STELLAR CAPITAL PARTNERS LIMITED - Provisional condensed financial results for the year ended 30 June 2018

Release Date: 31/08/2018 10:42
Code(s): SCP
 
Wrap Text
Provisional condensed financial results for the year ended 30 June 2018

STELLAR CAPITAL PARTNERS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/015580/06)
Share code: SCP
ISIN: ZAE000198586

PROVISIONAL CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 30 JUNE 2018

INTRODUCTION

Stellar Capital Partners Limited ("Stellar Capital", the "Company" or the "Group") presents its provisional results for the year
ended 30 June 2018.

SUMMARY: YEAR ENDED 30 JUNE 2018

- Net asset value per share (NAVPS) at 30 June 2018 is R1.05
- This represents a decrease in NAVPS of 19% compared to a NAVPS of R1.29 as at 30 June 2017
- Unrealised fair value losses in relation to the Group's investment in Torre Industries (R228.2 million) and Tellumat
  (R67.3 million) were the primary contributors to the decline in NAVPS during the year under review
- Repayment of the remaining R100m Bridge facility during the year under review
- Stellar Capital has entered into a binding term sheet to empower Prescient, which ultimately will reduce Stellar Capital's
  economic interest in Prescient to 19.4%, subsequent to the year under review
- A formal disposal process is underway in respect of the investment in Amecor
- The transactions involving Prescient and Amecor will enable Stellar Capital to optimise its capital structure

COMMENTARY

PRESCIENT
On 26 July 2018 Stellar Capital announced the conclusion of a binding term sheet that, after a series of transactions, will
result in Prescient becoming an empowered entity, with Prescient Empowerment Trust Proprietary Limited (PET) ultimately
becoming the controlling shareholder to Prescient. Stellar Capital will retain an effective 19.4% economic interest in Prescient
once all the conditions precedent to the transaction have been fulfilled, as a result of a disposal of Prescient shares and the
dilutive effect of Prescient issuing more shares. The total cash proceeds payable to Stellar Capital as a result of the disposal
of 24.5% of Prescient are currently estimated to be R384.5 million, which also includes expected price escalations to the
closing date of the transaction.

The investment continues to perform satisfactorily and is expected to benefit from an empowered majority shareholder. As
at 30 June 2018 the group had R86.4 billion client assets under management (AUM) and R260.5 billion client assets under
administration (AUA).

FRIEDSHELF 1678 LTD (INCLUDING CADIZ)
Despite continued improved investment performance and a stabilised level of assets under management being achieved,
the levels of cost rationalisation were not sufficient to return the business to a profitable position. During the year under
review Stellar Capital entered into a transaction with the Warwick Group in which it transferred the institutional and retail
asset management businesses, the Cadiz brand and certain regulated licenses, but retained certain specific business lines
and the asset management license. Stellar Capital continues to seek to leverage the various licenses held in order to grow
the retained revenue streams.

PRAXIS
During the previous financial period, Praxis took a strategic decision to exit its lower margin, working capital-intensive
invoice factoring operations in favour of higher margin, less capital-demanding part funding operations, which has seen
an improvement in the working capital cycle of the business. During the year under review a capital restructuring was
implemented, which resulted in the injection of R56.3 million equity into the business and a reduction of debt. As a result
of the restructuring, Stellar Capital has reduced its exposure to the business and diluted its shareholding to 37% for a cash
consideration of R20.9 million.

The business remains poised to leverage off the high demand for parts funding and management are committed to
improving the working capital cycle and further reducing debt levels using the excess cash generated from operations.

INTEGRATED EQUIPMENT RENTALS
Stellar Capital took the strategic decision to exit the investment in Integrated Equipment Rentals during the year under
review as it held no equity in the operating business which provided the underlying services to the clients. Stellar Capital was
released from all obligations for the debts of the business as part of the exit.

GREENPOINT CAPITAL (PREVIOUSLY STELLAR CREDIT)
During the year under review, the two management teams housed within Stellar Credit were split. Stellar Credit was
rebranded as Greenpoint Capital and is the appointed manager of Greenpoint Specialised Lending (GSL) (previously Stellar
Specialised Lending).

During the year under review Stellar Capital advanced R14.5 million to Greenpoint Capital in order for it to directly invest in
the funds that it manages. The business has shown improved profitability in its 2018 financial year, even after excluding the
effects of significant income items considered to be non-recurring in nature.

Stellar Capital has partnered with GPC management, resulting in a dilution of shareholding to 51% of the ordinary
shareholding of the company.

INYOSI SOLUTIONS
During the year under review the operations related to the Supplier and Enterprise Development Funds were sold by Stellar
Credit to Inyosi Solutions for R4 million, which was distributed by Stellar Credit to Stellar Capital. Inyosi Solutions, a newly
incorporated company with 75% held by Stellar Capital and 25% held by management, became the appointed manager of
the Supplier and Enterprise Development Funds held within Inyosi Capital. The investment in Inyosi Solutions was acquired
for R3.6 million.

The AUM managed by Inyosi increased from R195.7 million to R292.1 million during the year under review, which is the
primary driver of its increased profitability.

