DENEB INVESTMENTS LIMITED - Reviewed Condensed Consolidated Financial Statements For The Year Ended 31 March 2018

Release Date: 23/05/2018 16:55
Code(s): DNB
 
Wrap Text
Reviewed Condensed Consolidated Financial Statements For The Year Ended 31 March 2018

DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
("Deneb" or "the Group" or "the company")
Registration number: 2013/091290/06
JSE share code: DNB
ISIN: ZAE000197398

REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 March 2018


Financial highlights
for the year ended 31 March 2018

- Revenue from continuing operations up R333 million to R3 011 million

- Profit from continuing operations up R17 million to R89 million

- Profit down R43 million to R6 million

- Earnings per share from continuing operations up 6 cents to 21 cents

- Earnings per share down 8 cents to 2 cents

- Headline earnings per share from continuing operations up 4 cents to 14 cents

- Headline earnings per share down 9 cents to a loss of 4 cents

- Net asset value per share unchanged at 388 cents

- Net asset value excluding net deferred income liability unchanged at 415 cents

- Distribution per share of 3 cents declared (2017: 3 cents)


Condensed consolidated statement of financial position
as at 31 March

                                                            Reviewed     Audited     Audited
                                                                2018       2017*       2016*
                                                              R000's      R000's      R000's
ASSETS
Non-current assets                                         2 044 076   1 779 493   1 711 819
Plant and equipment                                          440 005     312 077     312 860
Owner-occupied property                                      373 421     458 641     434 075
Investment property                                          907 352     759 113     737 507
Intangible assets                                             41 525      48 466      22 263
Goodwill                                                      58 472      23 764      15 023
Other investments                                              4 237       3 026       3 391
Long-term receivables                                         56 780      88 349      74 093
Deferred tax assets                                          162 284      86 057     112 607
Current assets                                             1 512 620   1 480 596   1 452 849
Non-current assets held for sale                               1 080       1 985       2 175
Inventories                                                  680 935     706 953     683 732
Loan receivables                                                   -           -      83 101
Trade and other receivables                                  786 672     700 195     654 396
Current tax assets                                             2 266         705         143
Cash and cash equivalents                                     41 667      70 758      29 302
Total assets                                               3 556 696   3 260 089   3 164 668

EQUITY AND LIABILITIES
Total equity                                               1 674 626   1 662 980   1 857 615
Stated capital                                             1 452 264   1 449 653   1 717 286
Reserves                                                     220 950     213 226     139 746
Equity attributable to owners of the company               1 673 214   1 662 879   1 857 032
Non-controlling interest                                       1 412         101         583
Non-current liabilities                                      942 059     943 559     206 265
Deferred tax liabilities                                       7 142      11 882       5 160
Post-employment medical aid benefits                          98 896      91 861      90 803
Deferred income                                              141 754     131 805     105 289
Interest-bearing liabilities                                 688 533     706 752       4 149
Operating lease accruals                                       5 734       1 259         864
Current liabilities                                          940 011     653 550   1 100 788
Current tax liabilities                                          759       3 615       1 821
Post-employment medical aid benefits                           7 619       7 131       6 789
Deferred income                                                8 908      12 646      10 120
Interest-bearing liabilities                                 169 972      52 716      38 733
Trade and other payables                                     604 886     499 094     489 856
Provisions                                                     3 991         224       5 705
Bank overdraft                                               143 876      78 124     547 764
Total liabilities                                          1 882 070   1 597 109   1 307 053
Total equity and liabilities                               3 556 696   3 260 089   3 164 668
Net asset value                                            1 673 214   1 662 879   1 857 032
Net asset value per share                        (cents)         388         388         331
Net asset value excluding deferred income liability        1 788 664   1 778 329   1 949 763
Net asset value excluding deferred
income liability per share (net of taxation)     (cents)         415         415         347

