Wrap Text
Unaudited Unreviewed Condensed Interim Financial Results for the six months ended 30 September 2019
RECM AND CALIBRE LIMITED
Incorporated in the Republic of South Africa
(Registration number 2009/012403/06)
Preference share code: RACP
ISIN: ZAE000145041
(“RAC”)
UNAUDITED UNREVIEWED CONDENSED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019
Letter to shareholders
At 30 September 2019, RAC’s Net Asset Value (“NAV”) per share (ordinary and participating preference) amounted to R28,88. This
represents an increase of 7,3% over the first six months of the financial year, and an increase of 7,5% over 12 months. The JSE All Share
(Total Return) index generated a loss of 0,8% and a gain of 1,9% over the same periods.
The following chart shows the progression of the RAC NAV per share against the JSE All Share Index, including dividends. R10 invested
in RAC participating preference shares in June 2010 has grown to R28,88 in NAV after all fees and taxes. The same amount invested in
the JSE All Share Index would have grown to R26,86.
ALSI (based to R10) RAC NAV/share RAC Share Price
Jun-10 10.00 10.00 10.05
Sep-10 10.97 10.09 10.06
Mar-11 12.15 10.26 11.00
Sep-11 11.37 10.45 9.25
Mar-12 13.06 11.12 9.55
Sep-12 14.15 11.26 10.00
Mar-13 16.00 11.83 10.00
Sep-13 17.96 11.85 12.50
Mar-14 19.77 12.32 12.75
Sep-14 20.73 12.59 14.15
Mar-15 22.24 18.64 12.90
Sep-15 21.73 19.86 17.00
Mar-16 22.95 19.66 15.60
Sep-16 23.16 22.42 23.00
Mar-17 23.53 27.35 25.00
Sep-17 25.52 27.86 23.00
Mar-18 25.79 27.77 20.45
Sep-18 26.37 26.86 18.25
Mar-19 27.09 26.92 17.25
Sep-19 26.86 28.88 15.00
INTRODUCTION
We understand and appreciate that some of our shareholders are disappointed with the price at which our participating preference shares
currently trade. This is not something we focus on or try to manage. Management should focus on their business and let the market
determine the price of the shares. We therefore only take account of the discount to the NAV per share to the extent that it provides RAC
and our fellow shareholders with a good investment opportunity. Our only aim is and remains to maximise the growth in per share Net
Asset Value.
While the share price is outside of our control, the growth in NAV per share is our responsibility. Since inception, the 12% per annum
growth rate in that metric has outperformed the opportunity set available to the average investor, being the ALSI, and delivered more
than twice the inflation rate. Over the past five years, our NAV per share compounded at 18% per annum, during a period where the
opportunity set has been particularly meagre and the ALSI delivered 5,4% annual compound returns. We are proud of this achievement.
RESULTS COMMENTARY
For the last six months, RAC’s results were driven by the unlocking of value in Astoria and further acquisitions of Goldrush shares.
Lasting long-term value is built over time, in good times but more so in the bad. Beyond portfolio transaction activity, value is created
through the activity of our colleagues, being the co-owners and managers of the businesses we own, in the way they run their businesses
and serve their customers. It has become customary for South Africans to blame tough economic and political conditions for things that go
wrong and to focus on the negative. We are very proud of the fact that our colleagues have kept their heads down and continued building
their various businesses. Goldrush and Outdoor Investment Holdings are opening more stores. Isa Carstens is building additional student
accommodation in Pretoria and developing more qualifications.
This is not the time to shy away from committing capital to real business. In a world where very little capital is being committed, and
most investors are clamouring for the return of capital and hoarding cash, those that are prepared to write the cheques can command
outsized returns. This is exactly the kind of environment which RAC’s structure has been designed to withstand. The stability of our
capital structure, and the lack of market noise for the management teams of our investee companies allow us to operate with confidence.
We count ourselves proudly in the camp of the pro-active capital allocators.
