Wrap Text
Provisional financial results for the year ended 31 March 2018
Sephaku Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/003306/06)
Share code: SEP ISIN: ZAE000138459
("SepHold" or "the group")
PROVISIONAL FINANCIAL RESULTS
for the year ended 31 March
SALIENT POINTS
GROUP
CEMENT equity accounted earnings
R20,8 million
Operating earnings
R54,3 million at margin of 6.5%
Net profit
R44,2 million
Basic earnings per share
21,6 cents
Headline earnings per share
20,9 cents
Net asset value
501.8 cents
METIER
Sales revenue
R830,7 million
EBITDA margin
10.9 % (R91,2 million)
Operating profit margin
9.6% (R79,6 million)
Net earnings
R48,0 million
CEMENT1
Sales revenue
R2,4 billion
EBITDA margin
21.3% (R504,2 million)
Operating profit margin
14.1% (R333,3 million)
Net earnings
R57,8 million
1 CEMENT has a December year-end as a subsidiary of Dangote Cement PLC
Provisional financial results
for the year ended 31 March 2018
REMARKING ON THE RESULTS, CHIEF EXECUTIVE OFFICER, DR LELAU MOHUBA SAID,
"We experienced a challenging operating year as competition in the ready-mix concrete segment intensified characterised by lower volumes and marginal improvement in
pricing. We responded by optimising overall capacity utilisation in terms of production and transport between the different plants to minimise the downward pressure
on profitability.
The scenario was much more positive on the cement front with improved industry annual pricing per tonne of 3 - 5% for the 12 months ended December 2017. I am
pleased to confirm that CEMENT was successful in implementing an average increase of 5% per tonne that sustained during the year. This positive trend in pricing has
continued in 2018 calendar year with increases implemented by all producers in most markets during the first quarter. CEMENT's strong relationships with all major
national and regional chain stores, independent hardware retailers and users of bulk cement has been instrumental in our ability to maintain sales volumes.
Looking ahead, the economy is likely to remain under pressure for the next 12 - 18 months but we are optimistic that the enhanced business sentiment following the
perceived political stability will provide impetus for an improved macro economic landscape for our industry."
COMMENTARY
Improved trading environment for CEMENT while Metier experiences increased competitive forces
Sephaku Holdings Limited ("SepHold" or "the company") hereby reports on the group's provisional financial results for the year ended 31 March 2018. SepHold, Metier
Mixed Concrete (Pty) Ltd ("Metier" or "the subsidiary") and Dangote Cement SA (Pty) Ltd ("CEMENT" or "the associate") are collectively referred to as the group.
Group
The group net profit decreased from R68,1 million to R44,2 million resulting in headline earnings per share of 20.92 cents (2017: 33.37 cents).
Metier
Metier implemented marginal price increase of 1.8% per cubic metre but had a 1.1% decrease in revenue to R830,7 million (2017: R839,9 million) due to a 3% decline in
sales volumes. The twelfth plant that commenced production in March 2017 contributed 7% to the sales volumes with commensurate increase in production cost of 8.5%.
The increases in costs on lower volumes resulted in comparatively lower EBITDA and EBIT margins of 10.9% (R91,2 million) and 9.6% (R79,6 million) respectively. To
support margins, the subsidiary focused on improving the sourcing of raw materials to minimise the cost increases without compromising the quality of the concrete.
Metier's net profit was R48,0 million against R67,4 million achieved in the previous year.
The tough operating environment was also challenging for Metier's customer base, which mainly constitutes small to medium building contractors, who were severely
impacted by by the turmoil in the construction industry. Consequently, Metier experienced a high incidence of payments beyond the agreed trading terms thereby
increasing credit default risk. The subsidiary management assessed the level of risk for all its customers and increased its provision for bad debts by R5 million.
To continue to mitigate the risk, Metier will strengthen the credit management process for all new customers to ensure that profitability is protected and there is
full compliance with the credit terms.
CEMENT1
CEMENT achieved a 3.7% increase in revenue to R2,4 billion (2016: R2,3 billion) for the 12 months ended 31 December 2017. The price increases implemented in
February and August 2017 were sustained in most markets resulting in an effective annual increase of 5%. The associate's second half R90 million increase in net
profit to R73,9 million was driven by increased sales volumes, higher pricing and improvements in operational efficiencies. The quarterly EBITDA margins recorded
for the second half were 23% in Q3 and 25% in Q4. The improvement in the second six months significantly reduced the negative impact of the weak performance in the
first six months caused by excessive rainfall and low demand resulting in a loss of R16,1 million for the interim period.
The annual EBITDA margin at 21.3% (R504,2 million) and net profit of R57,8 million were lower than the figures recorded in 2016 of 23.1% (R527,0 million) and R68,9
million, respectively. The previous year's results included the once - off income from the closure agreement with Sinoma on the final handover of the plants of
R138 million. The equity accounted income translated to the Company income statement is R20,8 million (2016: R24,8 million).
