SEPHAKU HOLDINGS LIMITED - Trading Statement for the twelve months ended 31 March 2018

Release Date: 20/06/2018 11:59
Code(s): SEP
Wrap Text
Trading Statement for the twelve months ended 31 March 2018

Sephaku Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/003306/06)
Share code: SEP
ISIN: ZAE000138459
("SepHold" or “the Company”)


In terms of paragraph 3.4(b) of the JSE Limited (“JSE”) Listings Requirements, companies are required
to publish a trading statement as soon as they are satisfied, with a reasonable degree of certainty, that
the financial results for the period to be reported upon next will differ by at least 20% from those of the
previous corresponding reporting period. SepHold is in the process of finalising its annual financial
results for the twelve months ended 31 March 2018, which will be released on SENS by 28 June 2018.

Accordingly, shareholders are advised that, for the twelve months ended 31 March 2018 (“FY2018”),
the earnings of the Company are expected to be between 32% and 40% lower than the R68m reported
for the twelve months ended 31 March 2017 (“FY2017”).

The main reasons for the decrease in earnings are set out below:

Dangote Cement South Africa (“CEMENT” or “associate”)

As mentioned in the trading update of 22 March 2018, the annual EBITDA margin at 21,3% (R504,2
million) and net profit of R57,8 million were lower than the figures recorded in 2016 of 23,1% (R527,0
million) and R68,9 million, respectively. This was mainly due to the fact that the previous year’s EBITDA
and net profit included once–off income from the closure agreement with Sinoma on the final handover
of the plants of R138 million. The equity accounted income to be translated to the SepHold income
statement is R20,8 million (2016: R24,8 million).

CEMENT’s first half year performance was weak, recording a loss of R16,1 million due to excessive
rainfall in the first quarter and low demand for the interim period. In the second half of the year, the
associate’s recovery, due to increased demand and improvements in operational efficiencies, resulted
in an EBITDA margin of 23% in Q3 and 25% in Q4. The profit for the second half was R73,9 million an
increase of R90 million compared to the first six months. CEMENT achieved a 3,7% increase in revenue
to R2,366 million (2016: R2,281 million) for the 12 months ended 31 December 2017. The price
increases implemented in February and August 2017 were sustained in most markets resulting in an
effective annual price increase of 5%. This positive change experienced in the last six months continued
into the first quarter of 2018.

Métier Mixed Concrete (“Métier” or “subsidiary”)

As disclosed in the interim financial results for the period ended 30 September 2017, the subsidiary
reported declining volumes and increasing production costs resulting in the operating profit decreasing
by 17% to R51 million. The subsidiary’s net profit was R32 million for the first six months, down from
R38 million in the comparative period. Métier’s second half performance was weaker than the first six
months due to intensifying price competition and a further decline in sales volumes. Average selling
prices increased by only 1.8% and volume was down by 3.1%. The twelfth plant that commenced
production in March 2017 contributed 7.5% to volume but added 8.5% to production costs.
Métier’s customers, who mainly constitute medium-sized building contractors were severely impacted
by the turmoil in the construction industry. Consequently, the subsidiary experienced a high incidence
of payments from customers beyond the agreed trading terms and increased credit default risk. The
subsidiary assessed the level of risk for all its customers and increased its provision for bad debts by
R5 million during the second half of the year.

The summary of SepHold’s earnings are as follows:

•   earnings per share is expected to be between 20.18 and 22.87 cents per share (FY2017: 33.63
    cents per share), being a decrease of between 40% and 32% from the earnings per share reported
    for FY2017; and

•   headline earnings per share is expected to be between 20.02 and 22.69 cents per share (FY2017:
    33.37 cents per share), being a decrease of between 40% and 32% from the headline earnings per
    share reported for FY2017.

The financial information on which this trading statement is based, has not been reviewed or reported
on by the Company’s external auditors.

20 June 2018
Enquiries contact: Sakhile Ndlovu        Sephaku Holdings            Investor Relations          012 612 0210

Sponsor to Sephaku Holdings: Questco Corporate Advisory (Pty) Ltd

About Sephaku Holdings Limited

Sephaku Holdings Limited (“SepHold”) is a building and construction materials company with a portfolio of investments in the
cement sector in South Africa. The company’s core investments are a 36% stake in Dangote Cement South Africa (Pty) Ltd and
100% in Métier Mixed Concrete (Pty) Ltd. The strategy of SepHold is to generate growth and realise value for shareholders
through the production of cement and ready mixed concrete in Southern Africa.

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