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HULISANI LIMITED - Condensed Consolidated Results for the six months ended 31 August 2018

Release Date: 31/10/2018 17:27
Code(s): HUL     PDF:  
 
Wrap Text
Condensed Consolidated Results for the six months ended 31 August 2018

HULISANI LIMITED
Registration number 2015/363903/06
(Incorporated in the Republic of South Africa)
Share code: HUL
ISIN: ZAE000212072
("the Group" or "the Company")

CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2018

INTRODUCTION

Hulisani is presenting the group results for the six months period ended in 31 August 2018.

Hulisani is listed on the JSE and trades as an investment holding company.

RESULTS

Revenue for the period under review is reported at R23.6m, an increase of R10.7m from the
prior half-year period. Revenue arose from the sale of electricity to Eskom, backed by the PPA
contract.

Operating expenses increased by 24% compared to the prior half-year unaudited results to
R34.4m. Contributing to the increase in operating expenses is the increase in staff compliment
since Hulisani ceased to operate as a Special Vehicle Purpose (SPAC), as well as the
incorporation of the full six months of the subsidiary investee operations relative to three months
in the prior period (the subsidiary was acquired in June 2017). Hulisani’s evolution from
operating as a SPAC necessitated additional resources and building of capacity during the
period under review. The additional resources and capacity are necessary for the proper and
sustainable operation of the company in the long term.


Finance income of R2.4m earned consists of R0.9m interest in cash balances and R1.5m
interest earned on financial investments. The group incurred interest expenses of R7.6m on long
term borrowings.

Hulisani’s share of loss from associates for the six months period under review is R7.4m. This
relates to Hulisani’s share of losses from GRI Wind Steel South Africa (“GRI”’), the only
operational manufacturer of Wind Towers in South Africa, in which the Company holds 25%.
GRI has made losses as a result of the two year delay in the recently signed 27 Power Purchase
Agreements (PPAs). The previous reporting period included losses for two months (the
acquisition was made in July 2017) whereas the current reporting period includes six months of
losses. In addition, Hulisani’s full shareholding of 25% is accounted for in the current period,
whereas only a 12,5% share of losses was accounted for in the previous comparative period.
This holding is made up of a 12.5% equity investment (accounted for as a loss in the previous
period) as well as a further 12.5% holding through a preference share, which was reclassified as
an investment in associates at year end. While accounting for a much larger holding has
resulted in a greater loss reported for the six months under review, GRI Wind Steel has secured
significant orders to manufacture wind towers with the potential for an increase in orders since
the recent signing of 27 PPAs by ESKOM. The income from the signed contracts will only reflect
in subsequent periods.


In the prior half year period Hulisani Limited issued a loan to the value of R100m to Legend
Power Solution Pty) Ltd (“LPS”) which was classified as a loan receivable. At the end of the prior
year period the loan was classified as a financial asset at fair value through profit and loss and
carried as such in the period under review.

The following table reflects the operating financial results for the six months ended 31 August
2018 compared to the corresponding previous financial period:
 
                                        Unaudited            Unaudited
                                      period ended      period ended 31         Variance        Variance
 Summary of Results                   31 Aug 2018              Aug 2017
                                              R’000                R’000               R’000          %
 Revenue                                     23,593               12,863              10,730          83
 Operating expenses                        (34,369)             (27,670)             (6,699)        (24)
 Finance income                               2,430               11,618             (9,188)        (79)
 Finance cost                               (7,552)              (3,983)             (3,569)        (90)
 Profit/(loss) from associates              (7,444)                  857             (8,301)      (>100)
 Fair value adjustment                        2,456                    -               2,456         100
 Loss before tax                           (19,997)              (5,067)            (14,930)      (>100)
 NAV per share (R)                             7.13                 9.77               (2.64)       (27)


PROJECTIONS

The recent signing of 27 PPAs by ESKOM and the release of the IRP update, presents a
significant break from a long period of delays and uncertainty in the South African energy market
and provides momentum to the energy sector. Hulisani maintains a positive outlook on the
energy sector and our pipeline stands at R4bn, with an initial focus on R2bn in completed
projects. We continue to assess various forms of funding to enable the conclusion of the
pipeline.

GOING CONCERN

The unaudited condensed consolidated interim results for the period ended 31 August 2018,
have been prepared on a going concern basis.

