Wrap Text
Unaudited Condensed Consolidated Interim Results for the Six Months Ended 30 September 2018
DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
("Deneb" or "the Group" or "the company")
Registration number: 2013/091290/06
JSE share code: DNB
ISIN: ZAE000197398
The company's shares are listed under the Financial Services - Speciality Finance sector.
UNAUDITED CONDENSED CONSOLIDATED
INTERIM RESULTS
for the six months ended 30 September 2018
Financial highlights
for the six months ended 30 September 2018
- Revenue up R230 million to R1 596 million
- Profit up R31 million to R4 million
- Earnings per share up 7 cents to 1 cent
- Headline earnings per share up 3 cents to 1 cent
- Net asset value per share up 3 cents to 381 cents
Condensed consolidated statement of financial position
as at 30 September 2018
Unaudited
Unaudited and restated Audited
30 Sept 2018 30 Sept 2017* 31 March 2018
R000's R000's R000's
ASSETS
Non-current assets 2 082 271 1 848 004 2 044 076
Property, plant and equipment 772 595 839 103 813 426
Plant and equipment 320 522 378 261 440 005
Owner-occupied property 452 073 460 842 373 421
Investment property 978 323 732 266 907 352
Intangible assets and goodwill 98 490 70 494 99 997
Intangible assets 40 018 46 729 41 525
Goodwill 58 472 23 765 58 472
Financial asset at fair value 4 237 3 026 4 237
Long-term receivables 58 411 81 350 56 780
Deferred tax assets 170 215 121 765 162 284
Current assets 1 809 343 1 757 156 1 512 620
Non-current assets held for sale 1 080 1 560 1 080
Inventories 849 677 776 257 680 935
Trade and other receivables 937 835 933 315 786 672
Current tax assets 2 947 2 498 2 266
Cash and cash equivalents 17 804 43 526 41 667
Total assets 3 891 614 3 605 160 3 556 696
EQUITY AND LIABILITIES
Total equity 1 645 046 1 623 781 1 674 626
Stated capital 1 452 802 1 450 888 1 452 264
Reserves 191 792 173 238 220 950
Equity attributable to owners of the company 1 644 594 1 624 126 1 673 214
Non-controlling interest 452 (345) 1 412
Non-current liabilities 939 931 1 037 711 942 059
Deferred tax liabilities 8 870 12 323 7 142
Post-employment medical aid benefits 98 398 93 081 98 896
Deferred income 136 581 126 533 141 754
Interest-bearing liabilities 688 143 804 334 688 533
Operating lease accruals 7 939 1 440 5 734
Current liabilities 1 306 637 943 668 940 011
Current tax liabilities 1 203 3 646 759
Post-employment medical aid benefits 8 114 7 219 7 619
Deferred Income 7 440 11 945 8 908
Interest-bearing liabilities 152 863 52 010 169 972
Trade and other payables 770 093 629 581 604 886
Provisions - 15 691 3 991
Bank overdraft 366 924 223 576 143 876
Total liabilities 2 246 568 1 981 379 1 882 070
Total equity and liabilities 3 891 614 3 605 160 3 556 696
* Restated, refer to note 4.2 and note 7.
Condensed consolidated statement of profit or loss and
other comprehensive income
for the six months ended 30 September 2018
Unaudited
Unaudited and restated
30 Sept 2018 30 Sept 2017*
Notes R000's R000's
Continuing operations
Revenue 1 595 751 1 365 860
Cost of sales (1 234 352) (1 051 041)
Gross profit 361 399 314 819
Operating profit before finance costs 56 587 39 328
Finance expenses (52 779) (46 643)
Profit/(Loss) before taxation 3 808 (7 315)
Income tax expense 4.1 (468) 30 411
Profit after tax 3 340 23 096
Discontinued operations
Profit/(Loss) from discontinued operations, net of tax 4.2 913 (50 358)
Profit/(Loss) 4 253 (27 262)
Other comprehensive income, net of related tax
Items that are or may be reclassified to profit or loss
Foreign operations - foreign currency translation differences 4 544 1 878
Other comprehensive income, net of tax 4 544 1 878
Total comprehensive income/(loss) for the period 8 797 (25 384)
Profit/(Loss) attributable to:
Owners of the company 4 091 (26 816)
Non-controlling interest 162 (446)
4 253 (27 262)
Total comprehensive income/(loss) attributable to:
Owners of the company 8 635 (24 938)
Non-controlling interest 162 (446)
8 797 (25 384)
Basic earnings per share (cents) 0,95 (6,25)
Basic earnings per share from continuing operations (cents) 0,74 5,49
Basic earnings per share from discontinued operations (cents) 0,21 (11,74)
Diluted earnings per share (cents) 0,92 (6,25)
Diluted earnings per share from continuing operations (cents) 0,71 5,49
Diluted earnings per share from discontinued operations (cents) 0,21 (11,74)
* Restated, refer to note 4.2 and note 7.