*Restated, refer to note 4.1


Condensed consolidated statement of profit or loss and other comprehensive income
for the year ended 31 March
                                                                            Reviewed       Audited
                                                                                2018         2017*
                                                                              R000's        R000's
Continued operations
Revenue                                                                    3 010 671     2 677 676
Cost of sales                                                             (2 324 922)   (1 960 376)
Gross profit                                                                 685 749       717 300
Other income                                                                   6 802        (2 795)
Selling and distribution expenses                                           (344 848)     (333 059)
Administrative and other expenses                                           (277 993)     (229 458)
Operating profit before impairments, restructuring and
revaluation of investment property                                            69 710       151 988
Revaluation of investment properties                                          43 715        30 052
Net impairment of assets                                                      (1 436)            -
Restructuring and retrenchment expenses                                       (3 079)       (1 751)
Operating profit before finance costs                                        108 910       180 289
Finance income                                                                   591         5 986
Finance expenses                                                             (93 733)      (75 930)
Profit before taxation                                                        15 768       110 345
Income tax income/(expense)                                                   73 015       (38 416)
Profit after tax                                                              88 783        71 929
Discontinued operations
Loss from discontinued operations, net of tax                                (82 554)      (22 456)
Profit                                                                         6 229        49 473
Other comprehensive income, net of related tax
Items that will never be reclassified to profit or loss
Revaluation of land and buildings                                             18 822        21 389
 Revaluation                                                                  28 574        25 391
 Related tax                                                                  (9 752)       (4 002)
Post-employment medical aid benefits - actuarial (loss)/gain                  (3 679)          941
 Actuarial (loss)/gain                                                        (5 110)        1 307
 Related tax                                                                   1 431          (366)
Items that are or may be reclassified to profit or loss
Fair value adjustment on available-for-sale financial assets                   1 210             -
Foreign operations - foreign currency translation differences                 (2 304)          (10)
Other comprehensive income, net of tax                                        14 049        22 320
Total comprehensive income for the year                                       20 279        71 793
Profit attributable to:
Owners of the company                                                          8 130        50 410
Non-controlling interest                                                      (1 901)         (937)
                                                                               6 229        49 473
Total comprehensive income attributable to:
Owners of the company                                                         22 180        72 730
Non-controlling interest                                                      (1 901)         (937)
                                                                              20 279        71 793
Basic earnings per share                                        (cents)         1,89         10,19
 Continued operations                                           (cents)        21,12         14,73
 Discontinued operations                                        (cents)       (19,23)        (4,54)
Diluted earnings per share                                      (cents)         1,88         10,19
 Continued operations                                           (cents)        21,01         14,73
 Discontinued operations                                        (cents)       (19,13)        (4,54)

*Restated, refer to note 4.1


Condensed consolidated statement of changes in equity
for the year ended 31 March

                                                Stated                                              Non-
                                               capital       Other     Retained              controlling
                                                 Total    reserves       income       Total     interest      Total
                                                R000's      R000's       R000's      R000's       R000's     R000's
Balance at 1 April 2016,
as previously reported                       1 717 286     242 999      (10 522)  1 949 763          583  1 950 346
Impact of restatement*                               -           -      (92 731)    (92 731)           -    (92 731)
Total comprehensive income                           -      21 389       51 341      72 730         (937)    71 793
 Profit/(loss)                                       -           -       50 410      50 410         (937)    49 473
 Other comprehensive income, net of tax              -      21 389          931      22 320            -     22 320
   Fair value adjustment on available-for-
   sale financial assets                             -           -          (10)        (10)           -        (10)
   Revaluation of land and buildings,
   net of tax                                        -      21 389            -      21 389            -     21 389
   Post-employment medical aid benefits
   - actuarial gain, net of tax                      -           -          941         941            -        941
Transfers to other reserves                          -     (10 932)      10 932           -            -          -
Reclassification of revaluation surplus              -     (10 932)      10 932           -            -          -
Transactions with owners of the
company                                       (267 633)          -        1 205    (266 428)           -   (266 428)
Share buyback                                 (268 785)          -            -    (268 785)           -   (268 785)
Share scheme - expense                               -           -        2 357       2 357            -      2 357
             - options exercised                 1 152           -       (1 152)          -            -          -
Changes in ownership interest                        -           -         (455)       (455)         455          -
Acquisition of NCI without a change
in control                                           -           -         (455)       (455)         455          -
Restated balance at 31 March 2017            1 449 653     253 456      (40 230)  1 662 879          101  1 662 980
Total comprehensive income                           -      17 728        4 451      22 179       (1 901)    20 278
 Profit/(loss)                                       -           -        8 130       8 130       (1 901)     6 229
 Other comprehensive income/(loss),
 net of tax                                          -      17 728       (3 679)     14 049            -     14 049
   Fair value adjustment on available-for-
   sale financial assets                             -       1 210            -       1 210            -      1 210
   Foreign operations - foreign currency
   translation differences                           -      (2 304)           -      (2 304)           -     (2 304)
   Revaluation of land and buildings,
   net of tax                                        -      18 822            -      18 822            -     18 822
   Post-employment medical aid benefits
   - actuarial loss, net of tax                      -           -       (3 679)     (3 679)           -     (3 679)
Transactions with owners of the
company                                          2 611           -       (9 554)     (6 943)           -     (6 943)
Share scheme - expense                               -           -        5 916       5 916            -      5 916
             - options exercised                 2 611           -       (2 611)          -            -          -
Dividends                                            -           -      (12 859)    (12 859)           -    (12 859)
Changes in ownership interest                        -      (4 317)        (584)     (4 901)       3 212     (1 689)
Acquisition of subsidiary with
non-controlling interests                            -           -            -           -        2 628      2 628
Acquisition of subsidiary - common control
transaction                                          -      (4 317)           -      (4 317)           -     (4 317)
Acquisition of NCI without a change
in control                                           -           -         (584)       (584)         584          -
Balance at 31 March 2018                     1 452 264     266 867      (45 917)  1 673 214        1 412  1 674 626