TORRE
Stellar Capital's valuation of the business is based on the listed share price of R0.71 per Torre share at 30 June 2018, which is
a decline from R1.49 per Torre share at 30 June 2017 and which translates into a loss of 21 cents to the Stellar Capital NAVPS
over the year under review. Lack of liquidity in the listed Torre share price is also exacerbating the disconnect between the
traded share price and Stellar Capital's assessment of the intrinsic value of the business. For this reason Stellar Capital is
supportive in principle of the proposed delisting which was announced on 9 July 2018 (subsequent to year-end and
therefore not used as a basis for the valuation of the investment in Torre).

AMECOR
Amecor again delivered good growth in its financial year ended 31 March 2018, with EBITDA up from R52.3 million to
R66.7 million, despite increased competition and margin pressures.

Stellar Capital is currently undergoing a formal process to exit the investment and current offers received, which Stellar
Capital is considering, suggest that the transaction price will likely be at, or potentially in excess of, the current valuation.

TELLUMAT
The performance of Tellumat remains a concern as the downward EBITDA trend continues in its 2018 financial year, primarily
as a result of the under-performing Defence and Integrated Solutions divisions. As such the valuation has been reduced
further, based on a much lower estimated sustainable EBITDA of R20.9 million (2017: R28.6 million) and is now considered
to also approximate the Tellumat group's sum-of-the-parts break-up value.

During the year under review the Board of Directors took the decision to consider a disposal strategy with respect to the
investment in Tellumat and has engaged a corporate finance service provider to drive the disposal process, which is still in
its early stages as at 30 June 2018.

OUTLOOK

The further deterioration in profitability experienced by Torre and Tellumat continue to impact the valuations thereof. The
nature of the operations of Prescient and Amecor, being less cyclical, have proved to be able to weather tough economic
times far better. The Board expects to deliver on its key strategic target of optimising the Company's capital structure as
the 31 May 2019 maturity date of the Group's preference share approaches.

The Company remains on course to complete its medium-term objective to hold non-controlling stakes in underlying
investments and to be invested in businesses which can demonstrate growth prospects that meet Stellar Capital's return
requirements and which are scalable within their industry. The Company remains committed to reducing its exposure to
the Industrial sector in a practical and organised process and, in turn, to ensuring that the long-term approach results in
improved shareholder returns and the efficient allocation of capital.

CHANGES TO THE BOARD OF DIRECTORS AND COMPANY SECRETARY

Mr. CE Pettit resigned from the Board of Directors with effect from 31 August 2017 and was replaced by Mr. PJ van Zyl
as Chief Executive Officer with effect from 1 September 2017.

Mr. CB de Villiers resigned from the Board of Directors with effect from 30 September 2017 and was replaced by
Mr. S Graham on an interim basis until 26 March 2018 when Mr. S Graham was appointed as permanent Chief Financial
Officer.

Mr. PJ Bishop was appointed as a non-executive director with effect from 18 October 2017.

Ms. W Dreyer replaced Mr. S Graham as Company Secretary of Stellar Capital with effect from 26 March 2018.

There were no other changes made to the Board of Directors during the year under review and up to the date of this report.

SUM-OF-THE-PARTS (SOTP) VALUATION
AS AT 30 JUNE 2018

                                    % of          As at          As at   
R'000                          portfolio   30 June 2018   30 June 2017   
Financial Services                                                       
Prescient                            40%        710 005        697 015   
Friedshelf                            4%         69 217         86 862   
Praxis                                1%         20 973         29 671   
Greenpoint Capital                    0%          2 595          8 802   
Inyosi Solutions                      0%          4 931              -   
Industrials and technology                                               
Torre                                12%        208 355        435 142   
Amecor                               22%        398 207        359 708   
Tellumat(1)                           6%        110 971        178 331   
Corporate Assets                                                         
Financial assets                      1%         26 647         24 707   
Loan portfolio                        7%        125 134        200 140   
Venture capital portfolio(2)          2%         29 958         28 195   
Cash and cash equivalents             3%         39 649         13 554   
Other assets                          2%         36 333          7 993   
Total Assets                                  1 782 975      2 070 120   
Preference share liability                    (584 392)      (569 112)   
Other financial labilities                     (26 576)      (100 000)   
Trade and other payables                       (44 509)       (12 341)   
SOTP value                                    1 127 498      1 388 667   
Net shares in issue ('000)                    1 075 032      1 075 032   
SOTP value per share (Rand)                        1.05           1.29   

Notes:
1 The value comprises the sum of the investments in Tellumat and Masimong Technologies
2 Held in Stellar International

CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2018

                                             Audited as at   Audited as at   
R'000                                Notes    30 June 2018    30 June 2017   
Non-current assets                                 828 402       2 049 590   
Listed investments at fair value         7         208 355         435 142   
Unlisted investments at fair value       7         577 852       1 588 724   
Other financial assets                              13 985          24 531   
Loans to portfolio companies             8          27 975               -   
Property, plant and equipment                            -             993   
Deferred taxation                                      235             200   
Current assets                                     954 573          20 530   
Unlisted investments at fair value       7         894 139               -   
Other financial assets                              12 662             176   
Loans to portfolio companies             8           4 948           2 385   
Current tax receivable                                   -             103   
Trade and other receivables                          3 175           4 312   
Cash and cash equivalents                           39 649          13 554   
Total assets                                     1 782 975       2 070 120   
Equity                                           1 127 498       1 388 667   
Ordinary share capital                   9       2 347 806       2 347 806   
Preference share capital                10          32 044          32 044   
Accumulated loss                               (1 252 352)       (991 183)   
Non-current liabilities                                  -         514 657   
Preference share liability                               -         514 657   
Current liabilities                                655 477         166 796   
Preference share liability                         584 392          54 455   
Other financial liabilities             11          26 576         100 000   
Current tax payable                                    127               -   
Trade and other payables                            44 382          12 341   
Total equity and liabilities                     1 782 975       2 070 120   

CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018

                                                                                    Audited year   Audited 7 month   
                                                                                           ended      period ended   
R'000                                                                       Notes   30 June 2018      30 June 2017   
Fair value adjustments                                                         12      (366 692)         (895 923)   
Fair value adjustments on listed investments                                           (228 203)         (276 768)   
Fair value adjustments on unlisted investments and other financial assets               (54 654)          (69 457)   
Fair value adjustments resulting from capital distributions                             (83 835)         (549 698)   
Dividend revenue                                                               13        217 716           579 742   
Capital distributions                                                                     83 835           549 698   
Earnings distributions                                                                   133 881            30 044   
Interest revenue                                                                           5 845            10 214   
Gross loss from investments                                                            (143 131)         (305 967)   
Other income                                                                               2 259             1 024   
Finance costs                                                                  14       (86 627)          (50 091)   
Net loss before operating expenses                                                     (227 499)         (355 034)   
Management fee                                                                          (19 921)           (6 280)   
Operating expenses                                                                       (9 012)          (11 691)   
Transaction costs                                                                        (3 311)          (18 085)   
Loss before tax                                                                        (259 743)         (391 090)   
Taxation                                                                                 (1 426)             (513)   
Loss for the period                                                                    (261 169)         (391 603)   
Weighted number of shares in issue ('000)                                              1 075 032         1 072 433   
Loss per share (cents)                                                                   (24.29)           (36.52)   
Headline loss per share (cents)                                                          (24.23)           (36.52)   

The issue of 600 convertible redeemable preference shares has not been treated as dilutive in calculating diluted earnings and
headline earnings per share as the conversion thereof will result in a decrease in loss per share from continuing operations (i.e.
the conversion is anti-dilutive).

RECONCILIATION BETWEEN LOSS AND HEADLINE LOSS
FOR THE YEAR ENDED 30 JUNE 2018

                                                                    Audited year   Audited 7 month   
                                                                           ended      period ended   
R'000                                                               30 June 2018      30 June 2017   
Loss for the period                                                    (261 169)         (391 603)   
Impairment of receivable                                                     347                 -   
Write-off of fixed assets                                                    293                 -   
Headline loss for the period                                           (260 529)         (391 603)   
                           
CONDENSED CONSOLIDATED STATEMENT OF                           
CHANGES IN EQUITY                           
FOR THE YEAR ENDED 30 JUNE 2018                           
                           
                                                                    Audited year   Audited 7 month   
                                                                           ended      period ended   
R'000                                                               30 June 2018      30 June 2017   
Balance at the beginning of the period                                 1 388 667         1 768 613   
Loss for the period                                                    (261 169)         (391 603)   
Issue of shares                                                                -            11 709   
Capitalisation of share issue costs                                            -              (52)   
Balance at the end of the period                                       1 127 498         1 388 667   
                           
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018

                                                                    Audited year   Audited 7 month   
                                                                           ended      period ended   
R'000                                                               30 June 2018      30 June 2017   
Operating activities                                                     224 981           553 820   
Cash generated from operations and capital distributions received        221 333           545 104   
Interest revenue                                                           4 879            10 214   
Tax paid                                                                 (1 231)           (1 498)   
Investing activities                                                    (54 115)         (976 437)   
Net acquisitions of investments                                         (27 076)         (977 887)   
Net disposals of other financial assets                                    2 375               233   
Net loans repaid by / (advanced to) portfolio companies                 (29 983)             1 237   
Disposal / (purchase) of property, plant and equipment                       569              (20)   
Financing activities                                                   (144 771)            53 317   
Share issue costs                                                              -              (52)   
Net (repayments) / proceeds from other financial liabilities            (75 000)           100 000   
Preference share financing costs                                        (62 972)          (39 513)   
Bridge facility financing costs                                          (6 799)           (7 118)   
Cash and cash equivalents at the beginning of the period                  13 554           382 854   
Cash and cash equivalents at the end of the period                        39 649            13 554   
Net increase / (decrease) in cash and cash equivalents                    26 095         (369 300)   

NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1. REPORTING ENTITY
Stellar Capital is a South African domiciled investment holding company listed on the main board of the JSE Limited (JSE).
The condensed consolidated financial statements of the Group as at and for the year ended 30 June 2018 comprise the
Company and its Consolidated Subsidiary, Stellar Management Services Proprietary Limited.

The Company has significant interests in both listed and unlisted investments, which are more fully set out in note 7. As an
investment holding company, Stellar Capital has applied the investment entity exception and accounts for its investments
on a fair value basis, in accordance with IFRS 10 Consolidated Financial Statements.

2. FINANCIAL PREPARATION AND REVIEW
The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS), including the disclosure requirements of IAS 34 Interim Financial Reporting (IAS 34) and comply with the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, as well as the JSE Listings Requirements and the
Companies Act, No 71 of 2008.

The results include, as a minimum, the information required by IAS 34 and do not include all the information required for
a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding to the changes in the Group's financial position and performance.

These condensed consolidated financial statements have been prepared under the supervision of S Graham CA(SA), the
Chief Financial Officer and are not themselves audited. Amounts are presented in South African Rands.