As at 30 September 2019, the make-up of our NAV on a look-through basis consists of:
Directors Fair Value (R’m)
Unaudited Audited Unaudited
% % of total 30 September 31 March 30 September
ownership assets 2019 2019 2018
Core investments 89 1 654,7 1 817,5 1 690,3
Goldrush 58,8 71 1 329,4 1 089,3 1 038,0
Outdoor Investment Holdings 33,0 6 102,7 96,3 85,5
Astoria Investments 29,4 5 87,9 485,5 444,9
JB Private Equity (UCP) 90,0 5 85,7 96,2 71,7
ISA Carstens 49,0 2 49,0 50,2 50,2
Portfolio investments 5 92,3 99,0 162,8
Trans Hex 31,6 2 33,9 37,4 87,5
RECM Hedge Fund 0,0 2 41,3 37,5 45,0
Conduit Capital 2,3 1 17,1 24,1 30,3
Realised investments 0 – 41,9 84,6
College SA* 0,0 0 – 41,9 58,9
DAWN 0,0 0 – – 9,1
La Concorde 0,0 0 – – 16,6
Other investments 4 75,4 68,2 92,0
Cash and receivables 2 39,2 57,2 41,7
Total assets 1 861,6 2 083,8 2 071,4
CGT and other liabilities (7) (133) (120,5) (155,4)
Bank funding (14) (251,5) (586,3) (542,3)
Net assets 1 477,1 1 377,0 1 373,7
Net asset value per share (“R”) 28,88 26,92 26,86
* The largest part of CollegeSA was sold during this period. The remaining education businesses are now classified under “Other Investments”
INCREASE IN NAV PER SHARE
The increase in NAV per share of 7,3% for the six months equates to a monetary increase of R100,1m. The composition of the increase
on a look-through basis is as follows:
Unaudited Unaudited
Six months Six months
ended ended
30 September 30 September
2019 2018
R R
Interest and dividends received 12 830 283 39 350 926
Return of Capital from Astoria 452 842 935 –
Adjustment to fair value of Astoria (398 947 541) 56 480 877
Adjustment to fair value of assets other than Astoria 84 969 250 (112 572 881)
Financing expenses (20 760 849) (21 300 055)
Realised profits on sale of assets 1 645 777 239 340
Investment advisory fees (10 986 793) (11 180 857)
Operating expenses (2 584 975) (3 447 653)
Tax paid (1 490 273) (1 627 507)
Tax reversed/(provided for) (17 361 993) 7 041 028
Net increase/decrease in NAV 100 155 821 (47 016 782)
Our valuation method and philosophy remains unchanged, except for our valuation of Goldrush, which has now been calculated with
reference to EBITDA (earnings before interest, tax, depreciation and amortisation) compared to an EBITDAR (earnings before interest,
tax, depreciation, amortisation and machine rental) valuation in prior years.
All listed assets are held at market price, while unlisted assets are held at fair value. For assets where there is no visible market price,
we perform a valuation exercise, which culminates in a range of fair values, as required by International Financial Reporting Standards
(“IFRS”). Due to the inherent uncertainty of valuing influential stakes in unlisted, untraded assets, this range is necessarily quite wide.
Since inception, RAC management has consistently valued the investments towards the lower end of this range.
We explicitly take account of the impact of capital gains tax, where applicable. We properly account for and disclose this very real
reduction in net realisable value in our intrinsic value calculation. RAC management regards tax as a significant and real cost of doing
business. As with all other costs we manage our exposure very carefully.
Investors should also take our fee structure into account when estimating RAC’s intrinsic value. RAC pays 1,15% (including VAT) p.a.
of the portfolio value for investment management services. There are many views in the marketplace as to the capital value of such a
contractual payment. We suggest you deduct your own estimate of this value from your opinion of our overall value.
CORE INVESTMENTS
Goldrush
During the first six months of the year, Goldrush grew its operations both organically and through new bingo store openings. Revenue for
the six months came to R701m, up 12% from R625m in the same period last year.
The bingo division opened 2 new stores, bringing the total number of operating bingo properties to 29. This leaves Goldrush with another
6 bingo licences to activate, which are all planned within the next two years. Apart from the actual stores that went live during this period,
construction is currently under way on 2 more properties, which will open before the end of the financial year. Of the total number of
operating properties, 8 were opened during the previous 2 years. Even though these properties have already contributed to the growth
in the business, our experience is that a site takes three to four years to mature. Revenue for the bingo division for the six months was
R480m, up 12,7% from R426m for the same period last year.
The LPM division increased the number of active machines to 2 109, up from 1 778 in September last year. Revenue for the six months
totalled R169m, up only 5,6% from R160m for the same period last year as most of the roll-out happened late in the period.
The focus of the sports betting division during this period was on improving operations and profitability after rolling out 36 sports betting
retail shops last year. Revenue for the six months came to R52m, up 36,7% from R38m in the same period last year.
Starting this financial year, we amended our valuation method for Goldrush. Early in the life of the business we used normalised EBITDAR
(earnings before interest, tax depreciation and machine rentals) as a stable yardstick of the progress of the business. We applied a
multiple of 7 times to this earnings as a base to derive our valuation.
As the business has now matured sufficiently, we have adopted EBITDA as the stable and reliable yardstick of the progress of the
business. We apply a multiple of 9 times to this earnings as the base of our valuation. Our sustainable EBITDA increased by 8% over
the six months. Taking into account slightly increased debt levels in the business to fund the final roll-out of the KZN properties and the
repurchase of shares, our equity valuation for Goldrush comes to R2,26bn, up 4% from R2,18bn at the beginning of the financial year.