Condensed consolidated statement of cash flows
for the six months ended 30 September 2018
Unaudited Unaudited
30 Sept 2018 30 Sept 2017
R000's R000's
Net cash flow from operating activities (177 124) (114 986)
Cash generated from operating activities before working capital changes 26 152 21 392
Cash outflow from working capital changes (143 589) (83 117)
Net finance costs (52 779) (46 643)
Taxes paid (6 908) (6 618)
Net cash flow from investing activities (67 360) (20 822)
Net cash flow from financing activities (2 427) (36 876)
Change in borrowings 10 513 (24 017)
Distribution (12 940) (12 859)
Net decrease in cash and cash equivalents (246 911) (172 684)
Cash and cash equivalents at beginning of period (102 209) (7 366)
Cash and cash equivalents at end of period (349 120) (180 050)
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2018
Non-
Stated Other Retained controlling Total
capital reserves income Total interest equity
R000's R000's R000's R000's R000's R000's
Balance at 1 April 2017 1 449 653 253 456 75 220 1 778 329 101 1 778 430
Correction of error (net of tax) - - (115 450) (115 450) - (115 450)
Restated total equity at the
beginning of the financial year 1 449 653 253 456 (40 230) 1 662 879 101 1 662 980
Total comprehensive profit for
the period - 1 878 (26 816) (24 938) (446) (25 384)
Transactions with owners of
the company
Distribution - - (12 859) (12 859) - (12 859)
Share scheme - options exercised 1 235 - (1 235) - - -
Common control transaction
Business acquisition under common
control - (956) - (956) - (956)
Balance at 30 September 2017 1 450 888 254 378 (81 140) 1 624 126 (345) 1 623 781
Balance at 1 April 2018 1 452 264 266 867 (45 917) 1 673 214 1 412 1 674 626
Change in accounting policy - - (17 615) (17 615) - (17 615)
Restated total equity at the
beginning of the financial year 1 452 264 266 867 (63 532) 1 655 599 1 412 1 657 011
Total comprehensive profit for
the period - 4 544 4 091 8 635 162 8 797
Transactions with owners of
the Company
Distribution - - (12 940) (12 940) - (12 940)
Effects of change in holdings - - (6 700) (6 700) (1 122) (7 822)
Share scheme - options exercised 538 - (538) - - -
Balance at 30 September 2018 1 452 802 271 411 (79 619) 1 644 594 452 1 645 046
30 Sept 2018 30 Sept 2017
Composition of other reserves R000's R000's
Foreign currency translation reserve 2 240 1 878
Revaluation of investments 1 210 -
Common control reserve (20 219) (16 858)
Surplus on revaluation of land and buildings 288 180 269 358
271 411 254 378
Condensed consolidated segmental report
for the six months ended 30 September 2018
Head
Branded Office and
Product Industrial Textile Centralised
Properties Distribution Manufacturing Manufacturing Services Total
R000's R000's R000's R000's R000's R000's
2018
Segment revenue
Primary geographical
market
South Africa 83 385 604 423 610 185 253 933 - 1 551 926
Other African countries - 31 252 13 099 11 243 - 55 594
Europe - 26 649 6 264 - - 32 913
South America - - 2 534 - - 2 534
83 385 662 324 632 082 265 176 - 1 642 967
Major products/service
lines
Woven, knitted and non-
woven products - - 254 863 265 176 - 520 039
Pressed, roll-formed steel
products - - 309 793 - - 309 793
Speciality chemicals - - 67 426 - - 67 426
Rentals 83 385 - - - - 83 385
Toys, electronic games and
sports goods - 541 694 - - - 541 694
Stationery, publishing and
office supplies - 120 630 - - - 120 630
83 385 662 324 632 082 265 176 - 1 642 967
Timing of revenue
recognition
At a point in time 83 385 651 236 632 082 265 176 - 1 631 879