Following the Dangote Cement PLC results announcement on 24 April 2018 for their first quarter period ended 31 March 2018, CEMENT's first quarter revenue increased
by 13% to R566 million (Q1 2017: R501 million). The quarterly sales volumes increased by 7% year on year mainly due to the suppressed performance of the comparative
period. The associate increased pricing by 5% per tonne on both bagged and bulk cement during the quarter that sustained in most markets except Gauteng where price
competition continues to be high. These CEMENT quarterly results will be accounted for in the SepHold interim financial results for the six months ending 30 September 2018.
Investor results presentation
A results presentation will be hosted at the Johannesburg Stock Exchange and simultaneously webcast on Thursday, 29 June 2018 at 1000hs. The results presentation
can be downloaded from the Company website
www.sephakuholdings.com
The link to access the webcast is: http://sephakuholdings-2018-financial-results-webcast
1 CEMENT has a December year-end as a subsidiary of Dangote Cement PLC
Summarised statements of comprehensive income
as at 31 March 2018
GROUP
2018 2017
R R
Revenue 830 686 042 839 984 931
Cost of sales (488 756 744) (483 668 229)
Gross profit 341 929 298 356 316 702
Other income 4 732 869 2 429 156
Operating expenses (292 334 309) (273 996 024)
Operating profit/(loss) 54 327 858 84 749 834
Investment income 4 749 191 7 172 130
Profit from equity-accounted investment 20 819 672 24 803 788
Finance costs (22 032 115) (26 695 077)
Profit/(loss) before taxation 57 864 606 90 030 675
Taxation (13 697 584) (21 892 284)
Profit/(loss) for the year 44 167 022 68 138 391
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Revaluation reserve on land of associate written back 1 207 663 -
Total comprehensive income/(loss) for the year 42 959 359 68 138 391
Total comprehensive income/(loss) attributable to:
Equity holders of the parent 42 959 359 68 138 391
42 959 359 68 138 391
Basic earnings per share (cents) 21,60 33,63
Diluted earnings per share (cents) 21,49 33,36
Summarised statements of financial position
as at 31 March 2018
GROUP
2018 2017
R R
ASSETS
Non-current assets
Property, plant and equipment 143 665 110 142 797 829
Goodwill 223 421 981 223 421 981
Intangible asset 2 867 551 5 161 591
Investment in joint ventures 120 552 -
Investment in associate 765 870 275 743 842 941
Other financial assets 8 459 008 10 638 527
Long-term loans 2 000 000 2 000 000
1 146 404 477 1 127 862 869
Current assets
Inventories 16 829 437 16 972 080
Trade and other receivables 133 331 514 121 613 883
Cash and cash equivalents 10 510 169 44 756 833
160 671 120 183 342 796
Total assets 1 307 075 597 1 311 205 665
EQUITY AND LIABILITIES
Equity
Stated capital 644 443 723 635 403 188
Reserves 12 025 844 19 262 087
Retained income 378 928 819 329 214 333
1 035 398 386 983 879 608
Liabilities
Non-current liabilities
Other financial liabilities 121 353 224 180 132 807
Deferred income 1 555 444 2 233 359
Deferred taxation 21 022 839 19 696 446
143 931 507 202 062 612
Current liabilities
Other financial liabilities 39 781 797 35 803 432
Current taxation payable 307 491 408 615
Operating lease liability 4 090 842 4 101 068
Trade and other payables 76 192 231 84 272 472
Deferred income 677 887 677 858
Bank overdraft 6 695 456 -
127 745 704 125 263 445
Total liabilities 271 677 211 327 326 057
Total equity and liabilities 1 307 075 597 1 311 205 665
Net asset value per share (cents) 501,79 484,74
Tangible net asset value per share (cents) 392,51 372,83
Summarised statements of cash flows
for the year ended 31 March 2018
GROUP
2018 2017
R R
Cash flows from operating activities
Cash generated from/(utilised in) operations 47 455 351 96 978 796
Interest income 4 749 191 7 172 130
Finance costs (21 298 838) (24 320 458)
Taxation paid (12 472 313) (19 049 210)
Net cash generated from/(utilised in) operating activities 18 433 391 60 781 258
Cash flows from investing activities
Purchase of property, plant and equipment (14 915 358) (28 535 101)
Disposal of property, plant and equipment 4 314 861 1 852 035
Loans repaid 650 837 349 023
Investment increase in joint venture (40 754) -
Investment increase in associate - (48 571 875)
Government grant received - 1 153 240
Net cash (utilised in)/generated from investing activities (9 990 414) (73 752 678)
Cash flows from financing activities
Proceeds on share issue 6 149 397 2 453 033
Repayment of other financial liabilities (55 534 494) (35 195 345)
Facility raising fee paid - (760 867)
Net cash (utilised in)/generated from financing activities (49 385 097) (33 503 179)
Total cash and cash equivalents movement for the year (40 942 120) (46 474 599)
Cash and cash equivalents at the beginning of the year 44 756 833 91 231 432
Total cash and cash equivalents at the end of the year 3 814 713 44 756 833
Summarised statements of changes in equity
for the year ended 31 March 2018
GROUP
Stated Revaluation Equity-based Total Retained Total
capital reserve share option reserves income equity
R (relating to reserve R R R
land of R
associate)
R
Balance at 31 March 2016 632 950 155 (1 207 663) 20 118 434 18 910 771 258 730 837 910 591 763
Profit for the year - - - - 68 138 391 68 138 391
Other comprehensive income for the year - - - - - -
