548 (160 912)
– Rest of world 13 006 – – – 74 541 48 575 94 832
Adjusted EBIT 101 381 (36 136) (17 149) (38 221) 377 937 306 749 735 626
Net finance costs (23 960) 16 137 51 988 27 063 (171 385) (81 929) (291 679)
Adjusted PBT 77 421 (19 999) 34 839 (11 158) 206 552 224 820 443 947
Total assets 840 424 1 359 155 1 984 254 1 373 033 9 577 248 10 327 457 9 650 864
– Goodwill and intangibles 2 881 892 099 846 804 908 946 945 837 923 338 933 453
– Leasing assets – – – – 5 045 852 5 115 365 5 077 814
– Inventory 391 545 – – – 1 339 986 1 207 683 1 229 624
– Trade and other receivables 310 352 213 29 874 1 873 1 168 005 1 127 531 1 215 059
– Other assets 135 646 466 843 1 107 576 462 214 1 077 568 1 953 540 1 194 914
Total liabilities 766 238 484 416 346 973 345 263 6 930 426 7 053 464 6 935 614
– Interest-bearing liabilities and overdraft 289 830 388 860 77 467 189 340 4 869 731 4 823 512 4 838 980
– Deferred vendor consideration 41 671 – – – 25 922 66 428 51 084
– Trade and other payables and provisions 427 665 35 090 128 369 98 885 1 477 934 1 536 798 1 492 340
– Other liabilities 7 072 60 466 141 137 57 038 556 839 626 726 553 210
Net capital expenditure 19 219 7 96 445 820 114 486 723 1 371 881
Number of employees 97 14 13 14 2 573 2 440 2 458
GEOGRAPHICAL SEGMENTATION
Total assets 840 424 1 359 155 1 984 254 1 373 033 9 577 248 10 327 457 9 650 864
– South Africa 812 091 1 359 155 1 984 254 1 373 033 7 959 412 8 749 548 8 097 405
– Rest of world 28 333 – – – 1 617 836 1 577 909 1 553 459
Total liabilities 766 238 484 416 404 474 345 263 6 930 426 7 053 464 6 935 614
– South Africa 742 208 484 416 404 474 345 263 5 827 215 5 877 844 5 870 798
– Rest of world 24 030 – – – 1 103 211 1 175 620 1 064 816
# Excludes intercompany management fees.
NOTES
Unaudited
for the six
months ended
28 February 2018
R'000
1. Capital commitments
Total capital commitments contracted 21 522
Expenditure will be financed from cash generated from operations and
existing banking facilities.
There were no contingent liabilities or unrecorded guarantees at
28 February 2018.
2. Assets held for sale – eXtract
These assets were distributed via an in specie dividend declaration
to enX shareholders on 13 October 2017, as part of the eXtract
restructure agreement.
Unaudited Unaudited
for the six for the six Audited
months ended months ended for the year ended
28 February 2018 28 February 2017 31 August 2017
R'000 R'000 R'000
Interest-bearing borrowings
3. and overdraft
Medium Term Note Program 1 210 000 1 531 051 1 233 897
Bank debt and overdraft – South
Africa 2 861 553 2 523 266 2 776 806
Bank debt and overdraft – Rest
of world 798 178 769 195 828 277
Deferred vendor consideration 25 922 66 428 51 084
4 895 653 4 889 940 4 890 064
Comprising:
Non-current 4 054 000 4 349 779 4 026 692
Current 841 653 540 161 863 372
4 895 653 4 889 940 4 890 064
In April 2018 bonds of R565.5 million
were settled and new bonds of
R260 million were raised.
4. Net finance costs
Interest received 6 684 4 742 11 003
Interest received – MCC – 60 800 60 800
Interest paid (204 653) (144 695) (356 864)
Deemed interest income/(expense) 26 584 (2 776) (6 618)
(171 385) (81 929) (291 679)
5. Fair value hierarchy disclosures
Valuation methodology
Level 1 – Valuations with reference to quoted prices in an active market:
Financial instruments valued with reference to unadjusted quoted prices for identical assets or
liabilities in active markets where the quoted price is readily available and the price represents
actual and regularly occurring market transactions on an arm's length basis.
Level 2 – Valuations based on observable and unobservable inputs include:
Financial instruments valued using inputs other than quoted prices as described above for
level1 but which are observable for the asset or liability, either directly or indirectly, such as a
quoted price for similar assets or liabilities in an active market; a quoted price for identical or
similar assets or liabilities in inactive markets; a valuation model using observable inputs; and a
valuation model using inputs derived from/corroborated by observable market data.
The table below shows the Group's financial asset and liabilities that are recognised and
subsequently measured at fair value, analysed by valuation technique.