Over time - 11 088 - - - 11 088
83 385 662 324 632 082 265 176 - 1 642 967
Inter-segment sales (21 940) - (12 221) (3 232) - (37 393)
61 445 662 324 619 861 261 944 - 1 605 574
Less: Revenue attributable to
discontinued operations - (9 361) - (462) - (9 823)
Revenue as per statement
of comprehensive income 61 445 652 963 619 861 261 482 - 1 595 751
Segment results
Profit from continuing
operations before finance
cost 56 993 (17 027) 27 831 2 445 (13 655) 56 587
Finance expenses - - - - - (52 779)
Profit before taxation - - - - - 3 808
Total segment assets 1 334 044 1 140 079 804 631 489 712 123 149 3 891 614
Total segment liabilities 21 549 673 934 451 662 221 501 877 922 2 246 568
2017
Segment revenue
Primary geographical
market
South Africa 78 149 593 682 400 132 367 480 - 1 439 443
Other African countries - 9 981 12 460 23 498 - 45 939
Europe - 37 231 2 460 - - 39 691
South America - - 3 354 - - 3 354
78 149 640 894 418 406 390 978 - 1 528 427
Major products/service
lines
Woven, knitted and non-
woven products - - 235 909 390 978 - 626 887
Pressed, roll-formed steel
products - - 121 444 - - 121 444
Speciality chemicals - - 61 053 - - 61 053
Rentals 78 149 - - - - 78 149
Toys, electronic games and
sports goods - 471 440 - - - 471 440
Stationery, publishing and
office supplies - 169 454 - - - 169 454
78 149 640 894 418 406 390 978 - 1 528 427
Timing of revenue
recognition
At a point in time 78 149 628 156 418 406 390 978 - 1 515 689
Over time - 12 738 - - - 12 738
78 149 640 894 418 406 390 978 - 1 528 427
Inter-segment sales (25 887) - (12 878) (4 697) - (43 462)
52 262 640 894 405 528 386 281 - 1 484 965
Less: Revenue attributable to
discontinued operations - (42 377) - (76 728) - (119 105)
Revenue as per statement
of comprehensive income 52 262 598 517 405 528 309 553 - 1 365 860
Segment results
Profit from continuing
operations before finance
cost 56 530 (16 050) 18 047 3 604 (22 803) 39 328
Finance expenses - - - - - (46 643)
Loss before taxation - - - - - (7 315)
Total segment assets 1 240 740 1 039 691 654 527 575 964 94 237 3 605 160
Total segment liabilities 18 988 442 515 380 521 272 299 867 057 1 981 379
Statistics per share
for the six months ended 30 September 2018
Unaudited Unaudited
30 Sept 2018 30 Sept 2017*
Six months Six months
Weighted average number of shares in issue ('000) 431 453 428 789
Number of shares in issue ('000) 431 579 429 559
Diluted weighted average number of shares in issue ('000) 444 325 428 789
Basic earnings (cents) 0,95 (6,25)
Continuing operations (cents) 0,74 5,49
Discontinued operations (cents) 0,21 (11,74)
Headline earnings (cents) 1,26 (1,47)
Continuing operations (cents) 1,05 5,56
Discontinued operations (cents) 0,21 (7,03)
Diluted earnings (cents) 0,92 (6,25)
Continuing operations (cents) 0,71 5,49
Discontinued operations (cents) 0,21 (11,74)
Diluted headline earnings (cents) 1,22 (1,47)
Continuing operations (cents) 1,01 10,27
Discontinued operations (cents) 0,21 (11,74)
Reconciliation between profit and headline earnings
Income attributable to shareholders (R000's) 4 091 (26 816)
Impairment of property plant and equipment (R000's) 1 629 20 223
Surplus on disposal of property, plant and equipment (R000's) (272) (219)
Surplus of disposal of subsidiary (R000's) (955) -
Loss on disposal of property, plant and equipment (R000's) 1 846 645
Total tax effect of adjustments (R000's) (897) (119)
Headline earnings (R000's) 5 442 (6 286)
Net asset value per share (cents) 381 378
*Restated, refer to note 4.2 and note 7.