RAC’s investment in Goldrush increased by R240,1m during this period. R132,6m of this represents the purchase of a further 7,8% of
Goldrush, while the rest represents the increase in the valuation. The company bought back some of its own shares, bringing RAC’s
shareholding to 58,8%.
During the last six month period Goldrush fixed the interest rates on all of its outstanding term debt.
Outdoor Investment Holdings
Outdoor Investment Holdings (OIH) and its subsidiaries Safari Outdoor, Formalito and Inyathi Sporting Supplies maintained sales and
margins in line with the same period last year. Cost control contributed a small benefit to the bottom-line.
The market for further hunting and outfitting shops is limited. OIH is pursuing growth through the Family Pet Centre. The first store in
Midrand has been operating for about two years and we are confident that the they have proven the concept. In August, the second store
opened in Fourways as the first step in a planned roll-out phase.
During the period OIH bought back 5% of its shares which resulted in RAC’s shareholding in OIH Increasing to 33%.
Astoria Investments Limited (“Astoria”)
In April Astoria made a capital distribution of R12,82 per share to its shareholders. This returned cash of R453m to RAC, which was used
to make further investments and to repay debt at the centre.
After the capital distribution, Astoria was left with about $23m of assets, in a combination of cash, investments in global private equity
funds and a small listed UK Wealth manager. Since then, the board of Astoria has been realising the underlying portfolio of investments
into cash. These investments have been sold at discounts to their latest carrying value, in some cases as high as 35%.
A portion of the underlying investments has not been sold yet or do not seem to have a reasonable expectation of being sold in the near
term. Nonetheless, the Astoria share price has been approaching the publicly disclosed Net Asset Value per share over this period,
closing at R2,43 at our half year-end.
RAC originally bought its interest in Astoria at an average price of R11,07 per share. The combination of the capital distribution of R12,82
per share and the current share price added a net contribution of more than R84m to the NAV of RAC, after having incurred finance
expenses of R63.7m over the period of the transaction. Our current shareholding in Astoria leaves RAC with further options to enhance
our NAV.
Astoria is a listed business, and further information can be found at http://www.astoria.mu/
The JB Private Equity Partnership
The only asset held by JB Private Equity Partnership is a 37% stake in Unicorn Capital Partners Limited (“UCP”).
UCP subsidiary Richie crane hire continues to do well, while Geosearch and JEF Drill and Blast have maintained previous performance.
Nkomati Anthracite has proven out a large resource body, which so far has been difficult to mine profitably.
UCP is a listed business, and further information can be found at https://www.unicorncapital.co.za/
ISA Carstens
We have been working with the controlling family to recruit and entrench new management skills, grow the student numbers and to
develop further academic offerings for students.
The first half of this year has seen significant progress, with Ian Mundell joining ISA as Group CEO, after having successfully overseen
the sale of CollegeSA in August. The growth in student numbers at the Pretoria campus has meant that ISA has to build additional student
accommodation on the campus, which should be ready for occupation at the commencement of the 2020 academic year.
ISA has also been investing in its sales functions, academic delivery technology and in developing courses which have a strong focus on
business and delivering business-ready students.
The reduction in our valuation for ISA Carstens reflects a cash repayment we received in this period as part of finalising the purchase
transaction.
PORTFOLIO INVESTMENTS
Trans Hex Group Limited (“Transhex”)
Transhex owns and manages three operations: Shallow water mining, 67% of West Coast Resources (“WCR”) and 33% of Somiluana in
Angola. The business has gone through a period of significant cost reductions, particularly at the head-office level.
WCR has been struggling for some time. Transhex management engaged a third party with regards to the sale of WCR. On Friday,
18 October, Transhex announced that these negotiations had been called off and that WCR has been put into provisional liquidation. This
action has no impact on the NAV of RAC, save for the share price movement of Transhex.
Somiluana’s production is in line with expectations, but it remains challenging to repatriate foreign currency from Angola.
The business is in the process of being taken private, with a current offer to minorities, other than RAC and our fellow controlling
shareholders, of R1 per share. We expect this transaction to close during November.
Transhex is a listed business, and further information can be found at https://www.transhex.co.za/
RECM Flexible Value Fund
Our investment in the RECM Flexible Value Fund gained just over 10,2% during the period under review. The fund’s benchmark, the JSE
All Share Index, lost 0,8%.
The portfolio benefited primarily from owning a number of cheap, illiquid stocks in South Africa and from a number of short positions in
listed property counters. The manager has found ample opportunity to add further exposure to the portfolio during this period, both in
listed equity and in private credit transactions.
A fact sheet on this fund can be found at: https://www.recm.co.za/MinimumDisclosureDocuments
Conduit Capital
Conduit Capital, whose major asset is Constantia Insurance, continues in its efforts to build a high quality diversified insurance business,
supported by a value orientated, non-insurance related investment portfolio. The financial result of this combination in the past year nearly
halfed the NAV of the business, as the market value of its investment portfolio dropped at the same time as the aggressive ramping up
the insurance business lead to operating losses. As unpleasant as this result looks and feels to investors, we agree with management’s
strategy for the business.