Total comprehensive income for the year - - - - 68 138 391 68 138 391
Issue of shares 2 453 033 - - - - 2 453 033
Employees' share option scheme - - 351 316 351 316 2 345 105 2 696 421
Balance at 31 March 2017 635 403 188 (1 207 663) 20 469 750 19 262 087 329 214 333 983 879 608
Profit for the year - - - - 44 167 022 44 167 022
Other comprehensive income for the year - 1 207 663 - 1 207 663 - 1 207 663
Total comprehensive income for the year - 1 207 663 - 1 207 663 44 167 022 45 374 685
Issue of shares 9 040 535 - - - - 9 040 535
Employees' share option scheme - - (8 443 906) (8 443 906) 5 547 464 (2 896 442)
Balance at 31 March 2018 644 443 723 - 12 025 844 12 025 844 378 928 819 1 035 398 386
Notes to the summarised annual financial statements
for the year ended 31 March 2018
1. BASIS OF PREPARATION
The summarised consolidated provisional financial results are prepared in accordance with the requirements of the JSE Limited Listings Requirements ("Listings
Requirements") for abridged reports and the requirements of the Companies Act of South Africa No 71 of 2008. The Listings Requirements require abridged reports to
be prepared in accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards ("IFRS") of the
International Accounting Standards Board ("IASB"), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial
Pronouncements as issued by the Financial Reporting Standards Council and must also, as a minimum, contain the information required by IAS 34 Interim Financial
Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which these summarised consolidated financial statements
were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the previous consolidated annual financial
statements, except for the change in accounting policy as set out in note 2 and the new or revised accounting standards and interpretations of those standards
that were adopted.
2. CHANGES IN ACCOUNTING POLICY
The annual financial statements from which these results were extracted have been prepared in accordance with IFRS on a basis consistent with the prior year,
except for land and buildings which are now carried at cost.
Change in accounting policy of land and buildings
During the previous year, the associate, CEMENT, changed its accounting policy on land from fair value to historical cost basis. As the value in land and buildings
is substantial, the company decided to follow the same approach in SepHold in the current financial year in bringing its policy in line with the associate. There is
no material effect on the changes in accounting policy on the annual financial statements, as land and buildings with a carrying value of R21 093 833 have not been
revalued in previous and current financial years as management assessed that the fair value was not materially different from the carrying value.
The effect of the changes in accounting policy on the annual financial statements for the year ended 31 March 2018 is as follows:
GROUP
2018 2017
R R
Statement of financial position
Assets - Investment in associate
Previously stated (1 207 663) -
Adjustment 1 207 663 -
- -
Equity - Reserves
Previously stated (1 207 663) -
Adjustment 1 207 663 -
- -
Statement of changes in equity
Revaluation reserve (relating to land of associate)
Previously stated (1 207 663) -
Adjustment 1 207 663 -
- -
The impact in the change in accounting policy has been accounted for in the current year as the impact was not considered material.
3. NET ASSET VALUE PER SHARE AND EARNINGS PER SHARE
Net asset value and tangible net asset value per share
GROUP
2018 2017
R R
Total assets 1 307 075 597 1 311 205 665
Total liabilities (271 677 211) (327 326 057)
Net asset value attributable to equity holders of parent 1 035 398 386 983 879 608
Goodwill (223 421 981) (223 421 981)
Intangible assets (2 867 551) (5 161 591)
Deferred tax raised on intangible assets 802 914 1 445 246
Tangible net asset value 809 911 769 756 741 281
Shares in issue 206 342 821 202 969 487
Net asset value per share (cents) 501,79 484,74
Tangible net asset value per share (cents) 392,51 372,83
Earnings, diluted earnings and headline earnings per share
Reconciliation of basic earnings to diluted earnings and headline earnings:
Basic profit and diluted profit from total operations attributable to equity holders of parent 44 167 022 68 138 391
Profit on sale of property, plant and equipment (1 930 319) (743 181)
Total taxation effect of adjustments 540 489 208 090
Headline earnings and diluted headline earnings attributable to equity holders of parent 42 777 192 67 603 300
Basic weighted average number of shares 204 431 259 202 609 094
Dilutive effect of share options 1 089 107 1 641 560
Diluted weighted average number of shares 205 520 366 204 250 654
Basic earnings per share (cents) 21,60 33,63
Diluted earnings per share (cents) 21,49 33,36
Headline earnings per share (cents) 20,92 33,37
Diluted headline earnings per share (cents) 20,81 33,10
4. SEGMENT INFORMATION
Ready-mixed Head office Group totals
concrete
2018
Segment revenue - external revenue 830 686 042 - 830 686 042
Segment cost of sales (488 756 744) - (488 756 744)
Segment expenses (267 054 964) (25 279 345) (292 334 309)
Profit from equity-accounted investment - 20 819 672 20 819 672
Profit on sale of property, plant and equipment 1 930 319 - 1 930 319