Notes to the unaudited condensed consolidated
interim results for the for the six months ended 30 September 2018
1. Basis of preparation
The unaudited condensed consolidated interim results for the six months to September 2018 have been prepared in
accordance with, and containing the information as required by, International Accounting Standard (IAS) 34 Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the
Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and are in compliance
with the Listings Requirements of the JSE Limited and the requirements of the South African Companies Act as
amended. These results do not include all the information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and performance since the last annual consolidated
financial statements for the year ended 31 March 2018.
These results have been prepared under the supervision of the Financial Director, Gys Wege (CA)SA, and have not
been audited or reviewed by the Group's auditors, PwC Inc.
2. Significant accounting policies
The unaudited condensed consolidated interim results have been prepared under the historical cost convention,
except for the revaluation of certain properties and financial instruments. The accounting policies adopted are in terms
of IFRS and consistent with those followed in the preparation of the Group's annual financial statements for the year
ended 31 March 2018, except for the adoption of new standards and interpretations effective as at 1 April 2018. Refer
to note 3 for an explanation on the impact of the new standards on the condensed consolidated financial statements.
3. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers on the Group's financial statements and also discloses the new accounting policies that have been
applied from 1 January 2018, where they are different to those applied in prior periods.
3.1 IFRS 9 Financial Instruments - Impact of adoption
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, and impairment of financial assets.
The adoption of IFRS 9 Financial Instruments from 1 April 2018 resulted in changes in accounting policies and
adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in
this note. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated.
The total impact on the Group's retained earnings as at 1 April 2018 is as follows:
2018
R000's
Closing retained earnings 31 March - IAS 39 (45 917)
Adjustment to retained earnings from adoption of IFRS 9 on 1 April 2018 (17 615)
Increase in provision for trade receivables (refer to note below) (24 466)
Increase in deferred tax assets relating to impairment provisions 6 851
Opening retained earnings 1 April - IFRS 9 (63 532)
Impairment of financial assets
The Group has trade receivables that are subject to IFRS 9's new expected credit loss model and was required
to revise its impairment methodology under IFRS 9. The impact of the change in impairment methodology on
the Group's retained earnings and equity is disclosed in the table below.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. To measure the expected credit losses all trade receivables
have been grouped based on shared credit characteristics and the days past due.
The loss allowance for trade receivables as at 31 March 2018 reconciles to the opening loss allowance
on 1 April 2018 as follows:
Trade
receivables
R000's
At 31 March 2018 - calculated under IAS 39 28 817
Amounts restated through opening retained earnings 24 466
Opening allowance as at 1 April 2018 - calculated under IFRS 9 53 283
The loss allowances increased by a further R1,6 million to R54,9 million for trade receivables during the six months
to 30 September 2018.
Trade receivables are written off when there is no reasonable expectation of recovery.
Accounting policies applied from 1 April 2018:
Trade, long-term and other receivables
Trade and other receivables originated by the Group continue to be stated at amortised cost less impairment
losses. Interest income from long-term receivables are included in finance income using the effective interest
rate method.
Impairment
The Group applies the simplified approach permitted by IFRS 9 in determining provision on impairment allowances
for receivables. This approach requires expected losses to be recognised from initial recognition of all receivables.
3.2 IFRS 15 Revenue from Contracts with Customers - Impact of adoption
The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 April 2018 which resulted in
additional disclosures required and changes in accounting policy. However, there were no significant changes to
amounts recognised in the financial statements.