The auditors, BDO Cape Inc., have issued an unmodified audit opinion in respect of the consolidated financial statements of
the Group as at and for the year ended 30 June 2018. The auditor's report does not necessarily report on all the
information contained in this announcement. Shareholders are therefore advised that, in order to obtain a full understanding
of the nature of the auditor's engagement, they should inspect a copy of the auditor's report together with the
accompanying financial information at the Company's registered office.

These condensed consolidated financial statements were approved by the Board of Directors on 30 August 2018. The
directors take full responsibility for the preparation of these results, which have been correctly extracted from the audited
consolidated financial statements of the Group, which were approved on 30 August 2018.

3. ACCOUNTING POLICIES
The accounting policies applied by the Group in these condensed consolidated financial statements are consistent with
those applied in the consolidated annual financial statements for the period ended 30 June 2017.

All subsidiaries classified as portfolio investments are accounted for at fair value through profit or loss (FVTPL) in terms
of IAS 39 Financial Instruments: Recognition and Measurement and all associates classified as portfolio investments are
accounted for at FVTPL in terms of the exemption from applying the equity method of accounting provided in IAS 28
Investments in Associates and Joint Ventures.

  
4. JUDGEMENTS AND ESTIMATES
Management is required to make estimates and assumptions that affect the amounts represented in the financial statements
and related disclosures. Use of available information and the application of judgement is inherent in the formation of
estimates. Actual results in the future could differ from these estimates.

In preparing these condensed consolidated financial statements, the significant judgments made by management in
applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied
to the consolidated annual financial statements for the period ended 30 June 2017.

5. SEGMENT INFORMATION
As the Group has only one business segment which is managed as a single pool of capital irrespective of the sector in which
the Group's investees trade, segmental reporting is not applicable.

6. DIVIDENDS
No ordinary dividends were declared during the year ended 30 June 2018 (2017:Rnil). Preference share dividends on
preference share capital of R600 million accrued at 95% of prime from 1 July 2017 to 31 December 2017 and at 110% of prime
from 1 January to 30 June 2018. During the year under review preference share dividends of R63 million were declared, of
which R33.1 million, relating to the period 1 January to 30 June 2018, was paid on 2 July 2018, being the first banking day after
30 June 2018. Included in the preference share dividends declared, R1.6 million were payable to CJ Roodt, an independent
non-executive director of the Company.

7. INVESTMENTS AT FAIR VALUE

All subsidiaries and associates have a principle place of business in South Africa with the exception of Stellar International,
which has a principle place of business in Mauritius.

Listed investments

                                                                                             % HELD           % HELD
 ENTITY                                    NATURE OF OPERATIONS                           30 JUNE 2018     30 JUNE 2017
                          Industrial group that distributes and rents capital equipment
 Torre                    and supplies aftermarket parts to the mining, manufacturing,         57%               57%
                          construction and industrial markets across Africa

Unlisted investments

                                                                                             % HELD           % HELD
 ENTITY                                    NATURE OF OPERATIONS                           30 JUNE 2018     30 JUNE 2017
                          Diversified financial services group offering investment
                          management, fund services, administration, stockbroking,             49%               49%
 Prescient                wealth investment, retail and institutional and insurance
                          products

                          Financial services group specialising in institutional and          100%              100%
 Friedshelf(1)            personal investments

                          Provider of short term finance to the panel beating industry         37%               60%
 Praxis                   to address motor body repairers' working capital needs

 Greenpoint Capital       Provision of management services                                     51%              100%

 Inyosi Solutions         Provision of management services                                     75%                 -

 Amecor                   Technology solutions and services in security                       100%              100%

                          Technology solutions and services in manufacturing, air
 Tellumat                 traffic control systems, defence and security and turnkey            49%               49%
                          infrastructure solutions for the telecommunications industry
                                   
 Masimong                 A subsidiary of a diversified B-BBEE investment holding            100%               100%
 Technologies             company and B-BBEE partner of Stellar Capital for Tellumat      preference        preference
                                                                                           shares(2)        shares (2)

 Greenpoint               Credit fund specialising in mezzanine financing                     100%               100%
 Specialised Lending


                          Holding company for international venture capital                   100%               100%
 Stellar International    investments                                                                   
                          
 CAM preference                                                                               Sole              Sole
 share (investment in     Preference share investment in a subsidiary of Friedshelf        preference        preference
 GSL Fund)                                                                                   share             share

(1) The operational entities within the Cadiz group are subsidiaries of CAMH. Both Cadiz Holdings (Pty) Ltd (100% held) 
    and Cadiz Asset Management Holdings (Pty) Ltd (CAMH) (100% held) are held via Friedshelf 1678 Limited, a 100% held 
    subsidiary of Stellar Capital.
(2) The preference shares held in Masimong Technologies are non-cumulative and redeemable at the instance of the issuer.