DIRECTORS

No changes to the board of directors took effect during the period under review.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST
2018

                                                            Unaudited      Restated
                                                             31 Aug        Unaudited            Audited
                                                            2018           31 Aug 2017          28 Feb 2018
                                                Notes       R’000          R’000                R’000

 ASSETS
 Non-current assets                                         510,471        596,065              519,658
 Property, plant and equipment                          5   129,519        137,027              133,914
 Intangible assets                                          149,397        134,336              152,830
 Investments in associates                            2,3   131,445        219,190              148,810
 Financial asset at amortised cost                          6,050          -                    -
 Financial asset at fair value through other
 comprehensive income                                       16,461         -                      8,961
 Financial asset at fair value through profit
 and loss                                             3,4   77,599         105,161               75,143
 Deposits held against bank guarantee                       -                  350               -

 Current assets                                             48,379          80,779               64,657
 Trade and other receivables                                22,139          51,724               29,140
Cash and cash equivalents                                   26,240          29,055               35,517


TOTAL ASSETS                                               558,850         676,844              584,315

EQUITY AND LIABILITIES
Equity                                                     389,453         503,759              412,524
Stated capital                                              500,000        500,000              500,000
Accumulated loss                                          (144,379)       (11,714)            (122,874)
Non-distributable reserves                                      773       -                        773
Non-controlling interest                                     33,059         15,473               34,625

Non-current liabilities                                     156,758        159,277              157,506
Long term borrowings                                7       121,692        127,749              121,692
Deferred tax liability                                       35,066         31,528               35,814

Current liabilities                                          12,639         13,808               14,285
Trade and other payables                                      9,160          6,605                3,722
Current portion of borrowings                                 3,479          7,203               10,563

TOTAL EQUITY AND LIABILITIES                                558,850        676,844              584,315



CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX
MONTHS ENDED 31 AUGUST 2018

                                                               Unaudited   Unaudited     Audited
                                                                 31 Aug      31 Aug      28 Feb
                                                                   2018        2017        2018
                                                    Notes         R’000       R’000       R’000

Revenue                                                 8         23,593      12,863      37,378
Other income                                                         136       1,248         977
Operating expenses                                              (34,369)    (27,670)    (57,699)
Finance income                                                     2,430      11,618      10,107
Finance costs                                                    (7,552)     (3,983)    (12,298)
Share of losses from associates                         2        (7,444)         857     (6,492)
Impairment loss                                                        -           -    (60,299)
Loss before fair value adjustments                              (23,206)     (5,067)    (88,326)
Fair value gain/(loss)                                  4          2,456           -    (25,055)
Net loss before tax                                             (20,750)     (5,067)   (113,381)
Tax                                                                  753           -     (2,463)
Net loss after tax                                              (19,997)     (5,067)   (115,844)

Other comprehensive income
Items that may be reclassified to profit or loss:
Changes in the fair value of available-for-sale
financial assets                                                       -           -         773
Total other comprehensive income                                       -           -         773
Total comprehensive loss for the year                           (19,997)     (5,067)   (115,071)

Loss for the period is attributable to:
Owners of Hulisani Limited                                      (21,505)     (5,704)   (116,864)
Non-controlling interest                                           1,508         637       1,020
                                                                (19,997)     (5,067)   (115,844)

Total comprehensive income/(loss) for the half-
year is attributable to:
Owners of Hulisani Limited                                      (21,505)     (5,704)   (116,091)
Non-controlling interest                                           1,508         637       1,020
                                                                (19,997)     (5,067)   (115,071)
Basic and diluted earnings per share (cents)            9           (43)        (11)       (234)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX
MONTHS ENDED 31 AUGUST 2018


31 August 2018
                                                                            Non-                                   Non-
                                    Stated        Accumulated       distributable                             controlling
                                    capital              loss          Reserves              Total             interests              Total
                       Notes         R’000             R’000               R’000            R’000                 R’000              R’000
Balance at 01
March 2017                        500,000             (6,010)                   -         493,990                     -            493,990
Arising from
Acquisition of                            -                 -                   -               -                38,632             38,632
subsidiary
Loss for the year                         -         (116,864)                   -        (116,864)                1,020          (115,844)
Other
comprehensive
income                                    -                 -                 773              773                    -                773
Dividends paid                                                                                                  (5,027)            (5,027)
Balance at 28
February 2018                     500,000           (122,874)                 773          377,899               34,625            412,524
Profit/(Loss)for the
year                                      -          (21,505)                   -         (21,505)                1,508           (19,997)
Disposal of
subsidiary                                                                                                          272                272
Dividends paid                            -                 -                   -                -              (3,346)            (3,346)
Balance at 31
August 2018                       500,000           (144,379)                 773          356,394               33,059            389,453


