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VUN
VUN
VUN - Vunani Limited - Reviewed preliminary condensed consolidated
results for the year ended 31 December 2011
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/020641/06)
JSE code: VUN
ISIN: ZAE000163382
("Vunani" or "the Company" or "the Group")
Reviewed preliminary condensed consolidated results
for the year ended 31 December 2011
Salient features
Revenue from continued operations increased by 58% on the back of a
heightened focus on the professional services operations
Benefit of disposal-led restructuring resulted in net finance costs
decreasing by 57%
Loss per share reduced by 55%
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Figures in R`000s Note Reviewed Audited
31 December 31 December
2011 2010
CONTINUING OPERATIONS
Revenue 106 755 67 454
Other income 9 360 25 637
Operating expenses (152 140) (95 078)
Operating loss (36 025) (1 987)
Investment income 4 737 12 747
Loss on disposal of assets (6 099) (1 235)
Fair value adjustments and 1 47 381 (141 322)
impairments
Income from associates, net of 5 715 54 094
taxation
Net finance cost (39 337) (91 027)
Net loss before taxation (23 628) (168 730)
Taxation (1 263) 15 069
Loss from continuing (24 891) (153 661)
operations
DISCONTINUED OPERATIONS
(Loss)/profit from 3 (33 944) 108 959
discontinued operations (net
of taxation)
Loss and total comprehensive loss (58 835) (44 702)
for the period
Loss and total comprehensive loss attributable
to:
Equity holders of Vunani (47 603) (95 551)
Limited
Non-controlling interest (11 232) 50 849
(58 835) (44 702)
Loss per share (cents)
Basic loss per share (1.0) (2.2)
Diluted basic loss per share (1.0) (2.2)
CONDENSED STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2011
Figures in R`000s No Reviewed Audited
te 31 December 31 December
2011 2010
ASSETS
Non current assets
Investment property 4 000 915 623
Property, plant and equipment 4 191 32 514
Goodwill 34 123 46 858
Investment and loans to 97 333 93 434
associates
Other investments 2 238 741 380 243
Deferred tax asset 93 886 62 475
Other non current assets 4 709 3 323
Other intangible assets 1 466 2 443
478 449 1 536 913
Current assets
Other investments 2 181 687 180 565
Non-current asset held for sale - 147 939
Inventory 3 287 3 335
Taxation prepaid 154 389
Trade and other receivables 21 289 19 253
Accounts receivable from trading 95 638 124 939
activities
Trading securities 1 030 19
Cash and cash equivalents 17 169 22 073
320 254 498 512
Total assets 798 703 2 035 425
EQUITY
Share capital and share premium 595 812 602 008
Share based payment reserve 2 524 -
Accumulated loss (399 480) (351 877)
Equity attributable to equity 198 856 250 131
holders
Non-controlling interest 13 842 174 088
Total equity 212 698 424 219
LIABILITIES
Non current liabilities
Other financial liabilities 2 137 936 843 013
Deferred tax liabilities 46 784 73 823
184 720 916 836
Current liabilities
Other financial liabilities 2 263 789 391 825
Non-current liabilities held for - 111 871
sale
Taxation payable 445 3 538
Trade and other payables 47 225 50 105
Accounts payable from trading 89 666 122 668
activities
Bank overdraft 160 14 363
401 285 694 370
Total liabilities 586 005 1 611 206
Total equity and liabilities 798 703 2 035 425
Net asset value per share 3.8 5.3
Net tangible asset value per 3.1 4.2
share
CONDENSED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER
2011
Figures in R`000s Reviewed Audited
31 31 December
December 2010
2011
Net cash inflows from operating 27 494 124 353
activities
Net cash inflows from investing 295 928 48 912
activities
Net cash outflows from financing (314 123) (169 328)
activities
Increase in cash and cash equivalents 9 299 3 937
Cash and cash equivalents at 7 710 3 773
beginning of the year
Cash and cash equivalents at end of 17 009 7 710
the year
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Figures in R`000s Total Non- Total
attributa controllin equity
ble to g interest
equity
holders
of Vunani
Audited
Balance as at 31 Dec 21 693 117 960 139 653
2009
Issue of shares 323 989 - 323 989
Acquisition of - 5 279 5 279
subsidiary
Total comprehensive (95 551) 50 849 (44 702)
(loss)/income for the period
Balance as at 31 December 2010 250 131 174 088 424 219
Reviewed
Issue of shares 35 832 - 35 832
Treasury shares (14 277) - (14 277)