*Restated, refer to note 4.1


                                                                               2018        2017
                                                                             R000's      R000's
Composition of other reserves
Revaluation of investments                                                    1 210           -
Foreign currency translation differences                                     (2 304)          -
Common control reserve                                                      (20 219)    (15 902)
Surplus on revaluation of land and buildings                                288 180     269 358
                                                                            266 867     253 456



Condensed consolidated statement of cash flows
for the year ended 31 March

                                                                           Reviewed     Audited
                                                                               2018        2017
                                                                             R000's      R000's
Net cash flows from operating activities                                    179 964     131 076
Cash generated from operating activities before working capital changes     110 073     234 950
Cash generated from working capital changes                                 180 148       3 660
Net finance costs                                                           (93 142)    (79 768)
Taxes paid                                                                  (17 115)    (27 766)
Net cash flow from investing activities                                    (213 888)    (66 961)
Net cash flow from financing activities                                     (60 919)    446 981
Net other financing activities                                              (48 060)     65 766
Overdraft converted to term loan                                                  -     650 000
Share buyback                                                                     -    (268 785)
Distribution                                                                (12 859)          -
Net change in cash and cash equivalents                                     (94 843)    511 096
Cash and cash equivalents at the beginning of the year                       (7 366)   (518 462)
Cash and cash equivalents at the end of the year                           (102 209)     (7 366)


Condensed consolidated segmental report
for the year ended 31 March


                                                        Branded
                                                        Product                           Centralised
                                        Property   Distribution    Textiles  Industrials     Services        Total
Year ended 31 March 2018                  R000's         R000's      R000's       R000's       R000's       R000's
Gross revenue                            157 999      1 377 847     555 912      965 849          102    3 057 709
Inter-segment revenue                    (47 038)             -           -            -            -      (47 038)
External revenue - continued
operations                               110 961      1 377 847     555 912      965 849          102    3 010 671
External revenue - discontinued  
operations                                     -         62 236     142 836            -            -      205 072
External revenue                         110 961      1 440 083     698 748      965 849          102    3 215 743
Operating profit/(loss) before
finance costs - continued operations     155 165        (20 901)      6 300       14 996      (46 650)     108 910
Interest revenue                               -              -           -            -          591          591
Interest expense                               -              -           -            -      (93 733)     (93 733)
Operating profit before taxation
- continued operations                   155 165        (20 901)      6 300       14 996     (139 792)      15 768
Operating loss before finance costs
- discontinued operations                      -        (20 581)    (52 262)           -            -      (72 843)
Interest expense                               -              3      (9 714)           -            -       (9 711)
Operating loss before taxation
- discontinued operations                      -        (20 578)    (61 976)           -            -      (82 554)
Operating profit/(loss) before taxation  155 165        (41 479)    (55 676)      14 996     (139 792)     (66 786)
Segment assets                         1 302 590        971 172     435 953      748 736       98 245    3 556 696
Segment liabilities                       21 574        282 723     202 221      364 382    1 011 170    1 882 070

Year ended 31 March 2017*
Gross revenue                            150 021      1 322 074     611 394      642 741          113    2 726 343
Inter-segment revenue                    (43 856)        (4 811)          -            -            -      (48 667)
External revenue - continued
operations                               106 165      1 317 263     611 394      642 741          113    2 677 676
External revenue - discontinued
operations                                     -         57 997           -      182 004            -      240 001
External revenue                         106 165      1 375 260     611 394      824 745          113    2 917 677
Operating profit/(loss) before finance
costs - continued operations             134 519         25 290      (5 929)      49 912      (23 503)     180 289
Interest revenue                               -              -           -            -        5 986        5 986
Interest expense                               -              -           -            -      (75 930)     (75 930)
Operating profit before taxation
- continued operations                   134 519         25 290      (5 929)      49 912      (93 447)     110 345
Operating loss before finance costs
- discontinued operations                      -        (10 705)     (1 927)           -            -      (12 632)
Interest expense                               -              -      (9 824)           -            -       (9 824)
Operating loss before taxation
- discontinued operations                      -        (10 705)    (11 751)           -            -      (22 456)
Operating profit/(loss) before taxation  134 519         14 585     (17 680)      49 912      (93 447)      87 889
Segment assets                         1 238 511        904 240     528 245      451 142      137 951    3 260 089
Segment liabilities                       19 516        228 275     229 141      174 317      945 860    1 597 109