Segment profit/(loss) after taxation 48 013 015 (3 845 993) 44 167 022
Taxation (14 339 915) 642 331 (13 697 584)
Interest received 4 747 855 1 336 4 749 191
Interest paid (22 002 128) (29 987) (22 032 115)
Depreciation and amortisation (11 591 223) (2 366 354) (13 957 577)
Segment assets 285 141 373 1 021 934 222 1 307 075 597
Investment in associate included in the above total segment assets - 765 870 275 765 870 275
Capital expenditure included in segment assets 14 891 968 23 390 14 915 358
Segment liabilities (267 423 681) (4 253 527) (271 677 211)
2017
Segment revenue - external revenue 839 984 931 - 839 984 931
Segment cost of sales (483 668 229) - (483 668 229)
Segment expenses (250 388 987) (23 607 037) (273 996 024)
Profit from equity-accounted investment - 24 803 788 24 803 788
Profit/(loss) on sale of property, plant and equipment 749 292 (6 111) 743 181
Segment profit after taxation 67 385 969 752 422 68 138 391
Taxation (22 534 615) 642 331 (21 892 284)
Interest received 7 113 680 58 450 7 172 130
Interest paid (26 694 874) (203) (26 695 077)
Depreciation and amortisation (18 740 477) (2 362 767) (21 103 244)
Segment assets 445 845 703 865 359 962 1 311 205 665
Investment in associate included in above total segment assets - 743 842 941 743 842 941
Capital expenditure included in segment assets 27 604 211 930 890 28 535 101
Segment liabilities (325 083 711) (2 242 346) (327 326 057)
The only commodity actively managed by Metier is ready-mixed concrete.
The group does not rely on any single external customer or group of entities under common control for 10% or more of the group's revenue.
CEMENT is an associate of SepHold. No segment report has been presented for cement (the commodity) as the amounts attributable to cement (the commodity) have been
included in the head office segment.
5. INVESTMENT IN ASSOCIATE
Sephaku Holdings Limited has a 36% ownership interest in CEMENT. The associate is unlisted and is registered and operates within South Africa.
Summary of group's interest in associate 2018 2017
R R
Company level: Cost of investment in associate 635 117 284 635 117 284
Proportional increase in investment 48 571 875 48 571 875
Equity-accounted earnings - prior years 60 153 782 35 349 994
Equity-accounted earnings - current year 20 819 672 24 803 788
Revaluation reserve relating to land of associate - written back due to change in accounting policy 1 207 663 -
Group level: Carrying value of investment in associate 765 870 276 743 842 941
During the current year, the group decided to change the accounting policy for land and buildings to the historical cost basis. This is in line with CEMENT, who
adopted this change in the prior year. The result of this is the write-back of the revaluation reserve of R1 207 663 relating the land of associate arising during
the 2012 financial year.
During the prior year, Dangote Cement PLC and SepHold contributed a total amount of R134 921 875 in equity to relieve pressure on the debt covenants. During the
current financial year 6 938 839 shares at R7,00 per share were issued to SepHold, and 12 335 715 shares at R7,00 per share issued to Dangote Cement PLC in regard
of the prior year contribution.
Due to the fact that the debt service ratio was 1,225 during the prior year instead of the required 1,3 negotiations were entered into with Nedbank to reshape the
payment profile. This was successfully completed during the second half of 2017 and required a further R95 million contribution by shareholders. Dangote Cement PLC
made this contribution and, in terms of the relationship agreement, SepHold will have to contribute 36% of this on demand or face dilution of approximately
1,2 percentage points. The shareholders are still in discussion with regards to the timing of the repayment or dilution. SepHold has a potential liability of R34,2
million or a dilution in investment.
Impairment testing
No indications of impairment were identified and therefore no impairment testing was performed for the current financial year. The net asset value of the associate
is R1 496 269 041 (2017: R1 341 970 774) as indicated overleaf.
Summary of group interest in Dangote Cement South Africa Proprietary Limited and its subsidiaries 2018 2017
R R
Non-current assets 3 295 208 712 3 463 892 648
Current assets 819 849 860 749 053 952
Total assets 4 115 058 572 4 212 946 600
Total equity 1 496 269 042 1 341 970 774
Non-current liabilities (2 108 266 538) (2 152 594 106)
Current liabilities (510 522 992) (718 381 720)
Total liabilities (2 618 789 530) (2 870 975 826)
Revenue for the period 2 365 548 412 2 281 395 559
Cost of sales (1 853 935 209) (1 855 433 510)
Gross profit 511 613 203 425 962 049
Operating profit 333 294 740 358 435 454
Investment income 13 988 113 16 274 555
Finance costs (268 462 161) (291 349 372)
Profit/(loss) before taxation 78 820 692 83 360 637
Taxation (expense)/income (20 988 270) (14 461 227)
Profit after taxation for the period 57 832 422 68 899 410
Total comprehensive income for the period 57 832 422 68 899 410
* Dangote Cement South Africa Proprietary Limited has a December year-end, so as to agree with Dangote Cement PLC's year-end. In line with the requirements
of IAS 28, the year-end, results of Dangote Cement South Africa Proprietary Limited as at 31 December 2017 have been included in these financial statements.
