TIDMTBGR
RNS Number : 1832B
Tiso Blackstar Group SE
05 October 2015
This announcement replaces the Tiso Blackstar release sent out
today at 07.00 under RNS: 1548B
The RNS headline has been changed from Half Year Results to
Final Results. All other details remain unchanged. The full
announcement is repeated below.
Tiso Blackstar Group SE
(previously Blackstar Group SE)
Results Announcement June 2015
Incorporated in Malta
Company number SE 4
Registered as an external company with limited liability in
the
Republic of South Africa under registration number
2011/008274/10
LSE Share code: TBGR
JSE Share code: TBG
ISIN: MT0000620113
("Tiso Blackstar" or the "Company" or the "Group")
Director's statement
Highlights for the six months to 30 June 2015
-- Buyout of Times Media Group successfully concluded;
-- Acquisition of 22.9% interest in Kagiso Tiso Holdings held by
Tiso Investment Holdings and The Tiso Foundation;
-- NAV increase to R4.4 billion (GBP230 million), R16.51
(GBP0.86) per share post transaction;
-- Reduction of acquisition leverage ahead of schedule from R534
million (GBP28 million) to R440 million (GBP23 million);
-- Strategic focus on core investments and disposal of all smaller investments; and
-- Robor and CSI well positioned to benefit from growing African infrastructure spend.
Introduction to Tiso Blackstar Group
Tiso Blackstar Group SE, provides investors with exposure to a
unique combination of investments which are well positioned for
long term growth on the African continent. The Company offers
investors an operationally experienced and proven management team
with a consistent track record of delivering value, originating
investment opportunities and creating value across the continent.
Tiso Blackstar is a capital partner of choice for African
businesses contributing strategic insight and operational expertise
to support and enhance their own growth initiatives. Tiso Blackstar
is focused on achieving sustainable long term growth and value
creation for shareholders as well as investment partners.
Executive Summary
Overview
The financial year ended 30 June 2015 saw the execution by Tiso
Blackstar of several fundamental steps in its growth as a premium
investment holding company. These have resulted in the Group's
intrinsic net asset value ("Intrinsic NAV") tripling together with
fundamental adjustments being made to its investment portfolio's
features.
Tiso Blackstar has always and continues to invest management
time at an operational level in its investee companies. This was
best illustrated at Times Media Group Limited ("TMG" or "Times
Media") where significant value was generated over time for the
benefit of all TMG shareholders. This value delivery strategy gave
rise to the eventual take-over of TMG by Tiso Blackstar, and we now
look forward to leveraging off its expertise and experience to
generate value as the sole beneficiary.
Past experience has shown us that value is best created when an
investor is able to contribute expert management and experience to
an asset under its control. These are skills that are only
developed over time and with relevant, focused exposure.
Additionally, value creation can be significantly enhanced through
increased scalability and leverage of, or within an investment. It
is therefore preferable to apply effort and capital towards
projects with critical mass. It therefore stands to reason that the
management of a large number of disparate investments would likely
dilute value creation efforts.
In light of the above, Tiso Blackstar, as part of its strategic
outlook, intends to consolidate the majority of its value within a
select number of controlled large investments (four to six) in
order to significantly influence strategy and growth. The Group
continuously endeavours to achieve complete transparency in its
portfolio, providing shareholders with insight into the underlying
earnings, composition and future prospects of its investee
companies. Tiso Blackstar continues to progress its underlying
investments organically together with value enhancing bolt-on
acquisitions to develop market leading verticals in its chosen
geographies.
Key Events
On 8 June 2015, Blackstar completed two significant transactions
which resulted in a fundamental change to the composition of the
Group's portfolio, namely:
-- The buyout of all the remaining issued ordinary shares in TMG
from TMG minorities by way of a scheme of arrangement; and
-- The acquisition of a 22.9% direct equity interest in Kagiso
Tiso Holdings Proprietary Limited ("KTH") from Tiso Investment
Holdings Proprietary Limited (RF) ("Tiso") and The Tiso Foundation
Charitable Trust ("Tiso Foundation");
collectively ("the Transactions").
Following the Transactions, the Company changed its name to Tiso
Blackstar Group SE. The Transactions enhanced the Group's growth
considerably by increasing its Intrinsic NAV by R2.8 billion
(GBP141 million) from a pre-acquisition value of R1.6 billion
(GBP89 million) to R4.4 billion (GBP230 million). In addition, the
Transactions have significantly enhanced the Company's scope and
capabilities across the continent by virtue of the Transactions
introducing respected African partners into its shareholder and
management base. The Transactions represent a significant
improvement in the capacity of Tiso Blackstar to achieve its long
term strategic goals, better position Tiso Blackstar to access long
term debt and equity capital, and establish the Company as an
evolving African investment company with a high degree of
transparency and governance best practice.
The KTH and TMG transactions and related costs were partially
funded with acquisition finance facilities procured directly by
Tiso Blackstar and TMG to the amount of R534 million (GBP28
million) and R500 million (GBP26 million), respectively. The three
year Tiso Blackstar facility bears a higher rate but only requires
interest to be serviced during the term and may be settled on
maturity whilst the five year, sculpted, amortising facility at TMG
bears a lower rate of interest. Group cash shall be allocated
towards the repayment of the Tiso Blackstar facility. Following
this, cash will be used towards the repayment of the TMG facility
so as to reduce borrowing costs and accelerate the repayment of the
two separate facilities.
The facilities referred to above were drawn down on 8 June 2015
and, as at 30 June 2015, Tiso Blackstar had reduced the amounts
outstanding under its facility by R94 million (GBP5 million) to
R440 million (GBP23 million) in less than a month and ahead of
internal targets. This shall be further reduced by December
2015.