28 February 2018
                                                                                                        Non-
                                                                              Non-                      controlling
                                      Stated       Accumulated        distributable       Total         interests             Total
                                      capital             loss           Reserves
                       Notes           R’000            R’000                R’000        R’000          R’000                R’000
Balance at 01                               -                -                 -              -               -              -
March 2016
Loss for the year                           -          (6,010)                 -         (6,010)              -             (6,010)
Issue of shares                       500,000                -                 -         500,000              -             500,000
Balance at 28
February 2017                         500,000          (6,010)                 -         493,990              -             493,990
Arising from
Acquisition of                              -                -                 -               -         38,632            38,632
subsidiary
Profit/(Loss)for the                        -        (116,864)                 -       (116,864)          1,020           (115,844)
year
Other
comprehensive                               -                -              773              773              -                773
income
Dividends paid                              -                -                -                -         (5,027)           (5,027)
Balance at 28
February 2018                         500,000        (122,874)              773          377,899         34,625            412,524


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS
ENDED 31 AUGUST 2018

                                                              Unaudited     Unaudited          Audited
                                                            31 Aug 2018   31 Aug 2017      28 Feb 2018
                                              Notes               R’000         R’000            R’000

Cash flows from operating activities
Cash generated from operations                                   1,293      (31,887)          (30,533)
Net Cash inflow/(outflow) from
operating activities                                             1,293      (31,887)          (30,533)

Cash flows from investing activities
Acquisition of subsidiary, net of cash
acquired                                                             -     (100,464)         (100,464)
Acquisition of investments in
associates                                                           -     (223,950)         (223,951)
Acquisition of financial assets                        6       (7,500)     (100,000)         (108,188)
Acquisition of property, plant and
equipment                                              5         (167)         (538)             (628)
Dividends received                                               9,921         5,616             8,350
Interest received                                                2,176         6,686             8,000
Net cash inflow/(outflow)from investing
activities                                                       4,430     (412,650)         (416,881)

Cash flows from financing activities
Repayment of borrowings                                7       (7,084)             -           (2,697)
Interest paid                                                  (4,570)           (1)           (7,896)
Dividends paid to non-controlling
interests in subsidiaries                                      (3,346)       (2,289)           (5,027)
Net cash inflow/(outflow)from financing
activities                                                    (15,000)       (2,290)          (15,620)

Net increase/(decrease) in cash and
cash                                                           (9,277)     (446,827)         (463,034)
Opening cash and cash equivalents                              35,517        498,551           498,551
Cash and cash equivalents                                      26,240         51,724            35,517


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and the requirements of
the Companies Act of South Africa. The accounting policies applied in the preparation of these
interim financial statements are in terms of International Financial Reporting Standards and are
consistent with those applied in the previous annual financial statements.
The condensed consolidated interim financial results for the six months ended 31 August 2018
have not been audited or reviewed. The condensed consolidated interim financial results have
been prepared under the supervision of MP Dem (CA)SA, in his capacity as Chief Financial
Officer.

2. INVESTMENTS IN ASSOCIATES

                                                          Unaudited      Unaudited       Audited
                                                            31 Aug         31 Aug        28 Feb
                                                              2018           2017          2018
                                                             R'000          R'000         R'000
Summary - Balances
Kouga                                                   114,639      136,879        122,312
GRI                                                      16,806         82,312       26,498
Total investments in associates                         131,445        219,191      148,810
Summary - Movements
Beginning of the period                                 148,810               -            -
Additions                                                     -        223,950      223,951
Impairments                                                                   -     (60,299)
Share of profits/(loss)                                  (7,444)            857      (6,492)
Dividends received                                       (9,921)        (5,616)      (8,350)
End of the period                                       131,445        219,191      148,810

3. RECLASSIFICATION OF ASSETS

(a)      Convertible loan to Legend Power Solution
Hulisani Limited has issued a convertible loan to the value of R100m to Legend Power Solutions
(Pty) Ltd (“LPS”), a company with an underlying investment in Avon and Dedisa Peaking Power.
The loan participates in 9% of distributable profits available to LPS shareholders and will convert
to a 9% equity stake in LPS on maturity. The convertible loan is carried at fair value with gains
and loss recognised through profit and loss. In the comparative period this investment was
presented as loan receivables on the group’s statement of financial position.

The group has updated comparative information and reclassified the convertible loan to financial
assets at fair value through profit and loss to reflect the measurement basis.


(b)     Investment in GRI Wind Steel (Pty) Ltd associates
The Company acquired 50% of the share capital in Pele SPV13 (Pty) Ltd (“Pele SPV13”) for a
cash consideration of R41.25m and subscribed for preference shares of R41.25m to Pele
SPV198 (Pty) Ltd (“Pele SPV198”). The preference share subscription agreement includes a
requirement that Pele SPV198 pledges its shares held in Pele SPV13 to Hulisani until the
preference share funding is repaid. Therefore, until such time as the preference shares have
been repaid, risks and rewards associated to Pele SPV198 investment in Pele SPV13 remain
with Hulisani resulting in a 25% effective stake in GRI Wind Steel South Africa (Pty) Ltd (“GRI”)
which has been equity accounted.