The Group manufactures and sells a range of goods and services across its different segments. Revenue from
these sales are recognised when goods or services are transferred to the customer, being when control is passed.
Some products are sold with volume rebates, rights of returns and trade discounts. Revenue from these sales
are recognised based on the price specified in the contract, net of the estimated returns and discounts to the
extent that it is highly probable.
3.3 IFRIC 22 Foreign Currency Transactions and Advance Consideration - Impact of adoption
The Group has adopted IFRIC 22 from 1 April 2018. The standard affects transactions which include the receipt
or payment of advance consideration. The spot rate used to translate a non-monetary asset or liability is the
earlier of the date of initial recognition of the non-monetary prepayment asset or the non-monetary deferred
income liability and the date the asset, expense or income is recognised in the financial statements. The Group
has applied this accounting prospectively.
3.4 IFRS 16
The standard is effective for the year commencing 1 April 2019. The Group has decided not to early adopt. There
has been no significant change in the Group's assessment of the impact of IFRS 16 since the 31 March 2018
annual financial statement disclosures that were made.
4. Significant operating activities
4.1 Taxation and deferred taxation
Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of
income we earn in those jurisdictions, which we expect to be fairly consistent in the near term. It is also affected
by discrete items that may occur in any given year but are not consistent from year to year. The table below
provides a reconciliation between our applicable tax to the effective tax from continued operations:
Reconciliation of the applicable tax to the effective tax:
30 Sept 2018 30 Sept 2017
R000's R000's
Continued operations
Profit/(Loss) before tax from continued operations 3 808 (7 315)
Tax (expense)/income using the statutory rate of 28% (1 066) 2 048
Difference in tax rate from foreign jurisdiction 686 310
Non-deductible expenses (1 186) (438)
Recognition of deferred tax asset on tax losses 1 098 28 491
Effective tax (468) 30 411
4.2 Discontinued operations
The Group discontinued certain textile and office automation businesses and sold its interest in Limtech Biometric
Solutions. Accordingly their results have been separately disclosed on the face of the statement of profit or loss
and other comprehensive income. Where practical these results have been restated.
30 Sept 2018 30 Sept 2017
Results of discontinued operations R000's R000's
Revenue 9 825 119 105
Operating profit/(loss) before impairments and restructuring and
retrenchment costs 1 060 (14 444)
Impairment of assets - (20 223)
Restructuring and retrenchments costs (147) (15 691)
Operating profit/(loss) before finance costs 913 (50 358)
Finance expense - -
Profit/(loss) before taxation 913 (50 358)
Income tax expense - -
Profit/(loss) for the period from discontinued operations 913 (50 358)
Cash flows used in discontinued operations
Net cash used in operating activities (3 611) (14 444)
Net cash used in investing activities - (964)
Net cash used in discontinued operations (3 611) (15 408)
The loss from discontinued operations is attributable entirely to equity holders of the parent.
4.3 Relates parties
During the period under review, in the ordinary course of business, certain companies within the Group entered
into transactions with each other. All these intra-group transactions are similar to those in the prior period and
have been eliminated in the condensed interim financial statements on consolidation.
5. Significant investing activities
5.1 Capital expenditure and commitments
Capital expenditure Contractual commitments
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
R000's R000's R000's R000's
Investment property 41 801 - - 21 000
Land and buildings - 277 - -
Plant and equipment 41 893 29 111 35 383 7 602
Total capital expenditure 83 694 29 388 35 383 28 602
5.2 Business combinations
Current period
Sale of subsidiary
The Group has sold its interest in Limtech Biometric Solutions Proprietary Limited for a total consideration of
R2,2 million on 30 June 2018, of which R1,5 million was paid upfront in cash and the remaining balance shall
be paid in equal instalments commencing on 1 July 2019.
The following table summarises proceeds on disposal, net cash flow on disposal and analysis of assets and
liabilities disposed.
