EOH HOLDINGS LIMITED - Pro Forma Financial Effects relating to the Transaction and Withdrawal of Cautionary Announcement

Release Date: 16/08/2018 17:15
Code(s): EOH
 
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Pro Forma Financial Effects relating to the Transaction and Withdrawal of Cautionary Announcement

EOH HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/014669/06)
Share code: EOH ISIN: ZAE000071072
(“EOH” or the “Company”)

PRO FORMA FINANCIAL EFFECTS RELATING TO THE TRANSACTION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

Unless otherwise defined, capitalised words and terms contained in this announcement shall bear the
meanings ascribed thereto in the announcements published on SENS on 12 March 2018 and 30 July 2018.

1.   INTRODUCTION

     Shareholders are referred to the announcements published on SENS on 12 March 2018,
     26 April 2018, 11 June 2018, 15 June 2018, 24 July 2018, 30 July 2018 and 10 August 2018
     relating to the proposed strategic partnership and BEE transaction to be concluded between EOH
     and Lebashe (the “Transaction”).

2.   PRO FORMA FINANCIAL EFFECTS

     The table below sets out the pro forma financial effects of the Transaction and the Capitalisation
     Share Issue on EOH’s basic earnings per share (“EPS”), headline EPS, diluted EPS, diluted
     headline EPS, net asset value per share (“NAV”) and net tangible asset value per share (“TNAV”),
     (the “Pro Forma Financial Effects”).

     The Pro Forma Financial Effects have been prepared to illustrate the effect of the Transaction and
     the Capitalisation Share Issue on the published, unaudited consolidated financial statements of
     EOH for the six month period ended 31 January 2018, had the Transaction and Capitalisation
     Share Issue been implemented on 1 August 2017 for EPS, headline EPS, diluted EPS and diluted
     headline EPS purposes and on 31 January 2018 for NAV and TNAV purposes.

     The Pro Forma Financial Effects are provided for illustrative purposes only and because of their
     nature, may not fairly represent the financial performance and position of EOH after the
     implementation of the Transaction and the Capitalisation Share Issue.

     The Pro Forma Financial Effects illustrate the assumption that the Subscription Undertaking is
     implemented in full on the Implementation Date, however the actual transaction in relation to the
     Subscription Undertaking will only be recorded in the period in which Lebashe subscribes for the
     various tranches of EOH Shares pursuant to the Subscription Undertaking, which may occur over
     several future financial reporting periods.

     The Pro Forma Financial Effects have been compiled using the accounting policies that comply
     with International Financial Reporting Standards (“IFRS”) and that are consistent with those applied
     in the published, audited consolidated annual financial statements of EOH for the year ended
     31 July 2017.

     The Pro Forma Financial Effects are the responsibility of the directors of EOH and have been
     extracted from the complete pro forma financial information, on which Mazars (Gauteng) Inc. has
     issued an independent reporting accountants’ reasonable assurance report (“RA Report”). The
     complete pro forma financial information and the RA Report will be included in the Transaction
     circular to be distributed to Shareholders in due course.

                                                                                                       
                                Before - for the
                                       six month                                               After the
                                  period ended /       After A Share                         Transaction
                                           as at           Issue and                                 and
                                      31 January             Initial        After the     Capitalisation
                                            2018        Subscription      Transaction        Share Issue
                                          Actual           Pro forma        Pro forma          Pro forma
     
     Notes                                     1                   2                3                  4

     Earnings per share - from continuing operations
     Basic EPS (cents)                       320                 116               99                101
     Diluted EPS (cents)                     310                 113               97                 98
     Headline EPS (cents)                    314                 110               94                 96
     Diluted headline EPS (cents)            304                 107               92                 94

     Earnings per share - from total operations (including discontinued operations)
     Basic EPS (cents)                        47                (142)            (122)              (108)
     Diluted EPS (cents)                      45                (138)            (119)              (106)
     Headline EPS (cents)                    319                 115               98                100
     Diluted headline EPS (cents)            309                 112               96                 98

     NAV (cents)                           5 708               5 532               5 150           4 876
     TNAV (cents)                          1 869               1 898               2 043           1 935

     Total number of EOH Shares          144 023             152 131             177 987         187 987
     in issue (000’s)

     Weighted average number of          143 765             151 873             177 729         187 729
     EOH Shares in issue (000’s)

     Diluted weighted average            148 349             156 457             182 313         192 313
     number of EOH Shares in
     issue (000’s)

     Notes:

     1.   The “Before” financial information has been extracted without adjustment and / or derived from the
          published, unaudited consolidated financial statements of EOH for the six month period ended
          31 January 2018.
     2.   The “After A Share Issue and Initial Subscription” financial information has been derived from the
          published, unaudited consolidated financial statements of EOH for the six month period ended
          31 January 2018 and adjusted for:
          a.  The issue of 8.1 million Subscription EOH Shares to Lebashe at a subscription price of R30.83 per
              EOH Share, being the 60 day VWAP on 20 July 2018 less 10%, for an aggregate cash subscription
              price of R250 million, pursuant to the implementation of the Initial Subscription. This adjustment is
              expected to have a continuing effect.
          b.  The issue of 40 million A Shares for a nominal aggregate subscription price of R1.00, pursuant to
              the implementation of the A Share Issue, is anti-dilutive, for purposes of determining diluted EPS
              and diluted headline EPS, based on the 30 day VWAP of R65.76 of an EOH Share on
              31 January 2018 and a dividend of R2.15 per EOH Share for the six month period ended
              31 January 2018. This adjustment is expected to have a continuing effect.
          c.  The recognition of a once-off BEE share-based payment charge of approximately R215 million in
              terms of IFRS 2: Share-Based Payments in relation to the A Shares. The share-based payment
              charge on the A Shares is determined using an option pricing model based on the 30 day VWAP
              of R32.23 per EOH Share on 20 July 2018. In addition, the share-based payment charge includes
              the present value of anticipated future dividends of the A Shares, utilising the assumptions in the
              option pricing model. The share-based payment charge is recognised as an equity settled share-
              based payment with no vesting period and the full expense of approximately R215 million is
              recognised upon implementation of the Transaction.
          d.  The payment of costs amounting to approximately R55 million, relating to the implementation of
              the Transaction and matters related thereto.
     3.   The “After the Transaction” financial information has been derived from the published, unaudited
          consolidated financial statements of EOH for the six month period ended 31 January 2018 and adjusted
          for those adjustments included in note 2 above and for the issue of 25.9 million EOH Shares to Lebashe
          at a subscription price of R29.01 per EOH Share, being the 30 day VWAP on 20 July 2018 less 10%, for
          an aggregate cash subscription price of R750 million, pursuant to the implementation of the Subscription
          Undertaking. In the event that EOH obtains the right to early redeem all or a portion of the A Shares, this
          right provides EOH with an asset. This adjustment is expected to have a continuing effect.
     4.   The “After the Transaction and Capitalisation Share Issue” financial information has been derived from
          the published, unaudited consolidated financial statements of EOH for the six month period ended
          31 January 2018 and adjusted for those adjustments included in notes 2 and 3 above and for:
          a.  The issue of 10 million EOH Shares (“Capitalisation Shares”), pursuant to the implementation of
              the Capitalisation Share Issue. The issue of 10 million Capitalisation Shares is based on the
              assumptions that Lebashe holds 40 million A Shares on the Maturity Date, no dividend is declared
              and paid by EOH in respect of an EOH Share for the duration of the Transaction Term and a 30
              day VWAP of R120.00 per EOH Share on the Maturity Date. This adjustment is expected to have
              a continuing effect.
                 -    Holding all assumptions the same, if the 30 day VWAP of an EOH Share on the Maturity Date
                      is R90.00, there will be nil Capitalisation Shares issued on the Maturity Date. The pro forma
                      financial effects of nil Capitalisation Shares issued on the basic EPS, headline EPS, diluted
                      EPS, diluted headline EPS from continuing and including discontinued operations per EOH
                      Share are negligible.
                 -    Holding all assumptions the same, if the 30 day VWAP of an EOH Share on the Maturity Date
                      is R150.00, there will be 16 million Capitalisation Shares issued on the Maturity Date. The pro
                      forma financial effects of 16 million Capitalisation Shares issued on the basic EPS, headline
                      EPS, diluted EPS, diluted headline EPS from continuing and including discontinued
                      operations per EOH Share will decrease the loss per EOH Share.
           b. The redemption of the 40 million A Shares held by Lebashe for a nominal aggregate consideration
              of R1.00, assuming Lebashe holds 40 million A Shares on the Maturity Date. As stated above, the
              issue of the 40 million A Shares on implementation of the Transaction is anti-dilutive and therefore
              the redemption of such A Shares would therefore not require an adjustment to the number of EOH
              Shares in issue or the weighted average or diluted weighted average number of EOH Shares in
              issue.
     5.   The adjustments in respect of the Transaction costs (including the BEE share-based payment charge)
          and the redemption of the A Shares are once-off adjustments.

3.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

     Shareholders are advised that as a result of the publication of the Pro Forma Financial Effects,
     caution is no longer required to be exercised by Shareholders when dealing in the Company’s
     securities.

Further details regarding the Transaction, the Transaction circular and the related salient dates and
times pertaining to the Transaction will be published on SENS in due course.

Johannesburg
16 August 2018

Corporate Advisor and Transaction Sponsor to EOH on the Transaction
One Capital

Attorneys to EOH on the Transaction
Cliffe Dekker Hofmeyr Inc.

Independent Auditors and Reporting Accountants to EOH on the Transaction
Mazars (Gauteng) Inc.

                                                                                                                   

Date: 16/08/2018 05:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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