| Fri 3 Sep 2010, 10:05 | | VUN - Vunani Limited - Unaudited condensed consolidated financial results |
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VUN
VUN
VUN - Vunani Limited - Unaudited condensed consolidated financial results
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/020641/06)
JSE code: VUN
ISIN: ZAE000110359
("Vunani or the company")
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
Overview
The past six months trading period has been volatile as global economies
grappled to determine prospects for the immediate future. Key global equity
market indices have declined with June 2010 levels in the Dow falling by more
than 11% from the highs in April 2010 and 6,7% since the beginning of the year.
Having lagged the recovery of the global economy, South Africa produced a
commendable real GDP increase of 4,6% in the first quarter of the calendar year,
on a seasonally adjusted basis and a satisfactory 3,2% in the second quarter.
Notwithstanding the 2010 FIFA Soccer World Cup, the JSE seems to have failed to
harness the enthusiasm associated with the successful hosting of the event. At
the end of June 2010, the JSE had fallen by more than 11,5% from the highs in
April 2010 and 7,5% since the beginning of the year. Some recovery has been felt
since the end of our half year.
The Vunani Limited`s board and management spent the first few months of the year
concluding agreements with funders to restructure the debt obligations of the
group and recapitalise the balance sheet. These discussions culminated in the
injection of R 313,6 million of fresh capital into Vunani Limited by means of a
claw back offer and rights issue that saw 3,136 billion new shares being issued
at 10 cents a share. The capital event was concluded on 28 January 2010 and the
cash flowed on 15 February 2010. The result is that we have recapitalised the
balance sheet and, in the process, have addressed the issues regarding the loan
covenant ratios of the financial institutions that funded the group`s
investments.
The recovery in the domestic economy has been felt across our various business
segments. Our investment banking clients and some of our portfolio investments
have benefited from the infrastructure spend associated with preparations for
the Soccer World Cup. However, as these projects have reached completion, the
slowdown is becoming evident.
The investment banking business had a good performance on the back of an
improvement in the operating environment compared to 2009. However, merger and
acquisition activity in the private sector, particularly the small cap sector
lagged. Accordingly Vunani`s management has taken the opportunity to change the
client mix in the advisory business, focusing on public sector advisory and
deepening resources and information technology expertise. This has already
borne fruit with the corporate advisory team winning some significant public
sector advisory mandates that are expected to contribute to the group results
through the rest of the year and into the next financial year.
In order to adequately resource these mandates, additional skills were brought
into the group, including the acquisition of a 51% share in Jala Group (Pty)
Ltd, a corporate advisor focusing on information technology sector. The major
impact of the transaction was the enhancement of skills capacity on the advisory
side and broadening of our product suite in this sector. The acquired business
has been renamed Vunani Technology Ventures.
The asset management business has performed reasonably well, and has benefited
from the recovery in equity values that commenced in 2009.The key contributor
has been performance fees, as the market recovered from the lows last seen in
March 2009. During the period under review, a transaction was concluded to
acquire an additional 40% in Peregrine iQ (Pty) Ltd for R20.1 million,
predominantly through the issue of Vunani shares, bringing the total interest
to 51%. This transaction increases the assets under management of the group from
R 8 billion to R 20 billion. Peregrine iQ has since been renamed Vunani Fund
Managers and provides Vunani with a good platform to offer active fund
management to the institutional retirement fund market.
The property business remained stable during the period under review.
Improvements in occupancies were noticeable, but the demand for new developments
remains stagnant. Having anticipated this, management has been cautious and
will only bring new developments on-stream on a selective basis.
The volatility in equity markets has not been good for decision making, either
on the protection or unlocking of value in the investment portfolio.