Conduit is a listed business, and further information can be found at https://www.conduitcapital.co.za/
Portfolio activity
During the six months, we sold CollegeSA, the distance learning Technical and Vocational Education Training business which was the
original investment that got us started in the education space. After our investment in ISA Carstens, it became quite clear to us that not all
tertiary education businesses are made equal, and that we would rather choose to spend our efforts and invest capital in ISA Carstens in
future. When we received an offer for CollegeSA, it was therefore an easy decision to proceed with a transaction.
CollegeSA was sold for the value at which we carried it at year-end. This price reflected the original cost of the business, but not the effort
or the additional capital we had to invest during the period of turn around, and which we had impaired already. The remaining parts of the
education business are fairly small and are now classified under “Other investments”. The cash for the transaction was applied to paying
down debt.
CollegeSA detracted from our NAV per share. The only redeeming feature is that the investment led us to ISA Carstens.
Balance Sheet
As at September, we have outstanding debt of R251,5m in the form of preference shares issued to ABSA, and we have cash of
R39,2m. Apart from the acquisition of Goldrush and Astoria shares and some small investments in some of our newer opportunities, we
have used all the cash from realisations to pay down debt at the centre.
This leaves us with further committed borrowing capacity of more than R100m to fund the growth of our NAV per share. Normally this
would take the form of further investments into existing portfolio companies or into new opportunities. However, given the current discount
at which our own participating preference shares trade relative to our NAV, the hurdle for any new investment is extremely high.
Signed on behalf of the board
Piet Viljoen Jan van Niekerk
Cape Town
29 October 2019
Directors:
PG Viljoen (Chairman), T de Bruyn, Z Matlala, T Rossini, JG Swiegers, JC van Niekerk
Company Secretary: G Simpson
Financial results preparer: D Schweizer CA(SA)
Registered Office:
6th Floor Claremont Central, 8 Vineyard Road, Claremont, 7700 South Africa
Transfer Secretaries:
Link Market Services South Africa (Pty) Ltd, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2004
Sponsor:
Questco Corporate Advisory (Pty) Ltd, 1st Floor, Yellowwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, 2021
Statement of financial position
Unaudited Audited Unaudited
30 September 31 March 30 September
2019 2019 2018
Notes R R R
ASSETS
Non–current assets 1 476 343 888 1 376 853 748 1 373 864 410
Investments 2 1 476 343 888 1 376 853 748 1 373 864 410
Current assets 1 513 574 1 000 735 220 104
Investments 2 1 507 064 969 658 137 148
Trade and other receivables – 9 860 –
Cash and cash equivalents 6 510 21 217 82 956
Total assets 1 477 857 462 1 377 854 483 1 374 084 514
EQUITY AND LIABILITIES
Equity
Share capital – ordinary shareholders 4 18 206 250 18 206 250 18 206 250
Share capital – preference shareholders 4 506 296 000 506 296 000 506 296 000
Retained income 952 616 327 852 460 506 849 160 935
Total equity 1 477 118 577 1 376 962 756 1 373 663 185
Current liabilities 738 885 891 727 421 329
Trade and other payables 735 437 889 297 421 045
Current tax payable 3 448 2 430 284
Total equity and liabilities 1 477 857 462 1 377 854 483 1 374 084 514
Net asset value
Net asset value attributable to ordinary shareholders 108 293 151 100 950 349 100 708 445
Net asset value attributable to preference shareholders 1 368 825 426 1 276 012 407 1 272 954 740
Net asset value per ordinary share (cents) 6 2 888 2 692 2 686
Net asset value per preference share (cents) 6 2 888 2 692 2 686
Statement of comprehensive income
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
Notes R R R
Revenue 1 533 668 1 523 370 513 643
Operating expenses (858 806) (1 698 371) (1 000 679)
Operating profit/(loss) 674 862 (175 001) (487 036)
Fair value gains/(losses) on subsidiary 99 490 140 (43 314 549) (46 303 887)
Profit/(loss) before taxation 100 165 002 (43 489 550) (46 790 923)
Taxation 5 (9 181) (227 661) (225 859)
Profit/(loss) after taxation 100 155 821 (43 717 211) (47 016 782)
Other comprehensive income for the period net of taxation – – –
Total comprehensive income/(loss) 100 155 821 (43 717 211) (47 016 782)
Earnings and headline earnings per share
Per share information (ordinary and preference)
Basic and diluted earnings per share (cents) 7 196 (85) (92)
Headline and diluted headline earnings per share (cents) 7 196 (85) (92)
Statement of changes in equity
Total
Preference Ordinary Retained shareholders’
share capital share capital income equity
R R R R
Balance 31 March 2018 506 296 000 18 206 250 896 177 717 1 420 679 967
Profit – – (47 016 782) (47 016 782)
Other comprehensive income – – – –