30 Sept 2018
R000's
Property, plant and equipment 109
Trade and other receivables 3 843
Inventory 903
Cash and cash equivalents 153
Long-term borrowings (219)
Trade and other payables (2 210)
Provisions (960)
Other current liabilities (201)
Net asset value disposed of 1 418
Gain on disposal of subsidiary 955
Disposal proceeds set off against repurchase consideration
Deferred disposal proceeds (720)
Cash and cash equivalents disposed of (153)
Net cash inflow on disposal 1 500
5.3 Purchase additional shares in subsidiary
On 5 April 2018, the Group subscribed for 930 shares following a rights issue in Oops Global SA, increasing its
shareholding from 60% to 66,2%. On 16 May 2018, the Group purchased 1 220 additional shares in
Oops Global SA for a consideration of R7,8 million, further increasing its shareholding to 86,4%.
5.4 Investment property/property, plant and equipment
The fair value of investment property as at 30 September 2018 is R978,3 million. Movements since 31 March 2018
comprise an addition of R41,8 million and a transfer from property, plant and equipment of R29,1 million. The
fair value has not significantly changed since year-end.
Movements in property, plant and equipment since 31 March 2018 comprise disposals to the value of
R101,3 million, acquisitions of R41,9 million and a transfer to investment property of R29,1 million.
6. Diluted weighted average number of shares
The dilutive effect is due to the impact of the Group's incentive scheme on the weighted average number of shares
in the period under review.
7. Change in comparatives
7.1 Correction of prior period error relating to the accounting of government grants
Government grants are recognised in profit and loss on a systematic basis over the periods in which the Group
recognises the related costs for which the grants are intended to compensate.
During the prior periods, the grants were deemed to be earned through compliance with their conditions and
meeting the envisaged obligations. Where the qualifying conditions gave rise to future envisaged obligations,
the benefits were allocated against the historic costs of complying with the conditions as well as the future
related obligations. Where no envisaged obligations were identified, the grants were recognised when there
was reasonable assurance that the entity will comply with all the conditions attached to the grants and that the
grants will be received.
It was concluded that the above accounting treatment is incorrect and that the grants related to depreciable
assets are to be recognised in the periods in the proportions in which the depreciation expense on those assets
are recognised, with the balance being reflected as deferred income.
The effect of the restatement on the prior period numbers is as follows:
Impact of restatement
As previously
reported Adjustments As restated
30 September 2017 R000's R000's R000's
Total assets 3 577 277 27 883 3 605 160
Deferred tax asset 93 882 27 883 121 765
Total liabilities (1 842 901) 3 824 280 1 981 379
Deferred income - (138 478) (138 478)
Total equity (1 734 376) 110 595 (1 623 781)
Reserves (283 833) 110 595 (173 238)
Impact of restatement
As previously
reported Adjustments As restated
For the period ended 30 September 2017 R000's R000's R000's
Profit before taxation 1 374 (8 689) (7 315)
Income tax 31 529 (1 118) 30 411
Loss from discontinued operations, net of tax (65 020) 14 662 (50 358)
Total comprehensive income (30 239) 4 855 (25 384)
Basic earnings per share (cents) (7,40) 1,15 (6,25)
Diluted earnings per share (cents) (7,40) 1,15 (6,25)
There is no impact on the total operating, investing or financing cash flows for the six-month period
ending 30 September 2018.
7.2 Discontinued operations
The results of discontinued operations have been separately disclosed on the face of the statement of profit or
loss and other comprehensive income. Where practical these results for the prior period have been restated.
Operations classified as discontinued operations relate to the following three businesses:
– Berg River Textiles, a division of Winelands Textiles, has been discontinued in the previous period.
– Automation business - all branches, other than Gauteng and the central administration office, are accounted
for as discontinued operations.
– Limtech Biometric Solutions Proprietary Limited, which was sold during the period under review.
Refer to note 4.2 for further information on discontinued operations.
8. Events after the reporting period
There have been no material events after the reporting period-end.
9. Dividends/distribution
The directors have resolved not to declare an interim dividend/distribution for the six months ended 30 September 2018.