Cancellation of (27 751) - (27 751)
shares
Share based payment 2 524 - 2 524
reserve
Disposal of - (149 014) (149 014)
subsidiaries
Total comprehensive loss for (47 603) (11 232) (58 835)
the period
Balance as at 31 December 2011 198 856 13 842 212 698
SEGMENTAL REPORTING
FOR THE YEAR ENDED 31 DECEMBER 2011
Figures in R`000s Note Revenue Reportable Total
segment assets
profit/
(loss) for
the year
Reviewed 31 December
2011
Continuing operations
Asset management 22 663 5 916 34 895
Investment banking and 22 174 8 733 12 991
advisory
Investment holdings - (13 899) 536 972
Securities broking 50 693 (791) 129 273
Properties 5 6 516 8 594 84 572
Group overhead 4 709 (33 444) -
106 755 (24 891) 798 703
Discontinued
operations
Asset management 2 157 411 -
Properties 77 799 (34 355) -
79 956 (33 944) -
Audited 31 December
2010
Continuing
operations*
Asset management 16 334 (17 105) 202 466
Investment banking and 10 227 (3 587) 136 229
advisory
Investment holdings (41) (108 679) 504 996
Securities broking 26 271 14 062 158 550
Properties 5 4 764 (21 414) 1 033 184
Group overhead 9 899 (16 938) -
67 454 (153 661) 2 035 425
Discontinued
operations
Asset management 5 085 945 -
Properties 120 648 108 014 -
125 733 108 959 -
* Comparatives have been re-presented to reflect "Group
overhead" as a new segment.
OVERVIEW AND PROSPECTS
Vunani presents the results for the financial year ended 31 December
2011 against a background of volatility in global markets in 2011.
Significant increases in the oil price, rising global inflation and
poor consumer demand were the main features of the economic
environment. Austerity measures imposed on Greece Italy and Spain
squeezed business confidence, with signs of a mild recession
creeping into the EU, a significant trading partner with South
Africa. Domestically the country did not escape the pervasive
negative sentiment, a situation not helped by political developments
on the continent related to the "Arab Spring". A season of violent
industrial action by NUMSA coupled with Moody`s placing the country
on negative watch, threatened to make 2011 a forgettable year. As
it turned out a year expected to be dominated by rising interest
rates and rising inflation did not materialise. Interest rates
remained steady allowing South Africa to achieve modest growth close
to 3% and inflation in the upper end of the 6% inflation band.
Vunani`s objective for the year was to limit the negative impact of
expected interest rate increases on the statement of financial
position and reduce debt service costs. Accordingly the group
restructured the statement of financial position through asset sales
and, where possible, used the proceeds to redeem debt and strengthen
the cash generating businesses. The structural changes in the
business model mean that the current year`s results are
differentiated on the basis of continuing and discontinued
operations, in order to separately disclose the impact of businesses
that will no longer form the core of Vunani`s activities.
Continuing operations
Revenue increased by 58% from R67.5m in 2010 to R106.7m to in 2011,
on the back of a heightened focus on the professional services
operations. Other income declined by 63% to R 9.3m (2010: R 25.6m)
primarily because of the inclusion of a R22.8m gain in the 2010
results, arising from the bargain purchase of Kagiso Securities
Limited.
Operating expenses increased by 60% to R152.1m (2010: R95.1m),
reflecting the growth of operating business segments. The group now
employs 120 people. Key contributors were the consolidation of a
full year of Vunani Fund Managers costs, the skilling up of Vunani
Technology Ventures to meet deadlines on a significant advisory
mandate and the costs associated with integrating Kagiso Securities.
Whilst a number of these costs are not expected to recur, the impact
on the group results showed a higher operating loss of R36.0m (2010:
R2.0m), the biggest contributor being personnel costs.
The disposal of some dividend paying investments reduced Investment
Income by 63% to R 4.7m (2010: R12.7m). Losses on disposal of
assets of R6.1m (2010: R 1.2m) highlight the intensity of
restructuring activity during the year. This was mitigated by
positive fair value adjustments of R47.4m (2011: R141.3m loss)
reflecting the improved valuation of residual investments as markets
ended 2011 stronger.