In the comparative period the subscription to the preference shares in Pele SPV198 (Pty) Ltd
was classified as other financial instruments. The company has updated the comparative
information and reclassified the subscription to preference shares to Investments in associates
to reflect the substance of the transaction.
                                                                                                                Financial
                                                                                                                assets at fair
                                                                                                                value through
                                                                                     Other financial            profit and loss           Investments in
                                                                Loans                instruments                                            associates
                                                                Receivables
                                                                R'000                           R'000                     R'000                      R'000
Balance at 01 March 2017                                              -                             -                         -                          -
Addition                                                        104,932                        41,479                         -                          -
Reclassification                                              (104,932)                       (41,479)                  105,161  1                  41,250
Balance at 31 August 2017                                             -                             -                   105,161                      41,25
1 Included in the financial assets at fair value through profit and loss is the reclassification of interest rate SWAP valued at R229k, from other
financial instruments.


4. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT AND LOSS


                                                                     Unaudited      Unaudited    Audited
                                                                        31 Aug         31 Aug    28 Feb
                                                                           2018           2017      2018
                                                                          R'000          R'000     R'000
Balance at the beginning of the period                                   75,143                        -
Addition                                                                      -        100,229   100,000
Fair value gain/(loss)                                                    2,456              -  (24,857) 1
Interest accrued                                                              -          4,932         -
Balance at the end of the period                                         77,599        105,161    75,143

1 The balance of the fair value loss as disclosed in the statement of comprehensive income
includes R198k which relates to fair value movements on the interest rate swap.

5. PROPERTY, PLANT AND EQUIPMENT
                                                                              Fixtures      Computer
                                       Land &             Office              and           Equipment          Motor            Plant &
                                       Buildings          Equipment            Fittings     & Software         Vehicles         Machinery      Total
31 August 2018                         R'000              R'000                R'000        R'000              R'000            R'000         R'000
Balance at 01 March 2017                      -               323                 2,310             170           -                 -          2,803
Cost/additions                                -                49                   471             108           -                 -            628
Acquisition of subsidiary                  2,212                -                     2               -         248           135,025        137,487
Accumulated
depreciation/depreciation                      -              (60)                (434)            (98)        (56)           (6,356)        (7,004)
Carrying amount at 28
February 2018                              2,212               312                2,349             180         192           128,669        133,914

Half-year ended 31 August 2018

Opening carrying amount                    2,212               312               2,349              180         192           128,669         133,914
Additions                                      -                 -                   -               16           -               151             167
Depreciation                                   -              (31)               (209)              (49)        (36)           (4,237)        (4,562)
Balance at 31 August 2018                  2,212               281               2,140               147         156           124,583        129,519

Cost                                       2,212               372               2,783               294         248           135,176        141,085
Accumulated depreciation                       -              (91)               (643)             (147)         (92)         (10,593)       (11,566)
Carrying Amount at 31
August 2018                                2,212              281                2,140               147          156          124,583        129,519




                                                                                    Computer
                                                                       Fixtures    Equipment
                                      Land &             Office              and            &      Motor           Plant &
                                     Buildings       Equipment          Fittings     Software    Vehicles        Machinery         Total
28 February 2018                       R'000            R'000           R'000          R'000      R'000            R'000         R'000
Balance at 01 March 2016

Cost/additions                                  -         323           2,310           170            -               -         2,803
Accumulated
depreciation/depreciation                       -           -            (18)          (29)            -                          (47)
Carrying amount at 28 February
2017                                            -         323           2,292           141            -                -        2,756
Year ended 28 February 2018
Opening carrying amount                    -              323           2,292           141            -                -        2,756
Additions                                  -               49             471           108            -                -          628
Acquisition of subsidiary              2,212                -               2              -         248          135,025      137,487
Depreciation                               -              (60)          (416)           (69)         (56)          (6,356)      (6,957)
Balance at 28 February 2018            2,212              312           2,349           180          192          128,669      133,914
Cost                                   2,212              372           2,783           278          248          135,025      140,918
Accumulated depreciation                   -              (60)          (434)           (98)         (56)          (6,356)      (7,004)
Carrying Amount at 28 February
2018                                   2,212              312           2,349           180          192          128,669      133,914


                                   Land &                           Fixtures     Computer
                                  Building           Office               and   Equipment         Motor           Plant &
                                         s       Equipment           Fittings   & Software      Vehicles        Machinery          Total
31 August 2017                      R'000            R'000            R'000          R'000        R'000            R'000          R'000
Balance at 01 March 2017

Cost                                     -               323           2,310            170             -                -          2,803