Balance 30 September 2018 506 296 000 18 206 250 849 160 935 1 373 663 185
Profit – – 3 299 571 3 299 571
Other comprehensive income – – – –
Balance 31 March 2019 506 296 000 18 206 250 852 460 506 1 376 962 756
Profit – – 100 155 821 100 155 821
Other comprehensive income – – – –
Balance 30 September 2019 506 296 000 18 206 250 952 616 327 1 477 118 577
Note 4 4
Statement of cash flows
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
R R R
Cash flows from operating activities
Cash utilised in operations (1 002 806) (1 641 802) (1 402 502)
Interest income 262 773 556
Dividends received – 500 000 500 000
Tax paid (8 163) (3 866) (4 210)
Net cash outflow from operating activities (1 010 707) (1 144 895) (906 156)
Cash flows from investing activities
Sale of investments 996 000 1 130 868 970 000
Purchase of investments – – (16 132)
Net cash inflow from investing activities 996 000 1 130 868 953 868
Total cash movement for the period (14 707) (14 027) 47 712
Cash at beginning of period 21 217 35 244 35 244
Total cash and cash equivalents at end of period 6 510 21 217 82 956
Notes to the condensed interim results for the period ended 30 September 2019
GROUP STRUCTURE
RAC was established in 2009 as a closed-end investment entity that makes long-term investments, with the objective of generating
high real returns from capital appreciation, investment income or both. Investments can be listed or unlisted, public or private, and
there are no limits as to the geographic location.
Given that the investment infrastructure of RAC has been set up to facilitate investments and funding in the most efficient manner,
investments are made either through a fully owned subsidiary incorporated in South Africa, RAC Investment Holdings (Pty) Ltd (“RIH”),
Livingstone Investments (Pty) Ltd (“Livingstone”), or directly.
Given that the majority of investments are held through RIH, RAC has provided the fair value disclosure in two parts in note 2. Notes
2.1 and 2.3 disclose the investment in RIH as required by IFRS and notes 2.2 and 2.4 provide additional disclosures that the directors
deem useful by looking through RIH and RIH’s wholly owned subsidiary Livingstone to the underlying investments. All fair value
movements on the investment in RIH are recognised in profit or loss.
1. ACCOUNTING POLICIES – PRESENTATION OF CONDENSED INTERIM FINANCIAL STATEMENTS
Basis of accounting preparation
The accounting policies applied for the six months are consistent, in all material respects, with those used in the Annual
Financial Statements for the year ended 31 March 2019. The accounting policies continue to be in accordance with the
recognition and measurement criteria of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council. In addition, these interim results have been prepared in accordance with the presentation and disclosure
requirements of International Accounting Standard 34, Interim Financial Reporting, as well as the Listings Requirements of the
JSE and the Companies Act of South Africa.
The interim results have been prepared in accordance with the IFRS and IFRIC interpretations at the time of the preparation of
the information. As these standards and interpretations are the subject of ongoing review, they may be amended between the
date of this report and the finalisation of the annual financial statements for the year ending 31 March 2020.
Assessment as investment entity
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value
rather than consolidate them. The criteria which define an investment entity are, as follows:
• an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;
• an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation,
investment income or both; and
• an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis (refer to
note 2 for additional disclosures relating to fair value).
Based on the above, the Company is considered to meet all three conditions of the definition and, hence, qualifies as an
investment entity. Consolidated Financial Statements are therefore not prepared.
In line with RAC carrying its investment in RIH at fair value, RAC has also applied the exemption in IAS 28 to carry any
interests in associates and joint ventures at fair value through profit or loss. Such application is applied consistently due to the
fact that the Company is an investment entity and evaluates its investments on a fair value basis. The Company reports to its
investors via annual and semi-annual results and to its management, via internal management reports, on a fair value basis.
All investments are reported at fair value to the extent allowed by IFRS in the Company’s annual report.
The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it has
exposure, directly or indirectly, to more than one investment; the investments are predominantly in the form of equities and
similar securities; and its investors are not related parties. These conclusions will be reassessed on an annual basis, if any of
these criteria or characteristics change.