Income from associates declined to R5.7m in 2011 (2010: R54.1m) due
mainly to the disposal of the group`s interest in Edge Holding
Company Proprietary Limited, in which Vunani was a significant non-
controlling shareholder. The benefit of this disposal-led
restructuring is mostly seen in the 57% reduction in finance costs
to R39.3m (2010: R91.0m), an achievement which management are
particularly satisfied with.
Whilst the loss of R24.9m for continuing operations is considerably
better than the R153.7m loss in 2010, management is disappointed
with the overall result.
Discontinued operations
Discontinued operations are represented by the group`s disposal of
its investment property portfolio and Vunani Portfolio Solutions
Proprietary Limited (refer to note 3). The total loss of R33.9m is
largely attributable to losses incurred on the sale of units to pay
down debt on listing of the fund. The loss from discontinued
operations contributes 0.5c (2010: profit of 1.1c) per share to the
basic loss per share of 1.0c in 2011 (2010: loss of 2.2c).
Asset management
The asset management segment of the business performed significantly
better than last year with revenues rising by 39% to R 22.7 m (2010:
R 16.3 m). The team is winning new mandates and profitability has
improved to R5.9m, reversing a loss of R17.1m in 2010.
Investment banking and advisory
The investment banking segment, underpinned by the group`s corporate
finance division, performed commendably. Revenues more than doubled
to R 22.1m and the segment made a profit of R8.7 m (2010: R3.6m
loss). The business opened a satellite office in Harare Zimbabwe and
has been appointed the primary advisor to the National
Indigenisation Board.
Securities broking
The securities broking division made a small loss of R0.8m (2010:
R14m profit) as it struggled to digest the integration of Kagiso
Securities. Management is pleased with the progress made and big
gains were made in the positioning of the franchise as the equities
broking business improved its JSE ranking from 39th to 19th on
volume and value traded.
Properties
The properties segment made a profit of R 8.6m (2010: R21.4m loss)
as a result of profits made in associate companies. Revenues of
R6.5 million, up from R 4.8m in 2010, represent asset management
revenue derived from the management of VPIF. The biggest
development in this division was the listing of VPIF, dropping the
value of investment property on the statement of financial position
from R915.6m to R4.0m and long term debt from R843.0m to R R137.9m.
Going forward Vunani will reflect its investment in VPIF under Other
Investments at fair value on the group statement of financial
position.
Investment holdings
Long-term Investment holdings reduced from R380.2m to R 238.7m,
which positively influenced the drop in finance costs in the current
financial year. There are two particularly difficult investments
that remain in the portfolio, PSV and Brikor, which are key to
resolving the residue of the legacy debt and stabilising the
investment portfolio.
Group overhead
Group overhead is where the statement of comprehensive income has
suffered the most. Group overhead includes expenses that have not
been allocated to other business segments because they are not
directly related to operations. This includes expenses associated
with the restructuring activity that took place during the year.
Revenue of R 4.7m (2010: R9.9m) generated through opportunistic
transactions was R 5.2m lower than the previous year. Operational
expenses increased on the back of the establishment of a group IT
department; recruitment costs; share based payment recognition in
terms of IFRS; provision for anticipated legal fees and claims
relating to outstanding restructuring matters and accrued
performance bonus and incentives. As a result the segment made
losses of R33.4m (2010: R16.9m). This highlights the difficulties
encountered in trying to resolve outstanding issues designed to
right size the business. Notwithstanding once-off costs in 2011, it
is an area where management will be looking for improvement in the
2012 financial year.
Statement of financial position
Following the restructuring of investments and debt and listing of
the investment property portfolio, the group`s statement of
financial position has changed considerably. Total assets have
decreased from R2.0 billion to R798.7m and the net asset value has
decreased from R250m (tangible 4.2 cents per share) to R198.9m
(tangible 3.1 cents per share). R705.1m of long-term debt and
R128.0m of short-term debt was paid down on the back of the
restructuring. This has left the statement of financial position
considerably lighter, which management believes will be helpful in
the bid to return the group to profitability.
Prospects
Vunani`s short term objective is to get to the point where operating
profits and residual investment activity yields a comprehensive
profit. Management believes the group is on track; this being
confirmed by the profit from continuing operations of R0.4m in the
second half of the 2011 financial year. We look forward to
developments in public sector infrastructure investment initiatives
where Vunani has significant business exposure and a strong
franchise.