Notwithstanding this, Vunani is involved in transactions that will reduce some
equity positions to pay down debt. Nevertheless at R 556 million (Dec 2009 R
572 million) Vunani`s listed investment portfolio remains significant and the
value of the portfolio has stabilised over the past six months. Significantly,
the debt restructuring managed to further ring-fence some of the major funding
structures. Despite volatile markets, the equity investment division is looking
at a number of deals, particularly in the mining space.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
For the period ended 30 Notes Unaudited Unaudited Audited
June 2010 30 Jun 30 Jun 31 Dec
2010 2009 2009
Figures in R`000s
Revenue 1 88 239 74 785 125 046
Other income 3 613 14 399 6 183
Cost of property 1 - (18 032) (177)
developments sold
Operating expenses (57 377) (57 249) (129 294)
Operating profit 34 475 13 903 1 758
Investment income 6 988 8 533 16 876
Fair value adjustments 2 (81 454) (9 132) 1 069
and impairments
Income from associates 14 957 6 952 20 419
Finance cost (77 265) (108 001) (193 355)
Net loss before taxation (102 299) (87 745) (153 233)
Taxation 7 199 32 900 (5 548)
Total comprehensive loss for the (95 100) (54 845) (158 781)
period
Total comprehensive loss
attributable to :
Equity holders of Vunani (94 077) (49 872) (167 720)
Limited
Non-controlling interest (1 023) (4 973) 8 939
Total comprehensive loss for the (95 100) (54 845) (158 781)
period
Earnings per share
Basic loss per share (2.5) (4.2) (13.2)
(cents)
Diluted loss per share (2.5) (4.2) (13.2)
(cents)
Headline loss per share (2.5) (3.2) (11.0)
(cents)
Diluted headline loss per share (2.5) (3.2) (11.0)
(cents)
Dividends
Dividends per share - - -
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 30 June 2010 Notes Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2010 2009 2009
Figures in R`000s
ASSETS
Non current assets
Investment property 801 389 793 078 800 398
Property, plant and 25 759 8 065 25 963
equipment
Goodwill 66 889 75 948 39 436
Investments in associates 241 755 192 862 245 812
Other investments 3 556 645 614 535 572 757
Deferred tax asset 72 473 59 602 99 196
Other non current assets 2 153 2 556 2 395
Other intangible assets 3 432 5 142 1 250
1 770 495 1 751 788 1 787 207
Current assets
Other investments 3 - - 44 207
Inventory 4 255 8 362 4 254
Loan to holding company 110 - 29
Taxation prepaid 939 - 1 261
Trade and other 32 338 7 258 20 583
receivables
Accounts receivable from trading 21 714 196 861 34 166
activities
Trading securities 1 910 854 249
Cash and cash equivalents 17 900 5 910 10 299
79 166 219 245 115 048
Total assets 1 849 661 1 971 033 1 902 255
EQUITY
Share capital and share 602 008 250 263 278 019
premium
Revaluation reserve 772 128 312 4 824
Share based payment 3 825 - 3 825
reserve
(Accumulated loss) / retained (359 177) (274 790) (269 152)
earnings
Equity attributable to equity 247 428 103 785 17 516
holders of Vunani
Non-controlling interest 107 923 89 755 103 667
Total equity 355 351 193 540 121 183
LIABILITIES
Non-current liabilities
Other financial 3 1 308 071 1 476 681 1 525 371
liabilities
Deferred tax 93 266 44 874 126 049
1 401 337 1 521 555 1 651 420
Current liabilities
Other financial 3 759 - 43 746
liabilities
Taxation payable 1 232 6 999 2 657
Trade and other payables 54 831 63 606 42 979
Accounts payable from trading 21 627 185 333 33 611
activities
Loans from group 3 422 - -
companies
Trading securities 32 - 133
Bank overdraft 11 070 - 6 526
92 973 255 938 129 652
Total liabilities 1 494 310 1 777 493 1 781 072
Total equity and 1 849 661 1 971 033 1 902 255
liabilities
Shares in issue (adjusted for 4 763 502 1 176 444 1 340 562
treasury shares held by the
company) (000`s)
Weighted average number of 3 775 620 1 176 444 1 274 135
shares in issue (000`s)
Net asset value per share 5.2 8.8 1.3
(cents)
Net tangible asset value per 3.7 1.9 (1.7)
share (cents)
CONSOLIDATED STATEMENT OF CASH
FLOWS
For the period ended 30
June 2010
Figures in R`000s Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2010 2009 2009
Net cash inflows / (outflows) 24 623 (27 335) 56 872
from operating activities
Net cash inflows / (outflows) 17 629 27 637 29 965
from investing activities
Net cash (outflows) / inflows (39 195) (31 980) (120 652)
from financing activities
Increase / (decrease) in cash 3 057 (31 678) (33 815)
and cash equivalents
Cash and cash equivalents at 3 773 37 588 37 588
beginning of the period