Level 1 Level 2 Fair value
28 February 2018 R'000 R'000 R'000
Financial assets
Other investments and loans – 93 295 93 295
Designated as fair value
through profit and loss
– Derivative financial assets – 2 638 2 638
– 95 933 95 933
Financial liabilities
Financial liabilities designated as fair
value through profit and loss
– Derivative financial liabilities – 46 164 46 164
– 46 164 46 164
BUSINESS COMBINATIONS
EIE
The UK operation of EIE, Impact, acquired 100% of the share capital of two UK companies during the
period thus expanding our geographical footprint in the UK. The companies acquired were Bendigo
Mitchell (Holdings) Limited on 17 October 2017 and MacBrown Fork Truck Services Limited on
8 December 2017. Both businesses operate in broadly the same geographical, product and customer
markets as our current business operations.
These acquisitions were funded from existing cash and funding resources within the UK. The aggregate
amount paid for these two companies was R38.9m.
The summary of the net assets acquired through this business combination, for which the purchase
price has been allocated to the respective assets and liabilities, are as follows:
R'000
Non-current assets 17 549
Current assets 25 592
Non-current liabilities (8 685)
Current liabilities (12 341)
Total identifiable net assets acquired 22 115
Goodwill arising from business combination 16 819
Total purchase consideration settled in cash 38 934
Cash balances taken over (6 954)
Net cash outflow on total acquisition 31 980
The purchase price allocation is provisional and will be finalised on the first anniversary of the
business combination.
Revenue of GBP 1.1 million and net profit after taxation of GBP 86 000 have been included in these
results since the acquisition dates. If the acquisitions had occurred on 1 September 2017, revenue of GBP
1.6 million and net profit after taxation of GBP 137 000 would have been included in these results.
EFML
During the period enX completed the acquisition of the EFML business in Botswana by paying
R11.5 million.
This payment was recorded as additional goodwill in the EFML cash-generating unit.
OPERATIONAL OVERVIEW
Equipment
Revenues of R1 835.0 million, adjusted EBIT of R183.0 million and adjusted PBT of R96.6 million were
achieved. The inclusion of EIE's results for the full six months was the primary reason for the movement.
The EIE business continued to report solid orders and increasing market share both in SA and the UK.
Rental and value add services revenue contributed 63% of total revenue.
The Power business experienced a sharp decline in its order book since August, resulting in reduced
revenue and a loss before taxation of R11.3 million for the period. The business has concluded a
restructuring process to re-align its cost base with its revenue projections. The business will now focus
on the manufacturing of customised generators and importing smaller units below 600kVA.
The Wood business continued to operate in a subdued market. Notwithstanding margin pressure the
business reported a stable PBT number driven by consistent sales of capital goods.
Fleet
Revenues of R1 032.3 million, adjusted EBIT of R194.9 million and adjusted PBT of R103.5 million were
achieved. EFML leasing book has stabilised. The inclusion of EFML's results for the full six months was
the primary reason for the movement. Customer retention rates improved alongside growing pipeline
opportunities created by the strengthened sales team. Value added products ("VAPs") and remarketing
revenues showed continued traction, increasing to 55% of revenue contribution. End of term residual
values continued to be profitable.
Our Quest system is starting to show differentiating benefits and will allow scalability to the segment
without a proportionate increase in overhead structure.
Petrochemicals
Revenues of R778.4 million, adjusted EBIT of R36.2 million and adjusted PBT of R26.4 million were
achieved. Lubricants experienced a temporary overstock position due to a large blending customer
reducing manufacturing orders to rectify their overstocking situation. The resulting lower operating
profit was somewhat offset by an improved period on period performance in the Chemicals business.
Chemicals reported strong growth in all product ranges.
PROSPECTS
Strategy
The Group is focused on the dynamic allocation of capital and is continuously assessing its long term
strategic options. Reducing our cost structures throughout the Group is an ongoing objective. Our goal is
to build a growing, cash generative industrial business which over time consistently delivers returns on
equity in excess of its cost of capital. We aim to do this by investing in assets and opportunities that:
- drive differentiation, diversity and scale;
- strengthen our partnerships with leading global brand owners;
- expand our businesses geographically;
- build an entrepreneurial culture;
- maintain strong financial disciplines; and
- ensure an ongoing social licence to do business.
The specific initiatives that we are and intend to pursue to deliver on these strategic priorities are
as follows:
Equipment
- EIE will continue to seek growth in its South African share of the forklift market in line with Toyota's
aspirations and improve its operational efficiencies through the use of technology.
- In addition to the two companies acquired, EIE will further look to expand its UK market share
through the acquisition of complementary forklift businesses and strengthen its long-term
partnership with Mitsubishi, the supplier of Cat Lift Trucks.
- The Group is reviewing its long term strategic options for the Power business.
- Wood aims to maintain its leading market share and gradually build a leasing and rental
book. The business intends to grow revenues from its innovating box-on-demand machines and
expand into the steel and stone industries with its OEM's. It will hold its biennial show in July 2018,
which historically has produced strong sales.
Fleet
- EFML is focused on growing revenues derived from VAPs, which are non-capital intensive.