Group and Company 2018                                                                     Fair value                 
                                                                                          adjustments                 
                                                             Proceeds                       resulting                 
                                 Opening                         from     Fair value     from capital       Closing   
R'000                            balance    Acquisitions    disposals    adjustments    distributions       balance   
Listed investments               435 142           1 416            -      (228 203)                -       208 355   
Torre                            435 142           1 416            -      (228 203)                -       208 355   
Unlisted investments           1 588 724          26 660      (1 000)       (58 558)         (83 835)     1 471 991   
Prescient                        697 015           2 037            -         10 953                -       710 005   
Friedshelf                        86 862               -            -       (12 816)          (4 829)        69 217   
Praxis                            29 671          20 973            -       (29 671)                -        20 973   
Greenpoint Capital                 8 802               -      (1 000)        (1 207)          (4 000)         2 595   
Inyosi Solutions                       -           3 650            -          1 281                -         4 931   
Amecor                           359 708               -            -         38 499                -       398 207   
Tellumat                          87 204               -            -       (32 828)                -        54 376   
Masimong Technologies             91 127               -            -       (34 532)                -        56 595   
Stellar International             28 195               -            -          1 763                -        29 958   
GSL Fund                         200 140               -            -              -         (75 006)       125 134   
Total                          2 023 866          28 076      (1 000)      (286 761)         (83 835)     1 680 346   
  
TORRE
Stellar Capital acquired an additional 1.4 million Torre shares at R1.00 per share in December 2017.

The investment has been valued at the closing quoted market price of R0.71 per share on 30 June 2018 (2017: R1.49 per
share).

PRESCIENT
Stellar Capital acquired an additional 2.3 million Prescient shares during the year under review as part of the finalisation of
the original acquisition.

The valuation as at 30 June 2017 was unchanged from the acquisition price and was supported by applying a
sum-of-the-parts valuation to the underlying core operating units, which were valued primarily by applying a sustainable
earnings model. Where the sustainable earnings model was not considered to be the most appropriate valuation method,
the underlying business was valued using a percentage of assets under management (AUM).

The significant unobservable inputs/assumptions included in the 30 June 2017 sum-of-the-parts valuation:

-  P/E multiples of 8 – 15 times
-  Estimated percentage of AUM applied to relevant entities: 3% - 5%

As at 30 June 2018, the fair value of the investment in Prescient has been estimated by management using the sustainable
earnings model. Management considers the P/E multiple to be the most appropriate valuation method. As the investment
has now been held for a complete financial year, management has valued the investment based on the estimated sustainable
earnings of the group.

The significant unobservable inputs/assumptions included in the 30 June 2018 valuation:
-  Estimated sustainable net profit after tax of R101.4 million
-  P/E multiple of 14.3 times

Subsequent to year-end, Stellar Capital has entered into a series of transactions, which included the disposal of half of its
shareholding in Prescient (24.5% of the issued ordinary share capital of Prescient). The disposal is subject to certain
conditions precedent. As such, 50% of the investment has been classified as current.
                            
Investment in Prescient (R'000)                                                      2018                    2017
Non-current                                                                       355 002                 697 015
Current                                                                           355 003                       -
Total                                                                             710 005                 697 015
    
FRIEDSHELF (CADIZ)
As a result of the transaction with The Warwick Group, the Cadiz' employee share scheme in CAMH was cancelled and
CAMH is now 100% held by Stellar Capital, via Friedshelf 1678 Limited.

As at 30 June 2018, the estimated fair value of the investment is supported by the remaining net asset value of the group
entities as the basis for the estimated fair value. The value of the investment materially represents the net asset value (2017:
31% discount to 90% of the net asset value of R140.5 million).

PRAXIS
In March 2018, Praxis completed a capital raise for R56.3 million which resulted in a dilution of Stellar Capital's shareholding
in Praxis.

As at 30 June 2018, the fair value of the investment has been estimated by management using the sustainable earnings
model, which is consistent with the valuation method used in the previous financial period. Management considers the P/E
multiple to be the most appropriate valuation method. The valuation inputs were materially unchanged from those used in
the capital raise, resulting in no change to the valuation subsequent to the additional equity injection of R20.9 million.
                            
Significant unobservable inputs/assumptions                                          2018                    2017
Estimated sustainable net profit after tax                                   R7.3 million            R4.5 million
P/E multiple                                                                    7.4 times              10.9 times
                                 
The Company has pledged and ceded to GSL the shares held in Praxis as a continuing general covering collateral security in
respect of the amounts owed by Praxis to GSL.

GREENPOINT CAPITAL (PREVIOUSLY STELLAR CREDIT)
During the year under review the operations related to the Supplier and Enterprise Development Funds were sold to Inyosi
Solutions for R4 million, which was distributed to Stellar Capital.

Stellar Capital entered into a vendor-financed transaction with management in March 2018 whereby 49% of the ordinary
issued share capital was transferred to management and settled via the issue of a R1 million preference shares by associates
of management.

As at 30 June 2018, the fair value of the investment has been estimated by management using the sustainable earnings model
which is consistent with the valuation method used in the previous financial period. Management considers the P/E multiple
to be the most appropriate valuation method.

Significant unobservable inputs/assumptions                                          2018                    2017
Estimated sustainable net profit after tax                                   R0.6 million            R0.8 million
P/E multiple                                                                    8.6 times              10.7 times

INYOSI SOLUTIONS
Inyosi Solutions was newly incorporated during the year under review. Stellar Capital holds 75% of the ordinary share capital
of Inyosi Solutions, which it acquired for R3.6 million, with the other 25% being held by management.

As at 30 June 2018, the fair value of the investment has been estimated by management using the sustainable earnings model.
Management considers the P/E multiple to be the most appropriate valuation method.

Significant unobservable inputs/assumptions                                          2018                    2017
Estimated sustainable net profit after tax                                   R1.0 million                       -
P/E multiple                                                                    6.6 times                       -

AMECOR
As at 30 June 2018, the fair value of the investment in Amecor has been estimated by management using the sustainable
earnings model which is consistent with the valuation method used in the previous financial period. Management considers
the EV/EBITDA multiple to be the most appropriate valuation method.