*Restated refer to note 4.1


Statistics per share
for the year ended 31 March

                                                                   Reviewed    Audited
                                                                       2018      2017*
Number of shares in issue                                ('000)     431 337    428 622
Weighted-average number of shares                        ('000)     429 358    494 817
Diluted-average number of shares                         ('000)     431 575    494 817
Basic earnings                                          (cents)        1,89      10,19
 Continued operations                                                 21,12      14,73
 Discontinued operations                                             (19,23)     (4,54)
Diluted earnings                                        (cents)        1,88      10,19
 Continued operations                                                 21,01      14,73
 Discontinued operations                                             (19,13)     (4,54)
Headline (loss)/earnings                                (cents)       (3,68)      5,26
 Continued operations                                                 13,58       9,80
 Discontinued operations                                             (17,26)     (4,54)
Diluted headline (loss)/earnings                        (cents)       (3,67)      5,26
 Continued operations                                                 13,51       9,80
 Discontinued operations                                             (17,17)     (4,54)
Reconciliation between profit and headline earnings
Profit attributable to equity holders of the parent    (R000's)       8 130     50 410
Impairment of assets                                   (R000's)       9 299          -
Reversal of impairment of assets                       (R000's)         (55)         -
Remeasurement of investment property                   (R000's)     (33 923)   (23 320)
Surplus on disposal of property, plant and equipment   (R000's)        (277)    (1 089)
Loss on disposal of property, plant and equipment      (R000's)         696         41
Insurance claim for capital asset                      (R000's)         (22)         -
Impairment of goodwill                                 (R000's)         334          -
Headline earnings                                      (R000's)     (15 818)    26 042
 Continued operations                                                58 286     48 498
 Discontinued operations                                            (74 104)   (22 456)
Diluted headline earnings                              (R000's)     (15 818)    26 042
 Continued operations                                                58 286     48 498
 Discontinued operations                                            (74 104)   (22 456)

Adjustment for government grants
Profit attributable to equity holders of the parent    (R000's)       8 130     50 410
Deferred income released (net of tax)                  (R000's)     (30 176)   (15 231)
Government grant benefit for the period                (R000's)      30 176     37 950
                                                       (R000's)       8 130     73 129
Adjusted basic earnings                                 (cents)        1,89      14,78
 Continued operations                                                 23,85      19,61
 Discontinued operations                                             (21,96)     (4,83)
Adjusted headline (loss)/earnings                       (cents)       (3,68)      9,85
 Continued operations                                                 16,31      14,68
 Discontinued operations                                             (19,99)     (4,83)

*Restated, refer to note 4.1


Notes to the condensed consolidated financial results

1.  Basis of preparation

    The condensed consolidated financial statements are prepared in accordance with the requirements of the
    JSE Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act of South
    Africa. The Listings Requirement requires preliminary 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 accounting policies applied in the preparation of
    the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the
    previous consolidated annual financial statements.

    These results have been prepared under the supervision of the Financial Director, Gys Wege CA(SA). The directors
    take responsibility for the preparation of this report and that the information has been correctly extracted from the
    underlying annual financial statements.


2.  Significant accounting policies and estimates

    The accounting policies adopted in the preparation of the reviewed condensed consolidated financial statements
    are consistent with those followed in the preparation of the Group's annual financial statements for the year ended
    31 March 2017, except for new standards and interpretations effective as at 1 April 2017.

    The new standards have no impact on the financial information.


3.  Review report of the independent auditor

    The condensed consolidated financial statements for the year ended 31 March 2018 have been reviewed by
    PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion. A copy of the auditor's review report
    is available for inspection at the company's registered office together with the financial statements identified in the
    auditor's report. The auditor's report does not necessarily report on all of the information contained in the financial
    results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's
    engagement they should obtain a copy of the auditor's report together with the accompanying financial information
    from the issuer's registered office.


4.  Significant operating activities

    4.1 Restatement of prior period

         4.1.1   Correction of prior period error relating to the accounting of government grants

                 Government grants are recognised in profit and loss on a systematic basis over the periods in which the
                 Group recognises the related costs for which the grants are intended to compensate.

                 During the prior periods, the grants were deemed to be earned through compliance with their conditions
                 and meeting the envisaged obligations. Where the qualifying conditions gave rise to future envisaged
                 obligations, the benefits were allocated against the historic costs of complying with the conditions as
                 well as the future related obligations. Where no envisaged obligations were identified, the grants were
                 recognised when there was reasonable assurance that the entity will comply with all the conditions
                 attached to the grants and that the grants will be received.

                 It was concluded that the above accounting treatment is incorrect and that the grants related to
                 depreciable assets are to be recognised in the periods in the proportions in which the depreciation
                 expense on those assets are recognised, with the balance being reflected as deferred income.

                 The effect of the restatement on the prior-period numbers is as follows:


        Consolidated statement of financial position

                                                                           Impact of restatement
                                                            As previously
                                                                 reported      Adjustments          As restated
        1 April 2016                                               R000's           R000's               R000's
        Total assets                                            3 141 990           22 678            3 164 668
        Deferred tax asset                                         89 929           22 678              112 607
        Total liabilities                                      (1 191 644)        (115 409)          (1 307 053)
        Deferred income                                                 -         (115 409)            (115 409)
        Total equity                                           (1 950 346)          92 731           (1 857 615)
        Reserves                                                 (232 477)          92 731             (139 746)