Segmental analysis
The directors considered the implications of IFRS 8 – Operating Segments and are of the opinion that the operations of the
Company are substantially similar and that the risks and returns of these operations are likewise similar. Resource allocation
and the management of the operations are performed on an aggregated basis, and as such the Company is considered to be
a single aggregated business and therefore there is no additional reporting requirements in terms of IFRS 8.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
R R R
2. INVESTMENTS
Fair value hierarchy of financial assets
Level 2
Class 4 – Money market fund 1 507 064 969 658 137 148
1 507 064 969 658 137 148
Level 3
Class 5 – Unlisted shares – Unquoted – fair value through profit or loss 1 476 343 888 1 376 853 748 1 373 864 410
1 476 343 888 1 376 853 748 1 373 864 410
Total financial assets at fair value 1 477 850 952 1 377 823 406 1 374 001 558
Non-current assets – fair value through profit or loss 1 476 343 888 1 376 853 748 1 373 864 410
Current assets – fair value through profit or loss 1 507 064 969 658 137 148
Total investments 1 477 850 952 1 377 823 406 1 374 001 558
Available cash
Cash is held both directly and indirectly on call, along with indirectly
through a money market unit trust investment.
Level 3 reconciliation
Opening balance 1 376 853 748 1 420 152 165 1 420 152 165
Acquisitions – 16 132 16 132
Gains/(losses) on investments recognised in profit and loss 99 490 140 (43 314 549) (46 303 887)
Closing balance 1 476 343 888 1 376 853 748 1 373 864 410
Level 1
Class 1 financial assets are valued at the listed price per the exchange on which they trade.
Class 2 financial assets are valued at the quoted price based on the latest over the counter trades.
Level 2
Class 3 financial assets are valued based on the price of the underlying assets.
Class 4 financial assets are valued by taking the following market observable data into account and applying them to the
holdings:
• credit spread of the institution at which the funds are held
• any difference in the interest rate earned and what is available in the market
Class 6 financial assets are unlisted shares valued at the last traded price between third parties if the transaction occurred
within the last six months.
Level 3
Class 5 financial assets are valued using a number of valuation techniques based on the following unobservable market data
for each investment:
• Net profit of investee
• Equity and net debt of investee
• Return on capital
• Price/Earnings ratio
• Expected cash flows; and
• NAV of the investee if it recognises its assets and liabilities at fair value.
Management uses the above information in multiple valuation techniques by comparing the investee information to similar type
entities in the listed market. The nature of the fair value calculations means that fair values range greatly and are sensitive to
indirect and direct quantifiable and unquantifiable inputs.
There have been no significant changes to the inputs to the fair valuation calculations of the investments except for our valuation
of Goldrush which has now been calculated on an EBITDA (earnings before interest, tax, depreciation and amortisation)
multiple compared to an EBITDAR (earnings before interest, tax, depreciation, amortisation and machine rental) multiple in
prior years. RIH has continued to be valued based on its NAV which is driven by the valuation of the underlying investments.
In terms of IFRS, RAC is an Investment Entity, and therefore no consolidated results are required to be prepared. IFRS requires
the fair value disclosure to be prepared at the Unit of Account Level (i.e. at the level of shares that RAC owns and those are
shown above). The Board of Directors has decided to provide the following voluntary disclosures looking through the 100%
held subsidiaries, RIH and Livingstone, to the underlying investments. In addition, a summary of the NAV of RIH as well as the
underlying valuation techniques and sensitivities have been provided.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
R R R
Fair value hierarchy of financial assets held by RAC Investment
Holdings (Pty) Ltd and Livingstone Investments (Pty) Ltd
Level 1
Class 1 – Listed shares – Quoted 138 916 934 533 319 428 558 620 069
Class 2 – Unlisted shares – Quoted – – 16 567 120
138 916 934 533 319 428 575 187 189
Level 2
Class 3 – Hedge Fund 41 300 606 37 471 361 44 976 114
Class 4 – Money market fund 34 791 759 12 443 554 7 279 488
76 092 365 49 914 915 52 255 602
Level 3
Class 5 – Unlisted shares – Unquoted – fair value through
1 558 261 560 1 350 945 307 1 281 924 418
profit or loss
1 558 261 560 1 350 945 307 1 281 924 418
Total financial assets at fair value 1 773 270 859 1 934 179 650 1 909 367 209
Non-current assets 1 738 479 100 1 921 736 096 1 457 164 421
Current assets 34 791 759 12 443 554 452 202 788
Total investments 1 773 270 859 1 934 179 650 1 909 367 209
Summary of net asset value of RIH and Livingstone
Total investments from above 1 773 270 859 1 934 179 650 1 909 367 209
Loans and receivables 86 770 730 91 377 348 111 311 294
Cash and cash equivalents 2 671 443 43 532 573 34 174 329
Deferred tax (127 548 204) (110 178 022) (119 174 301)
Contingent consideration and options – 16 616 415 19 331 015
Loans and payables (7 319 911) (12 366 564) (7 641 044)
Preference shares issued to Absa (251 501 029) (350 344 854) (350 320 664)
Loan from Absa – (202 238 154) (192 044 181)
Loan from Calibre Treasury and Management Services – (33 724 644) (31 139 247)
Net asset value of RIH 1 476 343 888 1 376 853 748 1 373 864 410
Description of significant unobservable inputs and their sensitivities
30 September 2019
2.1 Description of significant unobservable inputs and sensitivities of RAC (level 3 investment)
Significant
Valuation Fair value unobservable Input
technique Rm inputs value Sensitivity
Earnings and
multiple of the A change in the multiple of the
RAC Investment underlying underlying investment by 1 would
NAV 1 476,3 N/A
Holdings ("RIH") investments (refer result in an increase or decrease in fair
to the breakdown value of approximately R161m.