Accumulated depreciation                 -                 -            (18)           (29)             -                            (47)
Carrying amount at 28
February 2017                            -               323           2,291            141             -                -          2,756

Half-year ended 31 August 2017

Opening carrying amount                 -                323           2,291            141             -                -          2,756
Additions                               -                 26             463             49             -                -            538
Acquisition of subsidiary           2,212                  -               2              -           248          133,600        136,062
Depreciation                            -               (29)           (207)           (31)          (17)          (2,044)        (2,329)
Balance at 31 August 2017           2,212                320           2,549            159           231          131,556        137,027

Cost                                2,212                349           2,778            219           359         162,167         168,084
Accumulated depreciation                -               (29)           (229)           (60)         (128)         (30,611)       (31,057)
Carrying Amount at 31 August
2017                                2,212               320            2,549            159           231          131,556        137,027

6. FINANCIAL ASSETS AT FAIR VALUE

(i)     Fair value hierarchy

The following table presents the group’s financial instruments measured and recognised at fair
value at 31 August 2018.

The group has classified its financial instruments into the three levels prescribed under the
accounting standards.


                                                   Level 1            Level 2           Level 3       Total
Financial assets                                    R'000              R'000             R'000       R'000
31 August 2018
Financial assets at fair value through profit
and loss:
  Convertible loan                                        -               -              77,599      77,599
Financial assets at fair value through other
comprehensive income:
  Cumulative redeemable preference
  shares                                                  -               -              16,461      16,461
Total financial assets                                    -               -              94,060      94,060

                                                    Level 1            Level 2           Level 3       Total
Financial assets                                     R'000              R'000             R'000       R'000
28 February 2018
Financial assets at fair value through profit
and loss:
  Convertible loan                                        -               -              75,143      75,143
Financial assets at fair value through other
comprehensive income:
  Cumulative redeemable preference
  shares                                                  -               -               8,961       8,961
Total financial assets                                    -               -              84,104      84,104

                                                  Level 1            Level 2            Level 3        Total
Financial assets                                   R'000              R'000              R'000        R'000
31 August 2017
Financial assets at fair value through profit
and loss:
  Convertible loan                                       -                -              100,000     100,000
Financial assets at fair value through profit
and loss:
  Interest rate SWAP                                     -               229                   -         229
Total financial assets                                   -               229             100,000     100,229


(ii)    Fair value measurements using significant unobservable inputs (level 3)

                                                                                       Cumulative
                                                                 Convertible           preference
                                                                       loan                shares         Total
31 August 2018                                                        R'000             R'000             R'000
Balance at the beginning of the period                               75,143             8,961               84,104
Acquisitions/additions                                                    -             7,500                7,500
Income recognised in other comprehensive income                           -                 -                    -
Gains recognised in profit or loss                                    2,456                 -                2,456
Closing balance at the end of the period                             77,599            16,461               94,060

                                                                                  Cumulative
                                                                                  preference
                                                           Convertible loan           shares              Total
28 February 2018                                                      R'000            R'000              R'000
Balance at the beginning of the period                                   -                 -                   -
Acquisitions/additions                                             100,000             8,188             108,188
Income recognised in other comprehensive income                          -               773                 773
Gains recognised in profit or loss                                 (24,857)                -            (24,857)
Closing balance at the end of the period                             75,143            8,961              84,104

                                                               Interest rate       Convertible
                                                                     SWAP                loan              Total
31 August 2017                                                        R'000            R'000              R'000
Balance at the beginning of the period                                     -                 -                 -
Acquisitions/additions                                                  229          100,000            100,229
Income recognised in other comprehensive income                            -                 -                 -
Gains recognised in profit or loss                                         -                 -                 -
Closing balance at the end of the period                                229           100,000           100,229

(iii)   Fair value gains and losses

                                                                            Unaudited            Audited
                                                                          31 Aug 2018            28 Feb
                                                                                                   2018
                                                                             R'000                R'000
Total loss for the period recognised in profit or loss under ‘Fair
value gain/(loss)’                                                             2,456           (24,857)
Total gains for the period recognised in other comprehensive
income under ‘Other comprehensive income’                                          -                773
                                                                               2,456           (24,084)

There were no transfers between levels 1 and 2 for recurring fair value measurements during
the year.
The group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as
at the end of the reporting period.

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and trading and available-for-sale securities) is based on quoted market prices at
the end of the reporting period. The quoted market price used for financial assets held by the
group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for
example, over-the-counter derivatives) is determined using valuation techniques which
maximise the use of observable market data and rely as little as possible on entity-specific
estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the
instrument is included in level 3. This is the case for unlisted equity securities.

(iv)    Valuation techniques used to determine fair values

The fair value of the convertible loan and preference shares is determined using discounted
cash flow method.