NOTES TO THE CONDENSED CONSOLIDATED RESULTS (all figures in R`000)
BASIS OF PREPARATION
The preliminary condensed financial statements for the year ended 31
December 2011 have been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting
Standards (IFRS) in particular, the presentation and disclosure
requirements of IAS 34 Interim Financial Reporting, the AC 500
series issued by the Accounting Practices Board, the Listing
Requirements and the Companies Act of South Africa.
The accounting policies as set out in the audited financial
statements for the year ended 31 December 2010 have been
consistently applied for the year ended 31 December 2011. The
preliminary condensed consolidated financial statements have been
presented on the historical cost basis, except for investments and
other financial liabilities, which are fair valued. These condensed
consolidated financial statements are presented in Rand rounded to
the nearest thousand, which is the group`s functional and
presentation currency.
These condensed 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.
NOTES
1. Fair value adjustments and impairments for continuing
operations
2.
3.
Reviewed Audited
31 December 31 December
2011 2010
Investment property 810 3 858
Financial assets and liabilities 47 786 (88 819)
designated as fair value through
profit and loss
Impairment of non-current assets (201) (30 700)
held for sale
Goodwill impairment - (20 011)
Impairment of investments and loans - (5 472)
to associates
Other impairments (1 014) (178)
47 381 (141 322)
4. Other investments and other financial liabilities
Unlisted investments are fair valued annually by the directors.
Listed investment prices are determined with reference to the share
price at year end. Both listed and unlisted investments are
designated as fair value through profit and loss. Financial
liabilities are either accounted for at amortised cost or designated
as fair value through profit and loss. An independent valuer is used
to determine the fair values of listed assets and their related
liabilities.
5. Discontinued operations
A strategic decision was made early in the year to restructure the
property assets of the group in order to reduce debt on the
statement of financial position. This culminated in Vunani listing a
significant portion of its investment property portfolio on the JSE
Limited on 11 August 2011. As these assets related to a major line
of Vunani`s business, the related activities have been presented as
a discontinued operation. The segment was not classified as held
for sale or a discontinued operation at 31 December 2010. The
comparative for the December 2011 condensed consolidated statement
of comprehensive income has been re-presented to show the
discontinued operation separately from continuing operations.
The group also disposed of its investment in Vunani Portfolio
Solutions Proprietary Limited ("VPS"). This investment was
previously classified in the asset management segment. It was not
classified as held for sale or a discontinued operation at 31
December 2010. The comparative for the December 2011 condensed
consolidated statement of comprehensive income has been re-presented
to show the discontinued operation separately from continuing
operations.
Reviewed Audited
31 December 31 December
2011 2010
Results of discontinued operation
Revenue 79 956 125 733
Other income 96 973
Operating expenses (36 171) (50 365)
Operating profit 43 881 76 341
Fair value adjustments and (206) 116 580
impairments
Net finance cost (54 234) (67 983)
Results from operating activities (10 559) 124 938
Taxation (262) (15 979)
Results from operating activities (10 821) 108 959
after taxation
Loss on sale of discontinued (23 123) -
operation
(Loss)/profit for the year (33 944) 108 959
Attributable to non-controlling 8 101 (61 084)
interest
Attributable to equity holders of (25 843) 47 875
Vunani Limited
Effect on basic (loss)/earnings (0.5) 1.1
per share (cents)
Effect on diluted earnings per (0.5) 1.1
share (cents)
Effect on headline earnings per (0.2) 0.1
share (cents)
6. Authorised and issued share capital
The authorised share capital at 31 December 2011 was 10 billion
(2010:10 billion) ordinary shares of R0.0001 each.