below)
2.2 The below table shows the sensitivities per underlying investment as if these were held directly by RAC (level 3
investment)
A change in multiple by 1 would
Safari and Outdoor Multiple 102,7 PBIT 6 result in an change in fair value of
approximately R24m.
A change in the EBITDA multiple by 1
Goldrush Group Multiple 1 329 ,4 EBITDA 9 would result in an increase or decrease
in fair value of approximately R167,7m.
The NAV of the JB Private Equity
Investors Partnership is directly linked
to the underlying investment in Unicorn
Capital which is listed on the JSE and
is not currently significantly impacted
JB Private
by any fair value adjustment to trade
Equity Investors NAV 70,7 N/A N/A
and other payables and therefore
Partnership
NAV of the JB Private Equity Investors
Partnership is considered to be fair
value. A 10% movement in the Unicorn
Capital share price would have a R7m
impact on the Partnership NAV.
A change in multiple up or down by 1
Multiple 34 PAT 3 would results in a change in fair value
ISA Carstens of approximately R5m.
(excluding
non-equity A change in the capitalisation rate
investments) up or down by 1% would result in a
Capitalisation rate Rent received 9%
change in fair value of approximately
R3,8m.
Other level 3 investments 21,5
Total 1 558,3
31 March 2019
2.3 Description of significant unobservable inputs and sensitivities of RAC (level 3 investment)
Significant
Valuation Fair value unobservable Input
technique Rm inputs value Sensitivity
Earnings and
multiple of the A change in the valuation techniques
RAC Investment
NAV 1 377 underlying N/A as documented below would result in
Holdings ("RIH")
investments (refer to change in fair value of R220m.
breakdown below)
2.4 The below table shows the sensitivities per underlying investment held by RIH as if these were held directly by
RAC (level 3 investment)
A change in multiple by 1 would
Safari and Outdoor Multiple 96,3 PBIT 6 result in an change in fair value of
approximately R23,1m.
An increase or decrease in the
EBITDAR multiple by 1 would result in
Goldrush Group Multiple 1 089,3 EBITDAR 7
a change in fair value of approximately
R175,3m.
The NAV of the JB Private Equity
Investors Partnership is directly linked
to the underlying investment in Unicorn
Capital Partners Limited (which is
listed on the JSE) and it is not currently
significantly impacted by any fair
JB Private
value adjustment to trade and other
Equity Investors NAV 82,5 N/A N/A
payables and therefore NAV of the JB
Partnership
Private Equity Investors Partnership
is considered to be fair value. A 10%
upward or downward movement in the
Unicorn Capital Partners share price
would have a R8,2m impact on the
Partnership NAV.
A change in multiple up or down by 1
ISA Carstens Multiple 35,2 PAT 3 would results in a change in fair value
(excluding of approximately R5m.
non equity A change in the capitalisation rate up or
investments) Capitalisation rate Rent received 9% down by 1% would result in a change in
fair value of approximately R3,8m.
A change in multiple by 10% would
SA College Multiple 41,9 Sales 0,8 result in a change in fair value of
approximately R4,6m.
Other level 3 investments 5,9
Total 1 351,1
Factors that were taken into account by management in all valuations include the current market conditions, the invested
market segment and interest rate certainty. The market for these instruments often has significant barriers to entry, making the
comparison pool of similar entities very shallow. Specifically, the hunting equipment industry has few market entrants with little
reliable comparative data. The nature of the fair value calculations means that the calculated fair values could range greatly
and are sensitive to indirect and direct quantifiable and unquantifiable inputs. Where we have influence over our investee
companies we plan to play an active role in the long-term strategy of the Company, ensuring that our interests are aligned.
3. RELATED PARTY TRANSACTIONS
There were no significant changes to related parties or related party transactions since the year ended 31 March 2019.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
R R R
4. SHARE CAPITAL
Authorised
5 000 000 Ordinary shares of R0,01 each 50 000 50 000 50 000
200 000 000 non-cumulative redeemable participating preference
– – –
shares of no par value
250 000 000 redeemable preference shares of no par value – – –
1 500 000 000 perpetual preference shares of no par value – – –
50 000 50 000 50 000
The 250 000 000 redeemable preference shares will have the
rights and privileges, restrictions and conditions as determined by
the Directors upon issue thereof, but which are intended to rank
in priority to the participating preference shares, the perpetual
preference shares and ordinary shares in respect of dividends and on
winding up.