(v)     Valuation inputs and relationships to fair value

31 August 2018
                                                                         Relationship of
                                                                         unobservable
                                                                         inputs to fair
                     Fair Value     Unobservable                         value
Description          R’000          inputs             Actual input
Convertible loan     77,599  1      Discount rates           13.20%     The higher the
                                                                        discount rate
                                                                        the lower the
                                                                        fair value
                                    Base revenue        R1.1 billion    The higher the
                                    from plant                          base revenue,
                                    operation                           the higher the
                                                                        fair value
                                    Period of               30 years    The shorter the
                                    operation                           period, the
                                                                        lower the fair
                                                                        value


1 The positive fair value movement for interims is mainly attributable to a change in the cashflow
sweeping mechanism that was put in place by the lender, which became no longer applicable
during interim reporting, resulting in increased free cashflows.


28 February 2018

                                                                        Relationship of
                                                                        unobservable
                                                                        inputs to fair
                       Fair Value   Unobservable                        value
Description            R’000        inputs             Actual input
Convertible loan       75,143       Discount rates           13.20%     The higher the
                                                                        discount rate
                                                                        the lower the
                                                                        fair value
                                    Base revenue       R2.3 billion     The higher the
                                    from plant                          base revenue,
                                    operation                           the higher the
                                                                        fair value
                                    Period of              30 years     The shorter the
                                    operation                           period, the
                                                                        lower the fair
                                                                        value


(vi)     Valuation processes

The finance department of the group obtains input from independent valuation experts in
performing valuations of financial assets required for financial reporting purposes, including level
3 fair values. The valuations expert communicates directly with the chief financial officer (CFO).

Cumulative preference shares are valued by using the Discounted Cash Flow Method and the
convertible loan uses the Dividend Discount Model. The discount rates used for the valuations
are the prevailing market rates at the time of the valuations.

The group conducts valuations twice a year, at the interim financial reporting period and also at
the year-end reporting period.


7. BORROWINGS

                                                                  Unaudited         Unaudited    Audited
                                                                    31 Aug            31 Aug      28 Feb
                                                                      2018              2017        2018
                                                                     R'000             R'000       R'000
Balance at the beginning of the period                             132,255                  -           -
Arising from acquisition of subsidiary                                    -          134,952     134,952
Repayments                                                          (7,084)                 -     (2,697)
Balance at the end of the period                                   125,171           134,952     132,255
Secured
Non-current
IDC loan                                                             60,977           64,107      60,977
Nedbank loan                                                         60,715           63,642      60,715
Total non-current interest-bearing debt                             121,692          127,749     121,692
Secured
Current
IDC loan                                                              1,757            3,586       5,301
Nedbank loan                                                          1,722            3,617       5,262
Total current interest-bearing debt                                   3,479            7,203      10,563
Total interest-bearing debt                                         125,171          134,952      10,255

8. REVENUE

Hulisani Limited revenue arises from the sale of electricity by the subsidiary, RustMo1 Solar
Farm (Pty) Ltd.

9. EARNINGS PER SHARE

The calculation of earnings per share at 31 August 2018 was based on the loss attributable to
ordinary shareholders of Hulisani Limited, and a weighted average number of ordinary shares.
Reconciliation between earnings and headline earnings is as follows:

Notes                                                     Unaudited            Unaudited          Audited
                                                       period ended         period ended     period ended
                                                       31 Aug 2018          31 Aug 2017      28 Feb 2018
                                                              R’000                R’000            R’000
Loss for the year                                          (21,505)              (5,704)        (116,864)
Adjustments:
Impairment loss                                                   -                    -           60,299
Loss on disposal of a subsidiary                                688                    -                -
Headline earnings                                          (20,817)              (5,704)         (56,565)
Number of shares in issue (’000)                             50,000               50,000           50,000
Weighted numbers of shares (’000)                            50,000               50,000           50,000
Basic and diluted earnings per share (cents)                   (43)                 (11)            (234)
Basic and diluted headline earnings per share
(cents)                                                        (42)                 (11)            (113)

10. SEGMENT REPORTING

The group’s executive committee, consisting of the chief executive officer, the chief financial
officer and the chief investment officer, examines the group’s performance both from the nature
of investment perspective and has identified the following reportable segments of its business:
a) RustMo1: This is a material subsidiary of Hulisani.
b) Kouga: This is an investment Hulisani has significant influence over.
c) GRI: This is an investment Hulisani has significant influence over.
d) LPS: Hulisani participates in 9% of the distributable profits of the investee.
e) Other: The segment represents activities within the holding company.

The executive committee uses dividends received/receivable to assess the performance of the
operating segments. Information about the segments' revenue and assets is received by the
executive committee on a monthly basis.