        31 March 2017
        Total assets                                            3 231 088           29 001            3 260 089
        Deferred tax asset                                         57 056           29 001               86 057
        Total liabilities                                      (1 452 658)        (144 451)          (1 597 109)
        Deferred income                                                 -         (144 451)            (144 451)
        Total equity                                           (1 778 430)         115 450           (1 662 980)
        Reserves                                                 (328 676)         115 450             (213 226)


        Consolidated statement of profit or loss and other comprehensive income

                                                                             Impact of restatement
                                                            As previously                                   As
        For the year ended                                     reported**       Adjustments           restated
        31 March 2017                                              R000's            R000's             R000's
        Other income                                               27 714           (30 509)            (2 795)
        Income tax                                                (44 739)            6 323            (38 416)
        Loss from discontinued operations, net of tax             (23 923)            1 467            (22 456)
        Profit                                                     72 192           (22 719)            49 473
        Total comprehensive income                                 94 512           (22 719)            71 793

        **Restated for discontinued operations


        Basic earnings per share                 (cents)            14,78             (4,59)             10,19
        Diluted earnings per share               (cents)            14,78             (4,59)             10,19
        Headline earnings per share              (cents)             9,85             (4,59)              5,26
        Diluted headline earnings per share      (cents)             9,85             (4,59)              5,26

        There is no impact on the total operating, investing or financing cash flows for the year ended
        31 March 2017.

4.1.2   Discontinued operations

        Operations classified as discontinued operations relate to the following three businesses:

        -   Berg River Textiles, a division of Winelands Textiles;
        -   Outlying branches of the office automation business;
        -   International leg of the branded sporting goods business.

            Results of discontinued operations
                                                                                                    2018         2017
                                                                                                  R000's       R000's
            Revenue                                                                              205 072      240 001
            Cost of revenue                                                                     (191 821)    (213 617)
            Gross profit                                                                          13 251       26 384
            Other income                                                                          11 649        5 437
            Distribution costs                                                                   (30 467)     (30 284)
            Administrative and other expenses                                                    (39 815)     (14 169)
            Operating loss before impairments and restructuring and
            retrenchment costs                                                                   (45 382)     (12 632)
            Impairment of assets                                                                 (11 736)           -
            Restructuring and retrenchment costs                                                 (15 725)           -
            Operating loss before finance costs                                                  (72 843)     (12 632)
            Finance expenses                                                                      (9 711)      (9 824)
            Loss before taxation                                                                 (82 554)     (22 456)
            Income tax expense                                                                         -            -
            Loss for the period from discontinued operations                                     (82 554)     (22 456)
            Cash flows used in discontinued operations
            Net cash used in operating activities                                                (37 536)      (9 581)
            Net cash used in discontinued operations                                             (37 536)      (9 581)

   4.2  Taxation and deferred taxation
                                                                                                    2018       2017*
                                                                                                  R000's      R000's
         Income tax
         South African normal taxation
          - current                                                                              (14 688)    (19 341)
          - prior year                                                                                24       1 079
         Deferred taxation                                                                        87 679     (20 154)
                                                                                                  73 015     (38 416)
   
         Reconciliation between actual and normal taxation rates**                                     %           %
         Taxation as a percentage of (loss)/profit before taxation                                 109,3        43,7
         Prior period                                                                                  -         1,2
         Non-deductible items expenses                                                               9,4        (3,5)
         Specific tax-deductible expenses                                                           (1,7)        0,7
         Capital gains tax on revaluation of investment property                                    (3,7)        1,9
         Foreign entities with different tax rate                                                    0,9           -
         Recognition of previous unrecognised tax losses                                           (86,2)      (16,0)
         Normal taxation rate                                                                       28,0        28,0

         * Restated, refer to note 4.1
         **Reconciliation is disclosed on a consolidated basis from both continued and discontinued operations.


   4.3   Government grants

         Government grants in the Group relates to the Production Incentive Programme (PIP). The programme is an
         incentive offered to the qualifying companies operating within the clothing and textile manufacturing industry.

                                                                                             2018              2017*
                                                                                           R000's             R000's
         Deferred amounts, to be recognised in more than 12 months' time                  141 754            131 805
         Deferred amounts, to be recognised in the next 12 months, included in
         trade and other payables                                                           8 908             12 646
         Total deferred income liability                                                  150 662            144 451
         Reconciliation of carrying amount
         Opening carrying value                                                           144 451            115 409
         Government receivable recognised during the period                                30 176             37 950
         Deferred income released during the period                                       (23 965)            (8 908)
         Closing carrying value                                                           150 662            144 451

         * Restated, refer to note 4.1



5. Significant investing activities

   5.1   Capital expenditure and commitments
                                                         Capital expenditure                Contractual commitments
                                                         2018             2017               2018                2017
                                                       R000's           R000's             R000's              R000's
         Investment property                                -            5 889             40 000                   -
         Land and buildings                               610            3 279                  -                   -
         Plant and equipment                          110 873           34 973             33 072               9 609
         Intangible assets                                138            1 838                  -                   -
         Business combinations                         61 672           77 897                  -                   -
                                                      173 293          123 876             73 072               9 609

         The capital commitments are expected to be incurred during the next 12 months. Commitments will be funded
         through banking facilities.