6. FINANCIAL ASSETS BY CATEGORY
The accounting policies for financial instruments have been applied to the line items below:
GROUP
Loans and Non-financial Total
receivables instruments* R
R R
2018
Other financial assets 8 459 008 - 8 459 008
Trade and other receivables 130 888 707 2 442 807 133 331 514
Cash and cash equivalents 10 510 169 - 10 510 169
Long-term loans 2 000 000 - 2 000 000
151 857 884 2 442 807 154 300 691
2017
Other financial assets 10 638 527 - 10 638 527
Trade and other receivables 119 397 335 2 216 548 121 613 883
Cash and cash equivalents 44 756 833 - 44 756 833
Long-term loans 2 000 000 - 2 000 000
176 792 695 2 216 548 179 009 243
* Non-financial instruments of the group consists of prepayments: R648 797 (2017: R585 020); deposits: R1 742 749 (2017: R1 631 528); and value added
taxation: R51 261 (2017: Rnil).
7. DEFERRED TAXATION
GROUP
2018 2017
R R
Deferred taxation asset/(liability)
Property, plant and equipment (24 243 629) (20 947 616)
Income received in advance and S24C allowances 586 075 497 829
Prepayments - (101 540)
Doubtful debt allowance 1 260 000 210 000
Provision for leave pay 423 797 323 377
Prepaid expenses - (18 454)
Provision for management bonus 300 491 469 477
Intangible assets (802 914) (1 445 246)
Operating lease accrual 1 453 341 1 315 727
Total deferred taxation liability (21 022 839) (19 696 446)
Reconciliation of deferred taxation asset/(liability)
At the beginning of the year (19 696 446) (15 978 858)
Originating temporary difference on property, plant and equipment (3 296 014) (3 483 916)
Originating temporary difference on income received in advance and S24C allowance 88 247 175 755
Originating temporary difference on accrual for leave pay 100 420 111 182
Originating temporary difference on provision for doubtful debts 1 050 000 -
Originating/(reversing) temporary difference on prepayments 119 997 (8 077)
Reversing temporary difference on provision for management bonus (168 986) (1 529 678)
Originating temporary difference on intangible assets 642 332 642 331
Originating temporary difference on operating lease accrual 137 611 374 815
(21 022 839) (19 696 446)
Unrecognised deferred taxation asset
Relating to unrecognised taxation losses 108 155 414 98 286 060
8. TRADE AND OTHER RECEIVABLES
GROUP
2018 2017
R R
Trade receivables 130 888 707 119 397 335
Prepayments 648 797 585 020
Deposits 1 742 749 1 631 528
Value added taxation 51 261 -
133 331 514 121 613 883
Trade and other receivables pledged as security
Trade and other receivables of Metier of R133 005 263 (2017: R121 360 888) are pledged as security for other financial liabilities as per note 10.
Credit quality of trade and other receivables
Management has made an assessment of the debts neither past due nor impaired and are satisfied with the credit quality of these debtors, as all such debts are
expected to be recovered without default.
Fair value of trade and other receivables
The fair values of trade and other receivables are substantially the same as the carrying amounts reflected on the statement of financial position, as the financial
instruments are short-term in nature.
Trade and other receivables past due but not impaired
Trade and other receivables which are less than three months past due are not considered to be impaired. At 31 March 2018, R15 320 496 (2017: R7 034 700) was past
due but not impaired.
GROUP
2018 2017
R R
The ageing of amounts past due but not impaired is as follows:
One month past due 6 895 340 882 681
Two months past due 4 035 728 1 219 098
Three months past due 3 049 649 4 932 921
More than three months past due 1 339 779 -
Subsequent to the reporting date, R6 452 191 of the amounts one month past due, R2 686 762 of the amounts two months past due, R761 749 of the amounts three months
past due and R364 602 of the amounts more than three months past due have been collected.
After taking the subsequent receipts into account, R5 055 192 is still outstanding in the past due not impaired category. These amounts have not been impaired as
management has received sufficient security from debtors in the form of personal sureties, cessions of book debt, cessions of retentions, company cross-guarantees
and surety bond over a property.
Trade and other receivables - allowance for impairment
As at 31 March 2018, trade and other receivables of R6 000 000 (2017: R1 000 000) were provided for. The following factors were considered in determining the
amounts of the impairment:
- each account was assessed based on past credit history; and
- any knowledge of particular insolvency or other risk.
180 days overdue amounts are considered indicators that the trade receivable is impaired.