                              RustMo1        Kouga         GRI            LPS       Other        Total
31 August 2018              R’000        R’000       R’000           R’000      R’000       R’000

Non-current assets         276,369     114,639      16,806       77,599        25,058    510,417
Current assets              32,053           -           -            -        16,326     48,379
Total assets               308,422     114,639      16,806       77,599        41,384    554,850
Non-current liabilities    156,758           -           -            -             -    156,758
Current liabilities          8,252           -           -            -         4,387     12,639
Total liabilities          165,010           -           -            -         4,387    169,397

                              RustMo1       Kouga          GRI        LPS           Other        Total
                                R’000       R’000        R’000       R’000         R’000        R’000
Revenue- external            23,593            -            -           -              -       23,593
Net profit                    7,049        2,248      (9,692)       3,694       (23,296)     (19,997)
Dividend received             6,496        9,921            -           -              -       16,417
Non-cash items in
statement of                      -           -             -           -          (688)        (688)
comprehensive income
Depreciation and            (7,709)           -             -           -          (286)      (7,995)
amortisation
Finance income                  746           -             -       1,238            446       2,430
Finance costs               (7,549)           -             -           -            (3)     (7,552)
 

                             RustMo1          Kouga          GRI        LPS           Other          Total
28 February 2018                R’000          R’000        R’000       R’000          R’000         R’000

Non-current assets            283,926        122,312       26,498      75,143         11,779        519,658
Current assets                 33,928              -            -       2,107         28,622         64,657
Total assets                  317,854        122,312       26,498      77,250         40,401        584,315
Non-current liabilities       157,506              -            -           -              -        157,506
Current liabilities            12,219              -            -           -          2,066         14,285
Total liabilities             169,725              -            -           -          2,066        171,791


                          RustMo1            Kouga            GRI           LPS            Other         Total
                            R’000            R’000          R’000          R’000           R’000         R’000
Revenue-                   37,378                -              -              -               -            37,378
external
Net profit                  7,415           (10,788       (56,003)       (22,750)        (33,718)        (115,844)
Dividend received           9,758             8,350              -              -               -           18,108
Non-cash items
in statement of                  -      (14,314)       (45,985)          (24,857)               -         (85,156)
comprehensive
income
Depreciation and          (11,563)                -                -             -          (543)         (12,106)
amortisation
Finance income               1,085                -                -        2,107          6,915            10,107
Finance costs             (12,298)                -                -            -              -          (12,298)



                             RustMo1          Kouga          GRI         LPS           Other          Total
31 August 2017                 R’000          R’000        R’000        R’000          R’000         R’000

Non-current assets            268,566       136,879       41,062       104,932        44,626        596,065
Current assets                 32,304             -            -             -        48,475         80,779
Total assets                  300,870       136,879       41,062       104,932        93,101        676,844
Non-current liabilities       159,277             -            -             -             -        159,277
Current liabilities            10,807             -            -             -         3,001         13,808
Total liabilities             170,084             -            -             -         3,001        173,085



                               RustMo1         Kouga          GRI        LPS            Other         Total
                                 R’000         R’000        R’000       R’000          R’000         R’000
Revenue- external               12,863              -           -           -               -       23,593
Net profit                       1,968          1,045       (188)       4,932        (12,824)       (5,067)
Dividend received                4,444          8,350           -           -               -       12,794
Non-cash items in
statement of                            -             -            -         -         (688)          (688)
comprehensive income
Depreciation and                 (3,767)              -            -         -         (267)        (4,034)
amortisation
Finance income                       327              -            -     4,932         6,359        11,618
Finance costs                    (3,981)              -            -         -            (2)       (3,983)

11. CHANGES IN ACCOUNTING POLICIES


This note explains the impact of the adoption of the following new accounting standards on the
group’s financial statements, as issued by IASB, which were effective for the group from 01
March 2018:
• IFRS15 Revenue from Contracts with Customers (IFRS 15).
• IFRS 9 Financial Instruments (IFRS 9).

(i)     Impact on the financial statements

The group did not need to restate prior year financial statements due to changes in accounting
policies due to adoption of IFRS 9 and IFRS 15.

(ii)    Adoption of IFRS 15

The policy changes came into effect on 01 March 2018 for the group. IFRS 15 replaces IAS 18
Revenue, IAS 11 Construction Contracts and related interpretations. Under IFRS 15, revenue is
recognised at an amount that reflects the consideration to which an entity is expected to be
entitled for transferring goods or services to a customer. In accordance with the transition
provisions in IFRS 15, the group is required to adopt the new rules retrospectively and restate
comparatives for the prior financial year.

The group generates revenue from the sale of electricity to Eskom. The adoption of IFRS 15 did
not have a significant impact on revenue recognition on the sale of electricity.