The following movement in the number of shares occurred during
the year:
Number of shares in issue at the beginning of the year4 763 502
216
* Unwinding of Edge Holdings Company
Proprietary Limited transaction on
15 April 2011 (114 367 925)
* Acquisition of 20 million shares in
BSI Steel Limited on 18 July 2011 239 852 770
* Acquisition of 49% of Vunani Fund
Managers Proprietary Limited on
12 August 2011 100 000 000
* Acquisition of investment in Buttonwood
Proprietary Limited on 20 October 2011 31 104 000
* Issue in terms of VPS sale agreement 20 October 2011
12 684 762
* Issued to the Vunani Employee Share
Scheme on 29 June 2011 237 956 639
Number of shares in issue at the end of the year
5 270 732 462
Weighted average number of Reviewed Audited
ordinary shares (000s) 31 December 31 December
2011 2010
Issued ordinary shares at the 4 763 502 1 340 562
beginning of the year
Less cancelled shares (32 900) -
Less treasury shares (121 260) -
Effect of issued shares 277 612 2 941 903
Weighted average number of 4 886 954 4 282 465
ordinary shares at the end of
the year
7. Properties (continuing operations)
The properties segment is broken down as follows:
Reviewed 31 December 2011 Revenue Reportable Total assets
segment
profit/(los
s) for the
year
Continuing operations
Property developments 249 2 131 45 567
Asset management - 6 267 (671) 398
properties
Properties investments - 7 132 38 607
6 516 8 594 84 572
Audited 31 December 2010
Continuing operations
Property developments 4 283 15 891 41 469
Asset management - 481 (25) 101
properties
Properties investments - (37 280) 991 614
4 764 (21 414) 1 033 184
8. Headline loss
9.
10.
Reviewed Audited
31 December 31 December
2011 2010
Total comprehensive loss (47 603) (95 551)
attributable to equity holders of
Vunani
Adjusted for:
- Loss on disposal of investment 23 007 -
property in subsidiaries
Taxation (77) -
Non-controlling shareholders` (5 045) -
interest
-Revaluation of investment property (604) (116 580)
in subsidiaries
Deferred taxation 85 16 321
Non-controlling shareholders` 114 58 730
interest
- Revaluation of investment property (3 476) (20 859)
in associates
Deferred taxation 231 4 045
Non-controlling shareholders` 714 3 699
interest
- Goodwill impairment - 20 011
- Loss on disposal of subsidiaries 14 269 -
Taxation (1 998) -
- Loss on disposal group - 30 700
Taxation - (4 298)
- Profit on disposal of associates (7 969) -
Taxation 1 116 -
- Profit on disposal of other - (2 573)
investments
Taxation - 360
- Business combinations - bargain (346) (22 770)
purchase
Taxation 48 3 188
(27 534) (125 577)
Headline loss/ (earnings) per share (cents)
Basic and diluted loss per share (0.6) (2.9)
- Continuing operations (0.4) (3.0)
- Discontinuing operations (0.2) 0.1
SUBSEQUENT EVENTS
Subsequent to year end:
Vunani Limited converted its ordinary shares to no par value
shares and subsequently consolidated its share capital on a
50:1 basis. The consolidation was effective on 12 March 2012.
The number of issued shares after the consolidation amounted to
105 414 701 ordinary shares of no par value.
The group increased its investment in Vunani Technology
Ventures from 51% to 75% for a notional consideration.
DIVIDENDS
No dividends were declared or paid to shareholders during the year
under review (2010: R nil).
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
company will not continue as a going concern for the foreseeable
future.
REVIEWED RESULTS
The condensed consolidated financial statements of Vunani Limited
for the year ended 31 December 2011 have been reviewed by the
company`s auditor KPMG Inc. In their review opinion dated 30 March
2012, which is available for inspection at the company`s registered
office, KPMG Inc. state that their review was conducted in
accordance with the International Standard on Review Engagements
2410, Review of Interim Financial Information performed by the
independent auditor of the entity and have expressed an unmodified
conclusion on the preliminary condensed consolidated financial
statements.
CORPORATE INFORMATION
Executive directors
EG Dube (Chief Executive Officer)
BM Khoza (Managing Director)
A Judin (Chief Financial Officer)
CE Chimombe-Munyoro
NM Anderson
Independent non-executive directors
WC Ross (Chairman)
Dr.BA Khumalo
NS Mazwi
G JR Macey Nzalo
Company secretary A Judin
Physical and registered address
Vunani House
Athol Ridge Office Park
151 Katherine Street
Sandown
Sandton
2196
Postal address
PO Box 652419
Benmore
2010
Telephone number +27 11 263 9500
Facsimile number +27 11 784 3095
Transfer secretaries and registered office
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
Lead Designated Adviser
Grindrod Bank Limited
Joint Designated Adviser
Vunani Corporate Finance
30 March 2012
Date: 30/03/2012 17:48:56 Produced by the JSE SENS Department.
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