5.2   Business combinations

      Current period

      Measurement of fair values

      The assets and liabilities acquired have been measured on a provisional basis and in accordance with IFRS 3.
      If new information is obtained within one year of the date of acquisition about the facts and circumstances that
      existed at the date of acquisition, the accounting for the acquisition will be revised.

      In the current period the Group acquired the following entities:

                                                                                                          % voting
      Subsidiary            Acquisition                                                                   interest
      name                  date              Segment             Description                             acquired
      Formex Industries     1 Aug 2017        Industrials         Formex Industries is an entity              100%
      Proprietary Limited                                         focusing on the development,
      ("Formex")                                                  manufacturing and supply of
                                                                  pressed and tubular components for
                                                                  the automotive market.

      New Just Fun Group    13 Dec 2017       Branded Product     New Just Fun is a South African             100%
      Proprietary Limited                     Distribution        toy distributer.
      ("New Just Fun")

      Oops Global SA        31 Dec 2017       Branded Product     Oops Global SA is based in                   60%
                                              Distribution        Switzerland and specialises in the
                                                                  design, conception and sale of toys
                                                                  for kids.

                                                                       Branded
                                                                       Product
                                                                  Distribution       Industrials             Total
                                                                        R000's            R000's            R000's
      Total identifiable net assets acquired                            29 258            20 740            49 998
      Less non-controlling interest                                     (2 628)                -            (2 628)
      Goodwill                                                          35 042                 -            35 042
      Goodwill directly to equity as transaction with owners                 -             4 317             4 317
      Total consideration                                               61 672            25 057            86 729
       Cash paid                                                        61 672                 -            61 672
       Hosken Consolidated Investments Limited loan                          -            25 057            25 057
      Cash outflow from this investing activity                                                                  -
      Cash consideration transferred                                   (61 672)                -           (61 672)
      Add cash and cash equivalents in the business acquired               320             3 090             3 410
      Less overdraft in the business acquired                          (38 599)          (22 723)          (61 322)
      Net cash inflow from investing operations                        (99 951)          (19 633)         (119 584)


         Prior period

         The Group acquired the entire issued share capital of Premier Rainwatergoods Proprietary Limited ("Premier").
         Premier is a manufacturer of galvanised steel roofing accessories.

                                                                                         Industrials           Total
                                                                                              R000's          R000's
         Total identifiable net assets acquired                                               69 156          69 156
         Goodwill                                                                              8 741           8 741
         Total consideration                                                                  77 897          77 897
         Cash paid                                                                            67 897          67 897
         Contingent consideration                                                             10 000          10 000
         Cash outflow from this investing activity
         Cash consideration transferred                                                      (67 897)        (67 897)
         Add cash and cash equivalents in the business acquired                               24 307          24 307
         Net cash inflow from investing operations                                           (43 590)        (43 590)

   5.3   Investment properties

         Reconciliation of carrying amount
                                                                                               2018            2017
                                                                                             R000's          R000's
         Opening carrying value                                                             759 113         737 507
         Transfer from owner-occupied property                                              110 456               -
         Additions                                                                           20 968               -
         Development cost                                                                         -           5 889
         Fair value adjustments                                                              43 715          30 052
         Disposals                                                                          (26 900)        (14 335)
         Closing carrying value                                                             907 352         759 113


6. Significant financing activities

   6.1   Significant related-party transactions

         Current period

         The Group acquired 100% of the shares in Formex from Hosken Consolidated Investments Limited ("HCI") with
         effect from 1 August 2017 for an amount of R25 million. The transaction was announced on SENS on 10 July
         2017 and 21 July 2017 and funded through a loan from HCI.

         Prior period

         In the prior period the company acquired 133 507 226 Deneb shares from the Southern African Clothing and
         Textile Workers' Union ("SACTWU") for a consideration of R267 014 452. The shares were delisted and cancelled
         on 30 September 2016.

   6.2   Banking facilities

         Current period

         R50 million of short-term facility has been renegotiated to term funding in the current period.

         Prior period

         The Group renegotiated its banking facilities in the prior period whereby R650 million of short-term overdraft
         facilities were converted to long-term funding.


7. Distribution

    Notice is hereby given that a final distribution of 3 cents (gross) per ordinary share in respect of the 12 months ended
    31 March 2018 has been declared and approved by the board of directors out of stated capital through the reduction
    of contributed tax capital ("distribution").

    In compliance with the requirements of Strate and the JSE Limited, the following dates are applicable:

    Distribution declared                                                                           Wednesday 23 May 2018
    Last day to trade cum distribution                                                               Tuesday 12 June 2018
    Shares trade ex distribution                                                                   Wednesday 13 June 2018
    Record date                                                                                       Friday 15 June 2018
    Payment date                                                                                      Monday 18 June 2018

    Share certificates may not be dematerialised or rematerialised between Wednesday 13 June 2018 and Friday 15 June
    2018, both days inclusive.