The business has been released of the capital constraints it was operating under. As a result,
there has been renewed focus on increasing customer retention rates and winning new
business within established credit granting and financial return criteria. The Quest system will
present opportunities to offer outsourced processing and fleet management services and drive
operational efficiencies.
Petrochemicals
- The Lubricants business will focus on rolling out the blending contract with ExxonMobil and growing
its distribution and contract manufacturing volumes. It will also seek new product distribution
opportunities through its relationship with ExxonMobil. We expect the implementation of ExxonMobil
local production to improve gross margins and lower working capital levels from the first quarter
of 2019.
- The Chemicals business will focus on growing volumes in selected polymer, natural rubber,
performance polyethylene and speciality chemicals. Volume growth is expected in polymer and
speciality chemicals products on the back of excess volumes from the USA refineries. The business
will also seek new distributorships, to increases volumes through its existing infrastructure.
Outlook
We expect EIE and Wood to improve on their first half reported performances. Power has largely
completed its restructure, resulting in an improved performance in the second half.
EFML expects to perform in line with its current performance and aims to grow its leasing book.
Encouraging progress has been made in the first half with regard to improving customer retention rates
and winning new business.
Petrochemicals should show moderate improved performance in the second half. The Lubricants
business will commence blending for ExxonMobil and should deliver overall growth in ExxonMobil
distribution volumes. Orders from the existing toll blending customer are expected to improve in the first
half of FY2019. The Chemicals business is expected to increase volumes of ExxonMobil chemicals and
synthetic rubber.
The Group will begin to engage with the South African leasing business banking consortium in the
coming months, to refinance the term facility that begins amortising in August 2019.
Key risks to our business are posed by declines in overall levels of economic sentiment, growth rates,
currency volatility and higher interest rates. Whilst recognising this, enX believes its business model and
current portfolio of businesses have defensive characteristics given the annuity generating nature of its
assets, strong market positions, brand partnerships and long-term client commitments.
We have an experienced management team who will maintain the strong relationships with our OEMs,
drive cost efficiencies and be alert to opportunities to grow.
SUBSEQUENT EVENTS
Debt capital markets and new note specific liquidity facility
enX Corporation Limited ("enX Corporation"), a wholly-owned subsidiary of the Group and borrower
of the debt raised to finance enX's South African leasing businesses, has raised R260 million in
the debt capital markets, through an auction conducted on 17 April 2018. The funding raised will
comprise R102 million 3 year 50% guaranteed notes (ENX01S) and R158 million 3 year unsecured notes
(ENX01). Rand Merchant Bank, a division of FirstRand Bank Limited, has provided the guarantee to the
ENX01S noteholders.
The proceeds received from the R200 million term loan raised in late 2017, as announced on SENS on
7 December 2017, a portion of the R200 million loan repayments received to date from eXtract and the
R260 million notes raised were utilised to redeem R265.5 million of notes that matured in early April
2018 (as announced on SENS on 28 March 2018 and 4 April 2018) and R300 million of notes maturing on
25 April 2018. Accordingly, overall debt levels have declined following the redemptions.
enX Corporation entered into a new Note Specific Liquidity Facility ("NSLF") of R315.5 million with all
the banks currently participating in its banking credit facilities. The NSLF replaces enX Corporation's
existing R300 million liquidity facility which terminated on 30 April 2018. The NSLF, which is available
for a 42 month period, may only be used to fund the redemption of principal amounts of any notes issued
under enX Corporation's DMTN programme on their respective due dates.
DIVIDENDS
In line with the Group policy to reinvest for growth, no cash dividend has been declared for the period.
DIRECTORS
Executive directors: SB Joffe (Chief Executive Officer), IM Lipworth (Financial Director)
Non-executive directors: PM Makwana* (Chairman), PC Baloyi, SF Booysen*, NV Lila*, LN Molefe*,
PS O'Flaherty, AJ Phillips*, LL von Zeuner*
(* Independent)
The following director roles changed during the period:
- SB Joffe was appointed CEO on 1 January 2018, relinquishing the role as non-executive
chairman; and
- PM Makwana took the role as interim Chairman from 1 January 2018 until his appointment as
Independent Chairman of the board on 13 February 2018, relinquishing the role as Lead Independent
director. He stepped down as a member of the audit and risk committee with this new appointment.
The following changes to directorships took place during the period:
- TC Moodley resigned as a non-executive director on 22 December 2017;
- PD Mansour resigned as director on 31 December 2017 and appointed as Chief Investment
Officer; and
- JL Serfontein resigned as CEO and director on 31 December 2017.
For and on behalf of the board
SB Joffe IM Lipworth
Chief Executive Officer Financial Director
14 May 2018
Registered office: 202D 11 Crescent Drive, Melrose Arch, Johannesburg, 2196
Postal address: PostNet Suite X86, Private Bag X7, Aston Manor, 1630
Sponsor: The Standard Bank of South Africa Limited
Company secretary: L Möller
Transfer secretaries: Computershare Investor Services Proprietary Limited
Date: 14/05/2018 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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