(iii)   Adoption of IFRS 9

IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and
measurement of financial assets and financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting. The adoption of IFRS 9 Financial
Instruments has the following impact on the group:
• Change in classification of the measurement categories for financial instruments.
• Change from the IAS39 incurred loss model to the expected credit loss (ECL) model when
  determining impairment of financial assets.

(a)     Classification and measurements

IFRS 9 introduced changes to the measurement categories for financial assets. The group
classifies financial assets in each of the IFRS 9 measurements categories based on the group’s
business model for managing financial assets and the cash flow characteristics of the financial
assets. The new financial assets categories are illustrated below:

IAS 39 Categories                                   IFRS 9 Categories
Financial assets at fair value through profit and   Financial assets at fair value through profit and
loss                                                loss (FVTPL)
Loans and receivables                               Financial assets at amortised cost

Available for sale assets                           Financial assets at fair value through other
                                                    comprehensive income (FVOCI)
Held to maturity

The reclassification into new measurement categories of IFRS 9 did not have a significant
impact on the group. Hulisani has designated investments in preference shares at fair value
through other comprehensive income, and convertible loan to LPS at fair value through profit
and loss.

Financial liabilities under IFRS 9 continued to be measured at amortised cost except for those
designated at fair value through profit and loss, which are measured at fair value.

(b)       Impairment of financial assets

The group was required to revise its impairment methodology under IFRS 9 for each of the
following classes of assets:
• Trade and other receivables
• Financial assets carried at amortised cost
• Contract asset relating to the Eskom contract
• Preference shares carried at FVOCI

While cash and cash equivalents are subject to the impairment requirement of IFRS 9, the
identified impairment loss was immaterial.

Under IFRS 9, credit losses (impairments) are recognised earlier than under IAS 39. Expected
credit loss allowances are measured on either one of the following basis:

•     12 – month ECLs; these are ECLs that result from possible default events within the 12
      months after the reporting date; and
•     Lifetime ECLs; these are ECLs that result from all possible default events over the expected
      life of the financial instrument.

?     Trade and other receivables and contract assets

The group applies the IFRS 9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for all trade receivables and contract assets.

The group recognised the expected credit risk as immaterial to provide for restatement of
opening balances.

12. RELATED PARTIES

(a) Balances
                                                                                                 31 Aug
                                                                                                   2018
                                                                                                  R’000
Other receivables (i)                                                                             5,201
Loan receivables (ii)                                                                             6,050


(i)     Sponsor fees refundable to Hulisani by Nibira (Pty) Ltd. The payment was rendered invalid and
        the amount remains owing to the group at the end of the financial period.

(ii)    A subsidiary of Pele Green (Pty) Ltd, Pele SPV198 (Pty) Ltd entered into an agreement with
        Hulisani Limited to jointly subscribe for ordinary shares in Pele SPV13 (Pty) Ltd. Hulisani
        Limited subscribed for cumulative preference shares in Pele SPV198 (Pty) Ltd for the entity's
        funding of the ordinary shares subscription in Pele SPV13 (Pty) Ltd. Loan receivables are due
        from Pele Green Energy (Pty) Ltd, a parent company to Pele SPV198 (Pty) Ltd.

13. DIVIDENDS

There will be no dividends declared for the interim period.

UNAUDITED INTERIM CONDENSED RESULTS

This short-form announcement is the responsibility of the directors and is only a summary of the
information in the full announcement and does not contain full or complete details. The full
announcement was released on SENS on 31 October 2018 and can be found on the Company’s
website at www.hulisani.co.za and is available free of charge at the registered office of the
Company and the sponsor’s office, during normal office hours. Copies of the full announcement
may be requested by contacting info@hulisani.co.za or calling 0878062425. Any investment
decision should be based on the full announcement published on SENS and the Company’s
website.

On behalf of the Board
ME Raphulu
Chief Executive Officer

Registered Office:
4th Floor, North Tower,90 Rivonia Road, Sandton, Gauteng.

Auditors
PricewaterhouseCoopers Inc.

Johannesburg
31 October 2018

Sponsor
PSG Capital

Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street Johannesburg, 2001

Company secretary
The Paper-Clip Consultancy, 31 Pineview Estates, Pine Road, Kengies, Fourways, Gauteng,
2146

Directors:
ME Raphulu (Chief Executive Officer), MF Modau (Chief Investment Officer), MP Dem (Chief
Financial Officer), PC Mdoda* (Chairman), A Notshe^, MH Zilimbola^, NP Gosa*, DR
Hlatshwayo*, HH Schaaf*#, B Marx*.

* Independent Non-executive      # German ^ Non-independent Non-executive.

Date: 31/10/2018 05:27:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
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 information disseminated through SENS.

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