    Additional information

    The directors have determined that this capital reduction distribution will be paid out of qualifying contributed tax
    capital as contemplated in the definition of "contributed tax capital" in section 1 of the Income Tax Act, 1962.

    As the distribution will be regarded as a return of capital and may have potential capital gains tax consequences,
    Deneb shareholders are advised to consult their tax advisors regarding the impact of the distribution.

    The directors have reasonably concluded that the company will satisfy the solvency and liquidity requirements of
    sections 4 and 46 of the Companies Act, 2008, immediately after the capital distribution.

    The number of issued ordinary shares is 431 337 345 as at the date of this declaration.


8.  New standards

    A number of new standards, amendments to standards and interpretations are effective for annual periods beginning
    on of after 1 April 2018, and have not been applied in preparing these condensed consolidated financial statements.

    We have undertaken an initial assessment of the financial impact of the new standards and assessed that only the
    below statements will impact the financial statements in the periods these standards are adopted:

    Financial Instruments (IFRS 9)

    The standard is effective for financial periods beginning on or after 1 January 2018. The measurement of provisions
    against receivables will be revised to comply with the expected credit loss method. The Group will disclose the full
    impact of this statement in its annual financial statements.

    Leases (IFRS 16)

    The standard is effective for financial periods beginning on or after 1 January 2019. The standard is expected to have a
    material impact due to the significant number of leases, and will result in changes to the statement of financial position,
    whereby a right-of-use asset and lease liability will be recognised. Changes to the statement of comprehensive
    income will result in the current operating lease costs being replaced by an amortisation of the right-of-use asset
    and associated finance costs. The Group will disclose the expected impact of this statement in its annual financial
    statements.


On behalf of the board


Stuart Queen                                              Gys Wege
Chief Executive Officer                                   Financial Director

Cape Town
23 May 2018


Commentary

Although we have had some strong performers in the Group, most notably Vega Properties, Prima Interactive, Formex, 
Romatex Home Textiles and the Empire Group, it's safe to say that the year ended 31 March 2018 proved to be a difficult 
year.

We mentioned in our results to 31 March 2017 that the Group had a number of loss-making businesses that were weighing
on the Group's results. We have taken decisive action with regard to these businesses and a number of restructuring
processes have been completed during the current financial year. The results for the current financial year are significantly
influenced by these restructuring initiatives. In certain instances, the restructuring affects separately identifiable pieces of
businesses and where this is the case, the results for these pieces are reflected as discontinuing operations. There are
other processes that affect certain product ranges and parts of continuing businesses, and in these cases the costs of
exiting these areas remain within the continuing operations.

The restructuring processes affected the following three businesses in the main:

-   Winelands Textiles - This business comprised two manufacturing facilities in the Western Cape: one in Paarl and one
    in Worcester. During the course of the year we have completed a restructuring process that resulted in these two
    facilities being consolidated into a single facility in Worcester. The consolidation significantly reduces the overheads and
    breakeven point, which will allow the business to focus on more viable product lines. The restructure will also release
    around R50 million of capital that was tied up in unproductive working capital;

-   The Group's office automation business - The Group has decided to concentrate this business on the Gauteng market.
    We have made good progress with the orderly disposal of the outlying branches. At the time of writing, only the
    Cape Town branch remained to be sold and we are confident of wrapping this up shortly. The restructure allows the
    businesses to unlock better efficiencies and it will release a significant amount of capital that was tied up in the long-
    term debtors book; and

-   Our branded sporting goods business - This business has been placed under the control of new management that
    has been working on discontinuing loss-making brands, improving operational efficiencies and effectiveness and
    optimising management structures. The result of these initiatives has seen the break-even point drop significantly. The
    focus now is to grow the brands that remain.

Continuing operations

Although turnover grew by 12% to just over R3 billion, this growth was derived from the following acquisitions:

-   Formex Industries was acquired from our holding company HCI with effect from 1 August 2017. This business
    manufactures specialised pressing and tubing components for the automotive market;

-   New Just Fun Group was acquired with effect from 13 December 2017. New Just Fun is a South African toy distributor
    and holds the distribution rights to some of the world's leading toy brands; and

-   The formation of HTIC (Hong Kong). This business sources goods from Asian manufacturers primarily for its South
    African client base, including our own Group companies. The business has a long association with the Group, but in
    prior years it acted as a sourcing agent. As from January 2017, it is classified as a subsidiary. The effect of this is that
    we now account for all the revenue and all the costs as opposed to just accounting for commissions earned as was
    the case previously.

If one excludes the revenue from these acquisitions, the remaining businesses saw revenues decline by 2%. Most of
this decline is attributable to our own decisions to discontinue unprofitable product lines, but it does reflect some of the
difficulties experienced in the retail and construction markets in particular.