Significant unobservable inputs/assumptions                                          2018                    2017
Estimated sustainable EBITDA                                                R64.2 million           R50.6 million
EV/EBITDA multiple used                                                         6.2 times               7.1 times

Management has taken the decision to exit the investment and is undertaking a formal disposal process. The investment has
therefore been classified as current as at 30 June 2018.

Tellumat
As at 30 June 2018, the fair value of the investment in Tellumat has been estimated by management using the sustainable
earnings model, which is consistent with the valuation method used in the previous financial period. Management considers
the EV/EBITDA multiple to be the most appropriate valuation method.

Significant unobservable inputs/assumptions                                          2018                    2017
Estimated sustainable EBITDA                                                R20.9 million           R28.6 million
EV/EBITDA multiple used                                                         5.3 times               6.2 times

Although Tellumat is expected to incur a negative EBIDTA for its 2018 financial year, the estimated fair value is also supported
by the Tellumat group's estimated tangible net asset value.

MASIMONG TECHNOLOGIES
As Tellumat is the only significant asset held by Masimong Technologies as at 30 June 2018, the fair value of the preference
shareholding in Masimong Technologies has been determined with reference to its share of the estimated fair value of
Tellumat (refer above for details of the valuation).

Management has taken the decision to exit the investments in both Tellumat and Masimong Technologies and therefore these
have been classified as current as at 30 June 2018.

STELLAR INTERNATIONAL
The functional currency of Stellar International is the US Dollar. As at 30 June 2018, the fair value of the investment in Stellar
International has been estimated by management using the price of recent investment valuation method. Management
considers this to be the most appropriate valuation method as both LifeQ and Tictrac are still in the early stages of
development with no current earnings, no positive cash flows nor any anticipated short-term earnings. The respective
acquisition prices, along with the balance of cash, have therefore been converted to Rands using the foreign exchange spot
rates on 30 June 2018.

Management has taken the decision to exit these investments and therefore the investment in Stellar International has been
classified as current as at 30 June 2018.

INVESTMENT IN GSL FUND
Stellar Capital has an investment in the GSL Fund, comprising B Notes and B Shares (B Units), which is held via Friedshelf.
During the year under review, a part-redemption of B Units to the value of R75 million was distributed to Stellar Capital
as a return of capital, effectively reducing Stellar Capital's indirect investment in the GSL Fund from R200.1 million to
R125.1 million at 30 June 2018.

The investment in the GSL Fund is derived from the GSL B Unit value per the statement received from the fund manager.

Refer to note 8 for details of funding provided to portfolio companies.

LEVEL 3 INVESTMENTS
With the exception of Torre, a listed entity, all portfolio companies are classified as Level 3. The Board of Directors has
approved the valuation methodologies used by management for Level 3 investments. The Company receives reports from
portfolio companies at each reporting date, either in the form of audited financial statements or unaudited management
accounts. These are then used in the primary valuation techniques to determine fair value or in the secondary valuation
techniques, which are used as a reasonability checks. The table below shows the reconciliation of Level 3 movements:

                                                                   Audited        Audited   
R'000                                                         30 June 2018   30 June 2017   
Opening balance                                                  1 588 724      1 219 609   
Additions                                                           26 660        988 164   
Disposals                                                          (1 000)              -   
Fair value adjustments                                            (58 558)       (69 351)   
Fair value adjustments resulting from capital distributions       (83 835)      (549 698)   
Closing balance                                                  1 471 991      1 588 724   


Transfers to Level 3 occur in instances where management assesses that the quoted market price of a listed investment is not
representative of fair value at the measurement date. Similarly, transfers from Level 3 occur where previously management
assessed that the quoted market price of a listed investment was not representative of fair value, but where a change in
factors results in management concluding that the quoted market price is considered to be an appropriate basis for
estimating fair value.

The table below shows the sensitivity analysis of Level 3 investments as at 30 June 2018:

                                     Significant            Reasonable         Reasonable
                             unobservable inputs    possible variation    possible change
Prescient                       Sustainable NPAT                   10%             71 001
                                    P/E multiple                    5%             35 500
Friedshelf                       Discount to NAV                   10%              7 124
Praxis                          Sustainable NPAT                   10%              2 097
                                    P/E multiple                   10%              2 097
Greenpoint Capital              Sustainable NPAT                   10%                260
                                    P/E multiple                   10%                260
Inyosi Solutions                Sustainable NPAT                   10%                493
                                    P/E multiple                   10%                493
Amecor                        Sustainable EBITDA                    5%             19 910
                              EV/EBITDA multiple                    5%             19 910
Tellumat                      Sustainable EBITDA                   10%              5 438
                              EV/EBITDA multiple                    5%              2 719
Masimong Technologies         Sustainable EBITDA                   10%              5 660
                              EV/EBITDA multiple                    5%              2 830
Stellar International                        n/a                   n/a                n/a
Investment in GSL Fund                       n/a                   n/a                n/a

8. LOANS TO PORTFOLIO COMPANIES                                 
                                                               Audited            Audited   
R'000                                                     30 June 2018       30 June 2017   
Greenpoint Capital                                              15 159                  -   
Friedshelf - Loan 1                                             17 764              1 661   
Friedshelf - Loan 2                                                  -                724   
Total                                                           32 923              2 385   
Non-current                                                     27 975                  -   
Current                                                          4 948              2 385   
Total                                                           32 923              2 385   