GROUP
Reconciliation of allowance for impairment of trade and other receivables 2018 2017
R R
Opening balance 1 000 000 1 000 000
Provisional impairment 5 000 000 -
Closing balance 6 000 000 1 000 000
Exposure to credit risk
The maximum exposure to credit risk at the reporting date is the fair value of each class of instrument mentioned above. The company does not hold any collateral as
security.
9. CASH AND CASH EQUIVALENTS
GROUP
2018 2017
R R
Cash and cash equivalents consist of:
Cash on hand 101 500 86 500
Bank balances 10 408 669 44 670 333
Bank overdraft (6 695 456) -
3 814 713 44 756 833
Current assets 10 510 169 44 756 833
Current liabilities (6 695 456) -
3 814 713 44 756 833
The fair values of cash and cash equivalents are considered to be equal to the carrying value.
SepHold has an available Absa overdraft facility of R2 000 000. Metier has an available Standard Bank overdraft facility and a general short-term banking facility
of R21 990 000 in total.
GROUP
2018 2017
R R
The total amount of undrawn overdraft and
term loan facilities available for future
operating activities and commitments 17 294 544 23 990 000
10. OTHER FINANCIAL LIABILITIES
GROUP
2018 2017
R R
Held at amortised cost
Standard Bank - Facility A 81 720 277 101 529 094
This loan bears interest at the variable JIBAR rate plus a margin of 4%, which is currently 11,13%
and is repayable in varying instalments with the final payment being made in February 2020.
Interest payments are made quarterly in arrears.
Standard Bank - Facility B 80 408 582 115 943 076
This loan bears interest at the variable JIBAR rate plus a margin of 3,49%,
which is currently 10,39% and is repayable in equal instalments of R3 747 422 with the
final payment being made in February 2020. The instalments are repayable monthly over a period
of three years and include payments of the interest and capital portions.
Capitalised transaction costs (993 838) (1 535 931)
Transaction costs of the above loans are capitalised and released to operating expenses
over the term of the loan.
161 135 021 215 936 239
The Standard Bank loans are secured as follows:
- General notarial bond granted by Metier in favour of the debt guarantor over all its movable assets, including inventory
- Pledge and cession by SepHold Limited in favour of the debt guarantor, in which SepHold inter alia pledges and cedes in securitatem debiti to the debt guarantor all
its shares in and claims against the borrower
- Cession of insurances by Metier in favour of the debt guarantor, in terms of which Metier cedes in securitatem debiti to the debt guarantor all of its right, title
and interest in and to all insurances over its assets
- Cession of debts by Metier in favour of the debt guarantor, in terms of which Metier cedes in securitatem debiti to the debt guarantor, all of its rights, title and
interest in and to all of its debtors
- Special notarial bond by Metier in favour of the debt guarantor over specified movable assets
- The deed of security over the domain name www.metiersa.co.za entered into between Metier (as cedent) and the debt guarantor (as cessionary) and any notices or
acknowledgements required thereunder, in terms of which Metier cedes in securitatem debiti to the debt guarantor all of its rights, title and interest in and to the
domain name.
Total term lending facilities are R180 408 582 (2017: R221 000 000).
GROUP
2018 2017
R R
Non-current liabilities
At amortised cost 121 353 224 180 132 807
Current liabilities
At amortised cost 39 781 797 35 803 432
161 135 021 215 936 239
The fair values of these financial liabilities are substantially the same as the carrying amounts reflected on the statement of financial position as they bear
interest at market-related rates.
11. TRADE AND OTHER PAYABLES
GROUP
2018 2017
R R
Trade payables 62 100 899 70 034 299
Value added taxation 1 684 706 1 722 319
Credit cards 9 370 16 792
Accrued expenses 4 106 961 3 954 064
Accrued bonus 1 648 121 1 676 711
Accrual for salary-related expenses 341 359 646 946
Accrued audit fees 405 000 382 000
Deposits received 5 249 379 4 378 169
Sundry suppliers 646 436 1 461 172
76 192 231 84 272 472
Fair value of trade and other payables
The fair values of trade and other payables are substantially the same as the carrying amounts reflected on the statement of financial position, as the financial
instruments are short term in nature.