Commentary
Good progress has been made in the period under review. Turnover is up 17% to R1 596 million derived largely from
the new acquisitions. Two of the businesses recently acquired, namely Formex Industries, a component automotive
manufacturer based in Port Elizabeth, and HTIC (Hong Kong), which sources and distributes branded products, have
shown good growth on a like-for-like basis with turnover up 83% and 31% respectively.
Gross margin was down by 40 basis points to 23,6% as a result of margin pressure in some of the manufacturing
businesses. Reduced turnover in these businesses put margins under pressure due to reduced fixed-cost absorption.
Furthermore, the revenue growth at Formex and HTIC weighs on the overall gross margin as these businesses operate
high volume, low margin models.
The increased turnover and good cost containment saw operating profit up 44% to R57 million. Finance expenses are up
13% to R53 million on the back of increased debt levels due to the recent acquisitions and the debt acquired as part of
the Formex transaction.
Overall, the results reflect that the good businesses have performed solidly whilst the restructuring initiatives have ensured
that the losses have been curtailed in the more challenging businesses. There is more work to be done to get these
businesses to make a return but we believe good progress has been made. It should also be borne in mind that some of
the Group's businesses are very seasonal with results in the second half of the year usually stronger than the first.
Properties
We have mentioned previously that we are focused on growing our property portfolio, but were struggling to find properties
within our target pricing. The recent softening of the property market has seen some opportunities arise. During the period
we acquired an industrial property in Parow, Cape Town and have approved the acquisition of another industrial property in
Epping, Cape Town. The total spend on these two properties is some R85 million. In addition to these two properties, we
have approved capital expenditure of some R24 million for the redevelopment of a property in Paarl which was previously
occupied by Berg River Textiles. Countering this, we sold a commercial property in Johannesburg, which was previously
occupied by our office automation business, for R25 million.
Our property portfolio delivered revenue growth of 7% to R83 million with revenue from external tenants increasing by 18%
to R61 million. Operating profit remained flat at R57 million due to increased repairs and maintenance costs in line with our
planned maintenance programmes. In the current financial year, these costs are more heavily weighted to the first half of
the year and should normalise by year-end.
Branded Products
It was a difficult period for the businesses that interface into retail given the tough retail environment. Revenue was up
9% to R653 million due to the new acquisitions and good growth at HTIC. However, the operating loss from continuing
operations grew by 6% to R17 million. The Branded Product division is heavily seasonal and the second half of the year is
typically far more profitable than the first.
Industrial Manufacturing
On the whole the industrial manufacturing businesses performed solidly with Formex the standout performer. Revenue was
up 53% to R620 million largely driven by the growth within Formex and the fact that it was accounted for six months in the
current period as opposed to two months in the prior period. Operating profit is up 53% to R28 million.
Textile Manufacturing
Our textile manufacturing businesses have struggled to get turnover through the businesses with turnover from continuing
operations down 16% to R261 million. This has had a negative effect on margins but cost savings ensured that operating
profit was only down R1 million.
Signed for and on behalf of the board.
Stuart Queen Gys Wege
Chief Executive Officer Financial Director
Cape Town
21 November 2018
Corporate information
DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
("Deneb" or "the Group" or "the company")
The company's shares are listed under the Financial Services - Speciality Finance sector.
Registration number: 2013/091290/06
JSE share code: DNB
ISIN: ZAE000197398
Income tax
registration number: 9844426156
Registered office: 5th Floor, Deneb House, Cnr Main and Browning Roads, Observatory 7925, Cape Town
PO Box 1585, Cape Town 8000
Contact details: info@deneb.co.za
www.deneb.co.za
Directors: J A Copelyn* (Non-executive Chairperson), M H Ahmed*^ (Lead Independent Director),
D Duncan, T G Govender*, N Jappie*^, A M Ntuli, S A Queen (Chief Executive Officer),
Y Shaik*, R D Watson*^, G D T Wege (Financial Director)
(* Non-executive ^ Independent)
L Govender resigned as a non-executive director on 17 April 2018.
Company Secretary: C Philip
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
PO Box 61051, Marshalltown 2107
Auditors: PricewaterhouseCoopers Inc.
Sponsors: PSG Capital Proprietary Limited
www.deneb.co.za
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