GREENPOINT CAPITAL
A loan of R10.1 million (Loan 1) was provided to GPC to fund its investment in GSL. Loan 1 bears interest at prime and both
interest and capital are repayable in a single bullet payment on 28 February 2021. Loan 1 is secured by the ordinary shares of
Greenpoint Capital that are held by GPC management. An additional loan of R4.5 million (Loan 2) was provided to Greenpoint
Capital to fund an investment in Praxis via its fund, Greenpoint Special Opportunities (Pty) Ltd (GSO). In year one, Loan 2
bears interest at prime plus 2% with no repayments. In year two, Loan 2 bears interest at prime and is repayable in quarterly
payments of R1 million each. In year three, Loan 2 bears interest at prime plus 2%. The balance of Loan 2 is repayable in a
single bullet payment on 28 February 2021. Loan 2 is secured by the ordinary shares of Greenpoint Capital held by
management of Greenpoint Capital and the units in GSO.

FRIEDSHELF - LOAN 1
The balance outstanding as at 30 June 2017 was repaid and subsequently R17.7 million, bearing interest at prime less 1.25%,
was advanced during the period under review to fund operations. R4.9 million of the loan was repaid in July 2018 and the
balance was capitalised as an equity contribution.

FRIEDSHELF - LOAN 2
The balance outstanding as at 30 June 2017 was repaid during the year under review.

9.ORDINARY SHARE CAPITAL

During the previous financial period, the Company issued a total of 7 014 882 ordinary shares to acquire investments.

NUMBER OF SHARES IN ISSUE                                                      
                                                               Audited            Audited   
R'000                                                             2018               2017   
Shares in issue at the beginning of the period               1 075 032          1 068 017   
Issue of shares for acquisitions                                     -              7 015   
Shares in issue at the end of the period                     1 075 032          1 075 032   

ISSUED SHARE CAPITAL                                                                        
                                                               Audited            Audited   
R'000                                                     30 June 2018       30 June 2017   
Share capital at the beginning of the period                 2 347 806          2 336 149   
Issue of shares for acquisitions                                     -             11 709   
Capitalisation of share issue costs                                  -               (52)   
Share capital at the end of the period                       2 347 806          2 347 806   

10. PREFERENCE SHARE CAPITAL

On 30 November 2015, the Company issued 600 convertible redeemable preference shares at R1 million each to raise
R600 million in funding. The preference shares were issued at an initial dividend rate of 95% of prime and at an initial
conversion price of R2.78. The redemption date is 31 May 2019. The preference shares are convertible, at the election of the
holders, into a maximum of 215 827 338 ordinary shares. Two financial covenants set out in the preference share offering
circular, being the asset cover ratio and net asset value minimum threshold, have not been satisfied as at 30 June 2018.

During the year under review the Board obtained approval from ordinary shareholders by way of a special resolution on
12 June 2018 to create a new class of share consisting of 10 000 cumulative, redeemable, non-convertible B preference shares
of no par value (B Preference Shares) without any associated preferences, rights, limitations or other terms for that class, on
the basis that the B Preference Shares will have the rights, privileges, restrictions and conditions as determined by the Board
prior to issue thereof. No B Preference Shares have been issued by Stellar Capital as at the date of this report.

11. OTHER FINANCIAL LIABILITIES

The bridge facility from Rand Merchant Bank (a division of FirstRand Bank Limited) was repaid in February 2018.

The Group received a short term loan of R25 million in during the year under review. The balance as at 30 June includes
accrued interest and the full amount outstanding was repaid in July 2018.

12. FAIR VALUE ADJUSTMENTS                                                                                   
                                                                            Audited year     Audited 7 month   
                                                                                   ended        period ended   
R'000                                                                       30 June 2018        30 June 2017   
Fair value adjustments on listed investments                                   (228 203)           (276 768)   
Torre                                                                          (228 203)           (276 768)   
Fair value adjustments on unlisted investments and other financial assets       (54 654)            (69 457)   
Prescient                                                                         10 953                   -   
Friedshelf                                                                      (12 816)                   -   
Praxis                                                                          (29 671)                   -   
Greenpoint Capital                                                               (1 207)                 868   
Inyosi Solutions                                                                   1 281                   -   
IE Rentals                                                                             -             (5 693)   
Amecor                                                                            38 499                   -   
Tellumat                                                                        (32 828)            (37 105)   
Masimong Technologies                                                           (34 532)            (23 746)   
Stellar International                                                              1 763             (2 104)   
Greenpoint Specialised Lending                                                         -             (1 571)   
Other financial assets                                                             3 904               (106)   
Fair value adjustments resulting from capital distributions                     (83 835)           (549 698)   
Total                                                                          (366 692)           (895 923)   

13. DIVIDEND REVENUE                                                                                           
                                                                            Audited year     Audited 7 month   
                                                                                   ended        period ended   
R'000                                                                       30 June 2018        30 June 2017   
Capital distributions                                                             83 835             549 698   
Friedshelf                                                                         4 829               3 500   
Greenpoint Capital                                                                 4 000                   -   
Greenpoint Specialised Lending                                                         -             456 189   
Friedshelf (GSL Fund redemptions)                                                 75 006              90 009   
Earnings distributions                                                           133 881              30 044   
Torre                                                                              8 761                   -   
Prescient                                                                         44 132                   -   
Greenpoint Capital                                                                 1 066                   -   
Amecor                                                                            53 000               6 000   
Greenpoint Specialised Lending                                                         -              24 044   
Friedshelf (GSL Fund returns)                                                     26 922                   -   
Total                                                                            217 716             579 742   
  