12. OPERATING PROFIT/(LOSS)
GROUP
2018 2017
R R
Operating profit/(loss) for the period is stated
after accounting for the following:
Operating lease charges
Lease rentals on operating lease (15 057 414) (12 819 527)
Profit on sale of property, plant and equipment 1 930 319 749 292
Loss on disposal of other financial assets - (6 111)
Amortisation on intangible assets (2 294 040) (2 294 040)
Depreciation on property, plant and equipment (11 663 536) (18 809 203)
Employee costs (91 326 086) (90 752 203)
Auditor's remuneration (816 003) (805 540)
13. TAXATION
GROUP
2018 2017
R R
Major components of the taxation expense
Current
Local income taxation - current period 12 371 189 18 048 616
Local income taxation - recognised in current tax for prior periods - 126 080
12 371 189 18 174 696
Deferred
Originating and reversing temporary differences 1 326 395 3 809 348
Under provision of deferred taxation for prior periods - (91 760)
1 326 395 3 717 588
13 697 584 21 892 284
Reconciliation of the taxation expense
Reconciliation between accounting profit and taxation expense
Profit/(loss) before taxation 57 864 606 90 030 675
Taxation at the applicable taxation rate of 28% 16 202 090 25 208 589
Taxation effect of adjustments on taxable income
Income taxation - prior period - 126 080
Deferred taxation - prior period - (91 760)
Non-deductible items and exempt income 10 677 -
Taxable temporary difference not recognised as deferred tax liability (173 872) (242 731)
Deferred taxation not raised on assessed taxation loss 2 694 588 2 956 716
Profit from equity-accounted investments (5 829 508) (6 945 061)
Fines 3 345 4 618
Donations 30 448 56 529
Government grant (189 808) (174 152)
Loss on disposal of assets - 1 711
Share options 797 838 754 997
Capitalised finance and transaction costs 151 786 236 747
13 697 584 21 892 283
14. CASH GENERATED FROM/(USED IN) OPERATIONS
GROUP
2018 2017
R R
Profit/(loss) for the year 57 864 606 90 030 675
Adjustments for:
Depreciation and amortisation 13 957 576 21 103 243
(Profit)/loss on sale of non-current assets (1 930 319) (743 181)
Profit from equity-accounted investments (20 819 672) (24 803 788)
Interest received - investment (4 749 191) (7 172 130)
Finance costs 22 032 115 26 695 077
Movements in operating lease assets and accruals (10 226) 1 344 415
Bad debts written off 50 000 -
Deferred income (677 887) (621 974)
Share options recorded against salary expense 2 849 424 2 696 417
Changes in working capital:
Inventories 142 643 (4 727 209)
Trade and other receivables (11 778 377) (10 642 409)
Trade and other payables (9 475 341) 3 819 660
47 455 351 96 978 796
15. TAXATION PAID
Balance at the beginning of the year (408 615) (1 283 129)
Current taxation for the period recognised in profit or loss (12 371 189) (18 174 696)
Balance at the end of the period 307 491 408 615
(12 472 313) (19 049 210)
16. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The changes in the group's liabilities arising from financing activities can be classified as follows:
Reconciliation of liabilities arising from financing activities Opening Imputed and Total non-cash Cash Closing
balance accrued movements flows balance
interest
2018
Other financial liabilities measured at amortised cost 215 936 239 733 276 733 276 (55 534 494) 161 135 021
2017
Other financial liabilities measured at amortised cost 249 517 832 2 374 619 2 374 619 (35 956 212) 215 936 239
17. RISK MANAGEMENT
Risk management
The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholder and
benefits for other stakeholders and to maintain an optimal capital structure.
The capital structure of the group consists of cash and cash equivalents disclosed in note 9, borrowings disclosed in note 10 and equity as disclosed in the
statement of financial position.
There are no externally imposed capital requirements.
There have been no changes to what the group manages as capital, the strategy for capital maintenance, or externally imposed capital requirements from the previous
year.
Liquidity risk
The group's risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future
commitments and credit facilities.
Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored.
The tables that follow analyse the group's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the
contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying
balances as the impact of discounting is not significant.
GROUP
Less than Between 1 and Between 2 and
1 year 2 years 5 years
R R R
2018
Other financial liabilities 55 471 999 131 328 293 -
Trade and other payables 67 268 666 - -
Bank overdraft 6 695 456 - -
2017
Other financial liabilities 57 415 092 57 726 050 154 272 338
Trade and other payables 80 873 442 - -
Interest rate risk
The company and the group are exposed to interest rate risk through their variable rate cash balances, as well as their other financial liabilities. Surplus cash
flows exposed to interest rate risk are placed with institutions and facilities which yield the highest rate of return.
An interest rate sensitivity analysis is set out below. The analysis indicates the financial assets and liabilities are sensitive to interest rate fluctuations and
the profit or loss and taxation effects of possible changes in interest rates to which the financial assets are linked.
At 31 March 2018, if interest rates on cash and cash equivalents had been 1% higher/lower with all other variables held constant, pretaxation profit of the group
for the year would have been R614 617 (2017: R831 558) higher/lower, mainly as a result of higher/lower interest income on funds invested on call. The resulting
taxation effect would have been Rnil.
At 31 March 2018, if interest rates on borrowings had been 1% higher/lower with all other variables held constant, pretaxation profit of the group for the year
would have been R2 199 985 (2017: R2 669 487) lower/higher, as a result of higher/lower interest expense on floating rate borrowings. The resulting taxation effect
would have been R615 996 (2017: R747 456).
