| Mon 29 Jun 2009, 17:20 | | RAC - Racec Group Limited - Unaudited pro forma financial effects of the |
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RAC
RAC
RAC - Racec Group Limited - Unaudited pro forma financial effects of the
transactions, posting of circular to shareholders and withdrawal of cautionary
RACEC GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/006153/06)
Share code: RAC ISIN: ZAE000105409
("RACEC" or "the company" or "the group")
UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTIONS, POSTING OF
CIRCULAR TO SHAREHOLDERS AND WITHDRAWAL OF CAUTIONARY
1. INTRODUCTION
Shareholders of RACEC are referred to the announcement dated 17 June 2009 in
which shareholders were advised that RACEC had entered into an agreement with
Solethu Investments (Proprietary) Limited ("Solethu Investments") whereby
Solethu Investments, through its recently established wholly-owned subsidiary
and special purpose vehicle, Solethu Civils (Proprietary) Limited ("Solethu
Civils"), will acquire a 25% interest in the increased share capital of the
company by way of subscription for 34 615 384 ordinary shares in the issued
share capital of the company at an issue price of R1.30 per share for an
aggregate subscription price of R45 million ("Solethu transaction").
Furthermore, the board of directors of RACEC had entered into agreements with
the minority shareholders of its subsidiaries, Greenbro (Proprietary) Limited
("Greenbro") and Northern Electric (Cape) (Proprietary) Limited ("Northern
Electric"), to acquire the remaining 20% shareholding in Greenbro and the
remaining 5% shareholding in Northern Electric, that it does not already own
("acquisition of the minority interests").
Hereinafter, the Solethu transaction and the acquisition of the minority
interests are referred to as the "transactions".
The circular incorporating the detailed terms of the transactions and notice
convening a general meeting of RACEC shareholders to be held at 10:00 on
Wednesday, 5 August 2009 at Kelvin Grove, Newlands, Cape Town, 7480 ("the
circular") was posted to shareholders today, Monday, 29 June 2009.
Shareholders are further advised that the pro forma financial effects omitted in
the announcement dated 17 June 2009 are presented below.
2. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTIONS
The table below sets out the summarised unaudited pro forma financial effects of
the proposed transactions on RACEC`s earnings per share, headline earnings per
share, net asset value per share and tangible net asset value per share. The
full pro forma financial effects as well as independent reporting accountant`s
limited assurance report on the unaudited pro forma financial information are
provided in annexures 1 and 2 of the circular.
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the proposed transactions on the reported financial information of the
company for the twelve months ended 30 September 2008, had the proposed
transactions occurred on 1 October 2007 for income statement purposes and on 30
September 2008 for balance sheet purposes.
The unaudited pro forma financial effects have been prepared using accounting
policies that comply with International Financial Reporting Standards and that
are consistent with those applied in the audited results of the company for the
twelve months ended 30 September 2008.
The unaudited pro forma financial effects which are the responsibility of the
directors are provided for illustrative purposes only and, because of their pro
forma nature may not fairly present the company`s financial position, changes in
equity, results of operations or cash flow.
Before1 Solethu After Acquisit After Percent
transacti Solethu ion of Solethu age
on2 transac the transacti change
tion minority on and
interest acquisiti
s5 on of the
minority
interests
Earnings per 15.0 (10.3)(4) 4.7 (0.3)(7) 4.4 (70.7)
share (cents)
Headline 16.0 (10.3)(4) 5.7 (0.3)(7) 5.4 (66.3)
earnings per
share (cents)
Net asset 56.0 (0.7)(3) 55.3 0.1(6) 55.4 (1.1)
value per
share (cents)
Net tangible 49.3 (0.7)(3) 48.6 (2.2)(6) 46.4 (5.9)
asset value
per share
(cents)
Weighted 99 199 - 99 199 179 273 99 379 0.2
average 759 759 032
number of
shares in
issue
Actual number 104 018 - 104 018 179 273 104 197 0.2
of shares in 088 088 361
issue
Notes:
1. The "Before" column has been extracted from the audited results of the
company for the year ended 30 September 2008 as published.
2. The "Solethu transaction" column reflects the financial effects of the
specific issue of 34 615 384 RACEC ordinary shares, the granting of the put
option and the provision of financial assistance to Solethu Civils. SIC 12
has been applied to the Solethu transaction which results in the
consolidation of Solethu Civils into the financial results of RACEC.
3. On consolidation, the issue of shares to Solethu Civils for R35 million
results in the R35 million liability to the funder recognised in the pro
forma balance sheet of RACEC instead of an increase in share capital. The
R35 million liability to the funder has been utilised against the reduction
in the overdraft that would result from the cash inflow of R35 million on
issue of the RACEC shares, therefore, the only impact of the transactions
on the pro forma net asset value and net tangible asset value per share is
in respect of the transactions costs of R720 000 which have been written
off against share premium.
4. The pro forma earnings and headline earnings per share have been adjusted
for the following:
- the IFRS 2: Share based payments BEE expense of R5 538 461 relating to
the option expense; and
- the after tax net increase in finance costs due to the payment of the
dividends on the preference shares less the interest saving on the
bank overdraft as a result of the R35 million cash received.
5. The "acquisition of minority interests" column reflects the financial
effects of the acquisition of the remaining 20% minority interest in
Greenbro and the remaining 5% minority interest in Northern Electric.
6. The pro forma net asset value and net tangible asset value per share have
been adjusted for:
- the reversal of the minority interest of R2 764 475 relating to
Northern Electric and Greenbro;
- the increase in the bank overdraft of R4 995 000 in respect of the
cash portion of the purchase considerations;
- the increase in share capital due to the issue of the 179 273 shares
at R1.30 to Mr R Savil as payment of 50% of the purchase consideration
of R450 000 plus interest of R16 112 in Northern Electric; and
- the increase in goodwill of R2 455 525 due to the premium paid over
the net asset value of a 5% interest in Northern Electric and a 20%
interest in Greenbro.
7. The pro forma earnings and headline earnings per share have been adjusted
for the after tax increase in finance costs due to the use of overdraft
facilities to settle the cash portion of the purchase consideration.
8. Detailed notes to the pro forma financial information have been set out in
annexure 1 of the circular.
WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcement dated 20 April 2009, 5
June 2009 and 17 June 2009, and are advised that subsequent to this
announcement, relating to the transactions, caution is no longer required to be
exercised by shareholders when dealing in their securities.
29 June 2009
Corporate and Designated Adviser
Merchantec (Proprietary) Limited
Reporting accountants
BDO Spencer Steward (Cape) Inc.
Legal advisor
C&A Friedlander Inc.
Date: 29/06/2009 17:20:01 Produced by the JSE SENS Department.
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