14. FINANCE COSTS                                                              
                                                                            Audited year     Audited 7 month   
                                                                                   ended        period ended   
R'000                                                                       30 June 2018        30 June 2017   
Preference share liability interest accrual                                       78 252              42 973   
Bridge facility interest expense                                                   6 536               7 118   
Interest accrual on loan payable                                                   1 576                   -   
Other interest expense                                                               263                   -   
Total                                                                             86 627              50 091   

Interest on the preference share liability accrued at 115% of prime on the discounted capital balance outstanding. Refer to note
6 for details of dividends on the preference shares. Interest of 1 month JIBAR plus 2.75% was charged on the bridge facility
and was serviced monthly. The loan payable accrued interest at prime plus 3% per annum plus a once-off raising fee which
was settled subsequent to year end with the repayment of the loan.

15. RELATED PARTY TRANSACTIONS

Related party transactions are entered into in the ordinary course of business and comprise (i) transactions with portfolio
companies, including loans advanced/repaid, interest income, dividends received and amounts received or paid in respect of
services provided; and (ii) management fee expenses paid to Thunder Securitisations Proprietary Limited.

16. CONTINGENT LIABILITIES

At the reporting date, the Company has issued limited corporate guarantees in favour of the creditors of Praxis for
R32.5 million (2017: R47.5 million). The guarantees can be cancelled with 3 months' notice by either party.

17. EVENTS AFTER THE REPORTING PERIOD

Torre Industries Limited published a cautionary announcement on the Stock Exchange News Service (SENS) on 9 July 2018
which detailed the basis on which the Torre board resolved to proceed with the delisting of Torre from the JSE. Torre intends
to offer Torre shareholders the option to either elect to retain some or all of their shares post the proposed delisting or to
accept a cash offer and sell some or all of their shares. Stellar Capital is supportive in principle of the delisting process.

Stellar Capital published a Category 1 Transaction announcement on SENS on 26 July 2018 which advised that Stellar Capital
is a party to negotiations with an empowered entity to invest in Prescient Holdings (Pty) Ltd (Prescient) to further improve
Prescient's B-BBEE status. It was also disclosed that the potential investment by the empowered entity could result in a
dilution of Stellar Capital's shareholding in Prescient. The cash proceeds payable to Stellar Capital as a result of the disposal
of half of its shares held in Prescient at 30 June 2018 is approximately R384.5 million. The Prescient Repurchases of Stellar
Capital's shares, together with the subscription of additional shares for the injection of capital in Prescient by Prescient
Empowerment Trust (Pty) Ltd, will result in a dilution of Stellar Capital's effective investment in Prescient from 49% to 19.4%.
The effective date of the Transactions will be 1 April 2018 and the closing date will be the 3rd business day after all the relevant
Conditions Precedent are fulfilled or waived, which have not yet occurred as at the publication of these results.

Stellar Capital published a Renewal of Cautionary announcement on SENS on 27 July 2018 which advised that the formal
disposal process relating to Amalgamated Electronic Corporation Limited ("Amecor") was still underway.

Effective 31 July 2018 Greenpoint Senior Debt (Pty) Ltd, a newly incorporated fund managed by Greenpoint Capital (Pty) Ltd,
purchased 300 preference shares at face value pro-rata from existing preference shareholders. The preference shares held
by Greenpoint Senior Debt have been subordinated in favour of existing preference shareholders. On 1 July 2018 the dividend
rate on the preference shares increased to 120% of prime as approved by ordinary shareholders at the General Meeting held
on 12 June 2018.

All events identified above are non-adjusting events. The Board of Directors are not aware of any other events after the
reporting date and until the date of approval, which have a material impact on the condensed consolidated financial
statements as presented.

By order of the Board

DD Tabata
Chairman of the Board

31 August 2018

FORWARD-LOOKING STATEMENTS
Any forward-looking statements included in this results announcement involve known and unknown risks,
uncertainties and other factors, which may cause the actual results, performance or achievements of the
Group to differ materially from any future results, performance or achievements expressed or implied by such
forward-looking statements. Any reference to forecast information included in this results announcement
does not constitute an earnings forecast and has not been reviewed or reported on by the Group's external
auditors.

DIRECTORS
DD Tabata (Chairman)*, PJ Van Zyl (Chief Executive Officer),
S Graham (Chief Financial Officer),
CJ Roodt~, MVZ Wentzel*, MM Ngoasheng*, L Potgieter*, HC Steyn^,
PJ Bishop^
^ Non-executive
* Independent non-executive
~ Lead Independent non-executive

COMPANY SECRETARY
Wilma Dreyer

REGISTERED OFFICE
Fourth Floor, The Terraces, 25 Protea Road,
Claremont, Cape Town, 7708

POSTAL ADDRESS
Suite 229, Private Bag X1005,
Claremont, Cape Town, 7735

TRANSFER SECRETARIES
Computershare Investor Services
Proprietary Limited

SPONSOR
Rand Merchant Bank
(a division of First Rand Bank Limited)
Date: 31/08/2018 10:42:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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