Cash flow interest rate risk
Financial instrument Current Due in less Due in one to
interest rate than a year two years
% R R
Cash in current banking institutions 5.00 10 408 669 -
Overdraft facilities used 10.60 6 695 456 -
Floating rate financial liabilities - Facility A 11.13 - 80 000 000
Floating rate financial liabilities - Facility B 10.39 39 781 797 40 626 785
Credit risk
Credit risk is managed on a group basis. Credit risk consists of cash deposits, cash equivalents, other financial assets, trade and loans receivable. The company
only deposits cash with major banks with a high-quality credit standing and limits exposure to any one counterparty.
Trade and other receivables relate mainly to the subsidiary's customers. The group's exposure to credit risk is influenced mainly by the individual characteristics
of each customer. Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the standard payment
terms and conditions are offered which include, in the majority of cases, the provision of a deposit for significant contracts. When available, the review includes
external ratings.
The carrying amount of financial assets represents the maximum exposure to credit risk. Financial assets exposed to credit risk are as follows:
GROUP
Financial instrument 2018 2017
R R
Other financial assets 8 459 008 10 638 527
Trade and other receivables 130 888 707 119 397 335
Cash and cash equivalents 10 510 169 44 756 833
Long-term loans 2 000 000 2 000 000
18. STATED CAPITAL
A total number of 2 294 551 (2017: 1 060 833) shares issued during the year at a value of R2,68 each for a cash amount of R6 149 397 (2017: R2 453 033) relate to
share options that were exercised by employees and directors. Of the issued share capital a number of 1 078 783 shares relate to unsold exercised
shares at a value of R2,68 each.
The unissued ordinary shares are under the control of the directors.
19. GOING CONCERN
The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to
finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course
of business.
20. EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any material fact or circumstance arising between the end of the financial year and the date of this report that would require
adjustments to or disclosure in the annual financial statements.
21. CHANGES TO THE BOARD
Due to added executive responsibilities at African Bank, B Maluleke resigned on 30 October 2017 from the audit and risk committee and the board. B Bulo was appointed to the board
and the audit and risk committee at the board meeting held on 26 March 2018.
22. COMPANY SECRETARY
There were no changes in the Company Secretary during the financial year.
Auditors' report
The summarised financial information included in this announcement is extracted from audited information but is not itself audited.
The directors take full responsibility for the preparation of the summarised financial information and that it has been correctly extracted from the underlying
annual financial statements.
The underlying financial statements have been audited by the group's external auditor, Grant Thornton Johannesburg Partnership. A copy of their unqualified report,
as well as the annual financial statements, are available for inspection at the company's registered office.
Any reference to operational or future financial performance included in this announcement, has not been reviewed or reported on by the company's auditors.
The auditors' report does not necessarily cover all of the information contained in this announcement. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditors' work, they should obtain a copy of that report together with the accompanying financial information from the
registered office of the company.
By order of the board
Chief Executive Officer Financial Director
Dr. Lelau Mohuba Neil Crafford Lazarus
28 June 2018
Enquiries contact: Sakhile Ndlovu Sephaku Holdings Investor Relations 012 612 0210
Sponsor to Sephaku Holdings: Questco Corporate Advisory (Pty) Ltd
Corporate information
Country of incorporation and domicile South Africa
Nature of business and principal activities Construction materials company
Directors B Williams Chairman independent
Non-executive director
PM Makwana Independent non-executive director
MM Ngoasheng Independent non-executive director
MJ Janse van Rensburg Independent non-executive director
B Bulo Independent non-executive director
Dr L Mohuba Chief executive officer
NR Crafford-Lazarus Financial director
RR Matjiu Non-executive director
KJ Capes Executive director
PF Fourie Non-executive director
J Pitt Alternate director
Registered office Southdowns Office Park
First floor, Block A
Cnr Karee and John Vorster Streets, Irene X54, 0062
Website www.sephakuholdings.com
Postal address PO Box 7651, Centurion, 0046
Bankers Nedbank
Auditors Grant Thornton Johannesburg Partnership, Chartered Accountants (SA)
Registered Auditors
Company secretary Acorim Proprietary Limited
Telephone: +27 11 325 6363
Email: sephaku@acorim.co.za
Company registration number 2005/003306/06
Transfer secretaries Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
PO Box 61051, Marshalltown, 2107, South Africa
Telephone: +27 11 370 5000
JSE sponsor Questco Corporate Advisory Proprietary Limited
Telephone: +27 11 011 9200
Investor Relations Officer Sakhile Ndlovu
Email: info@sepman.co.za or sakhile@sephold.co.za
Telephone: +27 12 612 0210
Metier Mixed Concrete Physical address: Romead Business Park, 23 Malone Road, Maxmead, 3610
(wholly owned subsidiary) Postal address: Postnet Suite #546, Private Bag x4, Kloof, 3640
Telephone: +27 31 716 3600/0861 638437
Website: www.metiersa.co.za
Dangote Cement South Africa (Associate) Physical address: Southdowns Office Park, Block A, Ground Floor
Cnr Karee and John Vorster Streets, Irene X54, 0062
Postal address: PO Box 68149, Highveld, 0169
Telephone: +27 12 684 6300
Website: www.sephakucement.co.za
www.sephakuholdings.com
Date: 28/06/2018 07:05:00 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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