Gross margins also came under pressure and declined by 400 basis points to 22,8%. This decline is due in part to
the new revenue streams from HTIC and the acquisition of Formex, both of which operate a high volume, low margin
business model. Furthermore, certain of the businesses experienced quite significant increases in raw material prices
which could not be entirely passed on to customers. These price increases came about through international shortages in
the underlying raw materials. The situation started to normalise towards the end of the financial year.

Overhead costs remain tightly controlled. The 11% increase in total costs, as reflected, is largely due to the costs in the
businesses acquired. Excluding the new acquisitions, overhead costs increased by just 3% year-on-year.

The net interest expense increased by R23 million to R93 million as a result of higher debt levels from the share buyback
completed in September 2016 and the interest-bearing debt assumed with the acquisitions of Formex and New Just Fun
Group.

Certain of our subsidiaries have moved from being loss-making to having realistic expectations of being sustainably
profitable. This has meant that the Group is required to recognise deferred tax assets on historic tax losses, which resulted
in the Group reporting taxation income of R73 million in the current period.

Overall, although the year under review proved to be difficult, we believe that the actions taken see the Group emerge
in a stronger position than it began. As we continue to find solutions for the underperforming businesses, it will result in
improved operating margins going forward or further capital releases.

Accounting for government grants

Shareholders are advised that the Group's results contain a prior-year adjustment relating to a change in the accounting
treatment of government grants.

During the prior periods, the grants were deemed to be earned through compliance with their conditions and meeting
the envisaged obligations. Where the qualifying conditions gave rise to future envisaged obligations, the benefits
were allocated against the historic costs of complying with the conditions as well as the future related obligations.
Where no envisaged obligations were identified, the grants were recognised in other income when there was
reasonable assurance that the Group would comply with all the conditions attached to the grants and that the grants
would be received.

The Group's new auditors believe that the relevant statement should be interpreted differently and that the above
accounting treatment was incorrect. It is their view that if the benefit derived from the grant is used to acquire a depreciable
asset, the benefit should simply be matched against the depreciation expense related to the asset acquired.

The new accounting treatment has the effect of taking the income derived from the government grants that had previously
been released through the income statement and placing it back on the balance sheet by creating a R116 million (net of
taxation) deferred income "liability".

The new accounting treatment has the consequence that our results as presented deviate from the underlying commercial
reality. We hold this view as the result of the following:

-   The acquisition of an asset is not a primary condition of the scheme. In any given year, the Group has a variety of
    expenditures that could qualify to be refunded by the applicable government grant. These expenses include staff
    training, spend on process improvement initiatives, equipment upgrades, etc. It is administratively more efficient for
    the Group to claim the government grants for equipment upgrades and this has been the chosen route. A different
    administration choice would lead to the grant being recognised in different periods;

-   The assets acquired have been tested for impairments on an annual basis. As there has been no indication of any
    impairments, we can conclude that the assets meet the general definition of an asset productively employed and that
    there are no onerous obligations attached to holding and operating the assets in the future;

-   The deferred income "liability", on the other hand, does not meet the general definition of a liability in that there is no
    current obligation that is likely to result in an outflow of economic benefit in the future. The "liability" is not owed to
    anybody nor is there any future onerous obligations to which this benefit could be matched; and

-   This "liability" will be released into the income statement by matching it against the relevant depreciation charge
    associated with the applicable asset acquired. The Group's assets have varying useful lives with the longest being
    25 years.

The result of this is that the deferred income "liability" can be expected to grow for the next few years and then will be
unwound through the income statement over quite a long period. All things remaining equal, the Group's results will
continue to deviate from the underlying commercial reality for many years into the future. In order to provide shareholders
with more useful information we will include adjusted earnings, adjusted headline earnings and adjusted net asset value
calculations in each year. The different accounting treatments have no effect on cash flows.


Corporate information


DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
("Deneb" or "the Group" or "the company")

The company's shares are listed under the Financial Services - Speciality Finance sector.

Registration number:     2013/091290/06

JSE share code:          DNB

ISIN:                    ZAE000197398

Income tax
registration number:     9844426156


Registered office:       5th Floor, Deneb House, Cnr Main and Browning Roads, Observatory 7925, Cape Town
                         PO Box 1585, Cape Town 8000


Contact details:         info@deneb.co.za
                         www.deneb.co.za


Directors:               J A Copelyn* (Non-executive Chairperson), M H Ahmed*^ (Lead Independent Director),    
                         D Duncan, T G Govender*, N Jappie*^, A M Ntuli, S A Queen (Chief Executive Officer),
                         Y Shaik*, R D Watson*^, G D T Wege (Financial Director)

                         (* Non-executive ^ Independent)

                         L Govender resigned as a non-executive director on 17 April 2018.


Company Secretary:       C Philip


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


Auditors:                PricewaterhouseCoopers Inc.


Sponsors:                PSG Capital Proprietary Limited


Cape Town
23 May 2018
Date: 23/05/2018 04:55:00 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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