Cash and cash equivalents at end 6 830 5 910 3 773
of the period
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the period ended 30 Total Non- Total
June 2010 attributab controllin equity
le to g interest
equity
holders of
Vunani
Figures in R`000s
Balance as at 31 December 153 655 94 728 248 383
2008
Total comprehensive loss for the (49 872) (4 973) (54 845)
period
Total changes (49 872) (4 973) (54 845)
Balance as at 30 June 103 783 89 755 193 538
2009
Issue of shares 27 756 - 27 756
Equity settled share 3 825 - 3 825
based payments
Total comprehensive (loss) / (117 848) 13 912 (103 936)
profit for the period
Total changes (86 267) 13 912 (72 355)
Balance as at 31 December 17 516 103 667 121 183
2009
Issue of shares 323 989 - 323 989
Acquisition of subsidiary - 5 279 5 279
Total comprehensive loss for the (94 077) (1 023) (95 100)
period
Total changes 229 912 4 256 234 168
Balance as at 30 June 247 428 107 923 355 351
2010
SEGMENTAL REPORTING Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2010 2009 2009
For the period ended 30
June 2010
Figures in R`000s
Revenue
Financial Services 87 378 74 814 146 441
Investment Services 861 (29) (21 395)
88 239 74 785 125 046
Attributable loss for the
period
Financial Services 19 514 4 669 (19 540)
Investment Services (114 614) (59 514) (139 241)
(95 100) (54 845) (158 781)
Total assets
Financial Services 179 551 296 765 199 552
Investment Services 1 670 110 1 674 268 1 702 703
1 849 661 1 971 033 1 902 255
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED
FINANCIAL RESULTS
1. Revenue includes the gross amount of property sales, the costs of
which are disclosed separately in the statement of comprehensive income
2. Fair value adjustments Unaudited Unaudited Audited
and impairments Jun 2010 Jun 2009 31 Dec
2009
Investment property - (27 000) (8 878)
Financial assets and (81 454) 17 868 42 867
liabilities designated at
FVTPL
Goodwill impairment - - (32 920)
(81 454) (9 132) 1 069
3. Vunani uses an independent valuer to determine the fair values of listed
investments and their related liabilities. The value of the listed investments
is determined with reference to the share price at the end of the relevant
period. Both listed and unlisted investments are designated at fair value
through profit or loss ("FVTPL").
4. In the 31 December 2009 Annual Report, the 2008 balances for accounts
receivable from trading activities and accounts payable from trading
activities were restated to reflect the legal right of set-off for cash held
with JSE Trustees against client account balances. Previously this was reflected
on a gross basis. The effect of the set-off has been taken into account in
the unaudited results to 30 June 2009. Account receivable and the payable from
trading activities reduced by R72.1 million as a result.
5. Headline loss Unaudited Unaudited Jun
Jun 2010 2009
Total comprehensive loss (94 077) (49 872)
attributable to Equity
holders of Vunani:
Adjust for:
Revaluation of
investment property -
subsidiaries
- Gross revaluation - 27 000
- Deferred tax - (3 780)
- Non-controlling - (5 108)
shareholders interest
Disposals of investment
property
- Profit on disposal - 27
- Capital gains tax - (4)
- Non-controlling - (11)
shareholders interest
Profit on disposal of
non-trading asset
- Profit on disposal (1 054) -
- Tax 148 -
(94 983) (31 748)
FINANCIAL RESULTS
Against this backdrop, Vunani has been able to produce an appreciable
performance for the year. Revenue increased by 18% to R 88,2 million (2009:
R 74,8million), on the back of increased fee income from new advisory mandates,
improved rentals as occupancies increased and rentals escalated.
Operating expenses were flat compared to 2009, following significant cost
reductions in the previous year, and this enabled the operating businesses to
generate a credible operating profit of R 34,5 million (2009: R 13,9 million),
a 148% increase on 2009. The increase in operating profit reflects management`s
focus on the operations and the drive to increase profitability.
At R 7 million (2009: R 8,5 million), investment income was 18% lower than the
comparable 2009 figure, reflecting lower dividend income, partly as a result
of disposals. However this was mitigated by a better performance by associate
companies, especially those involved in asset management. Income from associates
of R 15,0 million (2009: R 7,0 million) was 115% higher than the corresponding
period in 2009.