The 1 500 000 000 perpetual preference shares will have the rights
and privileges, restrictions and conditions as determined by the
Directors upon issue thereof, but which are intended to rank in
priority to the participating preference shares and ordinary shares in
respect of dividends and on winding up.
Issued
3 750 000 Ordinary shares of R0,01 each 37 500 37 500 37 500
Share premium 18 168 750 18 168 750 18 168 750
18 206 250 18 206 250 18 206 250
47 400 000 non-cumulative redeemable participating preference
506 296 000 506 296 000 506 296 000
shares
506 296 000 506 296 000 506 296 000
5. CURRENT AND DEFERRED TAXATION
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
R R R
Taxation expense
Current taxation (9 181) (227 661) (225 859)
Taxation expense (9 181) (227 661) (225 859)
Deferred tax has not been recognised on the fair value gains on
the investment in RIH as the manner of expected recovery of the
investment is unlikely to result in future tax consequences.
Temporary differences not recognised in terms of IAS 12 amount
to R587 702 842 (March 2019: R488 212 702, September 2018:
R484 420 005). Deferred tax has been recognised in RIH on the
investments that it expects to incur taxes on when realising their
value.
6. NET ASSET VALUE
Net asset value attributable to ordinary shareholders 108 293 151 100 950 349 100 708 445
Net asset value attributable to preference shareholders 1 368 825 426 1 276 012 407 1 272 954 740
Number of shares in issue
Ordinary shares 3 750 000 3 750 000 3 750 000
Preferences shares 47 400 000 47 400 000 47 400 000
Net asset value per ordinary share (cents) 2 888 2 692 2 686
Net asset value per preference share (cents) 2 888 2 692 2 686
7. EARNINGS AND HEADLINE EARNINGS PER SHARE
Earnings and headline earnings per share are based on the profit attributable to ordinary and preference shareholders in issue
during the year.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2019 2019 2018
R R R
Number of shares in issue
Ordinary shares 3 750 000 3 750 000 3 750 000
Preferences shares 47 400 000 47 400 000 47 400 000
Total weighted average number of shares 51 150 000 51 150 000 51 150 000
Earnings
Net profit/(loss) after tax 100 155 821 (43 717 211) (47 016 782)
Headline earnings 100 155 821 (43 717 211) (47 016 782)
Basic and diluted earnings per ordinary and preference share (cents) 196 (85) (92)
Headline and diluted headline earnings per ordinary and preference
196 (85) (92)
share (cents)
The Company has no dilutive instruments in issue as at 30 September 2019.
8. EVENTS AFTER THE REPORTING PERIOD
Subsequent to 30 September 2019 Trans Hex Group Limited announced that an application was made to the High Court
(Western Cape Division) for West Coast Resources Proprietary Limited to be placed into Liquidation. Please refer to the
shareholders letter on page 5 for further information.
9. DIVIDENDS
No dividend has been declared.
10. GUARANTEE, CESSION AND PLEDGE
As at 30 September 2019, RIH had 250 redeemable preference shares (March 2019: 350; September 2018: 350) of
R1 000 000 each outstanding, issued to Absa Bank Limited (“Absa”). The preference shares pay a preference dividend on the
31 March and 30 September each year at a rate equivalent to 115% of prime and are redeemable on 30 October 2020.
RIH redeemed 100 preference shares during the six months ended 30 September 2019 at par.
RAC and RIH provided the following securities to Absa in terms of the Preference Share Agreement:
• RAC pledged its shares held in RIH to Absa
• RAC provided a guarantee in favour of Absa for the full, complete and punctual payment and performance by RIH of all its
obligations under the Preference Share Agreement amounting to R31m (March 2019: 42,9m; September 2018: R42,3m)
within one year and R252,4m (March 2019: 374,8m; September 2018: R172,1m) within two years
• RIH pledged its shares held in Goldrush to Absa
The securities will remain in full force until such time as the preference shares issued to Absa have been fully redeemed and
all payments made.
As at 30 September 2019, both the value of RAC’s pledged shares in RIH as well as RIH’s pledged shares in Goldrush
exceeded the value of the preference shares issued to Absa. The directors of RAC foresee the possibility of RAC needing to
make any payments under the guarantee as being highly remote.
RIH may not pay any distribution in excess of R1,5m per annum to RAC without the prior consent of Absa.
As at 31 March 2019 Livingstone Investments (Pty) Ltd (“Livingstone”), a wholly owned subsidiary of RIH, had a loan from
ABSA totalling R202,1m. Livingstone has repaid the loan and total interest to Absa and all securities were released.
Date: 29/10/2019 10:00:00
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