A significant area of benefit has been in finance costs, where the repayment of
debt and lower interest rates have reduced finance charges from R 108 million
to R 77,3 million, a 28,5% reduction. The fair value adjustments charge of R
81.5 million (2009: R 9,1 million) was unexpected, as the view is that the asset
values are currently depressed. Management was therefore not expecting
significant impairments and fair value adjustments.However there were two once
off technical issues, both of an accounting nature. The first arose out of the
debt restructuring exercise that relates to the recognition of a surety of
R 62,3 million on the balance sheet, which had not been a requirement to date
because other cash sureties provided to lenders were sufficient to cover the
shortfall between the fair value of funded assets and the face value of the
corresponding liabilities, resulting in a fair value charge to the income
statement. The second amount relates to the correction of a misinterpretation
of the IFRS requirements for the fair value of associates amounting to R 19.2
million. These items are not expected to result in further adjustments in
future.
PROSPECTS
Emerging consensus is that South Africa`s GDP growth will only be in the
region of 3% in 2010. The trading environment is expected to remain difficult
in the second six months of the financial year.
Despite the challenging business environment we are now seeing a number of
interesting opportunities across our business segments that gives us confidence
that 2009 represented the lowest point in the group`s history. We are working
hard and with renewed energy to ensure that we can bring these opportunities
to account, if not in the final half of 2010 then certainly in 2011.
Vunani will concentrate on finding ways to further strengthen the balance sheet
that commenced with the restructuring of the debt obligations. Management
will also continue to focus on the business model to ensure that underperforming
investments and businesses are exited.
BASIS OF PRESENTATION
The results have been prepared in accordance with the listing requirements of
the JSE Limited, the recognition and measurement requirements of International
Financial Reporting Standards (IFRS), the presentation and disclosure
requirements of IAS 34 Interim Financial Reporting, the AC 500 series issued
by the Accounting Practices Board and the Companies Act (Act 61 of 1973), as
amended. The accounting policies as set out in the audited financial statements
for the period ended 30 June 2010 have been consistently applied. These
consolidated financial statements incorporate the financial statements of the
company, its subsidiaries and special purpose entities that, in substance, are
controlled by the Group and the Group`s interest in associates. Results of
subsidiaries and associates are included from the effective date of acquisition
up to the effective date of disposal. All significant transactions and balances
between Group enterprises are eliminated on consolidation.
STATEMENT ON GOING CONCERN
The directors have made an assessment of the company`s ability to continue as
a going concern and have no reason to believe the business will not be a going
concern in the year ahead.
AUTHORISED AND ISSUED SHARE CAPITAL
The authorised share capital was increased from 2,000,000,000 ordinary shares
of R 0.0001 each, to 10,000,000,000 ordinary shares of R 0.0001 each on 22 July
2009. The following issues of shares took place to 30 June 2010:
Date issued Number of Purpose of issue
shares issued
15 February 3,136,000,000 Claw back offer
2010
16 February 145,380,000 Issue for services
2010 rendered
22 June 2010 137,000,000 Acquisition of Vunani Fund
Managers
22 June 2010 4,560,000 Issue for services
rendered
At 30 June 2010 there were 4,763,502,216 (2009: 1,176,444,291) ordinary shares
in issue.
DIVIDENDS
No dividends were declared or paid to shareholders during the period under
review (2009: R nil).
SUBSEQUENT EVENTS AND CAPITAL COMMITMENTS
There were no material subsequent events nor were there significant capital
commitments within the Group.
CHANGES TO THE BOARD OF DIRECTORS
On the 16 March 2010 BM Khoza was appointed Managing Director and A Judin was
appointed as Financial Director on 19 August 2010. WG Frawley tendered his
resignation as director with effect from 18 August 2010.
EG Dube (Chief Executive A Judin (Financial Director)
Officer)
3 September 2010
CORPORATE INFORMATION
EXECUTIVE DIRECTORS
E Dube
A Judin
BM Khoza
NM Anderson
CE Chimombe-Munyoro
NON-EXECUTIVE DIRECTORS
WC Ross (Chairman)
(Independent)
BA Khumalo (Independent)
NS Mazwi (Independent)
G Nzalo (Independent)
JR Macey (Independent)
Sandton
3 September 2010
Independent Designated Adviser
Grindrod Bank Limited
Joint Designated Adviser
Vunani Corporate Finance
Date: 03/09/2010 10:05:01 Produced by the JSE SENS Department.
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