Following completion of the Transactions, the Company resolved
to realise its smaller holdings in order to focus on those material
investments that can meaningfully affect Tiso Blackstar NAV
growth.
These disposals comprise, inter alia:
-- Tiso Blackstar Real Estate Proprietary Limited ("TBRE") and the property subsidiaries
These entities house the Company's investment property
interests. Agreements have been concluded in terms of which the
individual properties will be sold for more than their previously
reported fair value.
-- Navigare Securities Proprietary Limited ("Navigare")
The Company disposed of a 25% interest in Navigare on 28 June
2015. The relative size of this non controlling interest justified
this transaction.
-- Blackstar Fund Managers Proprietary Limited ("BFM")
This entity housed the Group's hedge fund and portfolio
management operations which are immaterial and are not aligned with
the Tiso Blackstar strategy. The Group initiated the winding-up and
realisation of these interests after year end.
Disposal proceeds received through the non-core asset
realisation program will contribute towards the accelerated
repayment of Tiso Blackstar's debt facility.
Furthermore, over the past two years Tiso Blackstar management
has been extensively involved in TMG at an operational and
leadership level, and during this time has developed a deep
understanding of TMG's business. This expertise coupled with
absolute control over TMG now positions the Group to efficiently
implement value creation strategies within TMG for the benefit of
and at minimal cost to the Group.
The KTH transaction allowed the Group to forge an ongoing
partnership with the management of Tiso (David Adomakoh and
Nkululeko Sowazi, now directors and major shareholders of Tiso
Blackstar) which is expected to further the Group's South African
base and growth into the continent. KTH is one of the largest
privately held investment holding companies in South Africa, and
its solid track record has positioned it as a well recognised and
trusted investor and partner in the South African business
community. It maintains a diversified portfolio of investments with
a NAV in excess of R9 billion (GBP471 million) and represents an
important building block in the Tiso Blackstar growth strategy.
Over the past year, KTH has completed a number of significant
acquisitions outside South Africa, a development that has increased
the geographic appeal of the company. The Tiso Blackstar
acquisition of the KTH shares has increased its ability to access
leverage for growth, and has positioned Tiso Blackstar with scope
for further growth options.
The Transactions have also resulted in the reconstitution of the
Tiso Blackstar shareholder base, which now comprises some of
Africa's largest investors as shareholders and investment partners.
Importantly, the introduction of the Tiso Foundation as a large
Tiso Blackstar shareholder, allows value created with the Group to
contribute towards its charitable programmes, which focus on the
development of skills and leadership amongst South African
youth.
The Tiso Blackstar Intrinsic NAV was R4.4 billion (GBP230
million) or R16.51 (GBP0.86) per share as at 30 June 2015.
Head Office
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Tiso Blackstar aims to maintain a cost efficient and transparent
head office function that contributes value across the Company's
portfolio. Management is active at an operational level and
maintains a consistent track record of operating cost control, cash
generation enhancement and effective growth strategy
implementation.
For the six months ended 30 June 2015 head office costs were
well below 1% of Intrinsic NAV. Head office costs are expected to
increase during the 2016 financial year as a result of the enlarged
portfolio and transaction costs related to the Group's strategy,
however, these costs will be actively managed to be within 1.5% of
Intrinsic NAV, consistent with the Board's strategy.
Investment overview
A summarised overview of the Tiso Blackstar investments has been
provided below. Further detail of each investment is included in
Annexure B including a summary of their performance for the current
financial year.
Times Media Group Limited ("TMG")
Interest - 100% | Intrinsic NAV - R2,542 million (GBP133
million) | 58% of Group Intrinsic NAV
Over the past three years TMG has actively sought to diversify
its media interests in terms of both geography and platform, using
free cash flow to build a significant portfolio of broadcast assets
in South Africa and other African countries. Today we have
investments in market leading broadcast groups in Ghana and Kenya,
and will soon conclude similar deals in Nigeria and Uganda,
exposing TMG to some of the fastest growing media markets in the
world. Our strategy of partnering with existing best-in-market
players is proving successful, with our Kenyan investment
performing well ahead of expectations and Ghana retaining its
leading position in the market despite a tough operating
environment. As a result, TMG's earnings and asset mix is becoming
more diversified with potential for further significant growth.
Restructuring of TMG's fixed cost base has occurred and benefits
will flow in the next year. In the coming year there will be a
focus on TMG's key variable costs to deliver further benefit, along
with a realignment of print to digital first content production,
while retaining the market leading position in traditional
print.
Media Division
TMG's media assets comprise newspapers, magazines and digital
publishing ("Media division"). The Media division is a premier
newspaper and magazine publisher with some of the most recognised
brands in Africa. Titles include Sunday Times, Business Day,
Sowetan, The Herald, Daily Dispatch, Times, Financial Mail and BD
Live, amongst others.
The Media division's earnings were down 11% as a result of
continued economic weakness. As the largest general newspaper in
South Africa, the Sunday Times is the title most affected by the
cyclical nature of advertising markets, but is also likely to be
one of the first to benefit from a future upswing. Changing
consumption patterns are beginning to affect ad spend, but market
leading newspapers remain a trusted home for advertising.
Media Highlights
-- Core EBITDA for the twelve months ended 30 June 2015 totalled
R179 million (GBP10 million) before exceptional items (FY2014 R202
million, GBP11 million), largely the result of a R67 million (GBP4
million) decline in Sunday Times advertising revenue;
-- Key areas of restructuring were implemented during the year
including reduction of excess cost base and investment into
productive cost base;
-- Further initiatives are in process, which involve improving
subscriber sales and retention and distribution efficiency. These
initiatives are expected to have a material impact by improving
profit margins;
-- Investment in infrastructure, design and workflows to create
a digital first news environment which should improve both quality
and production cost of content; and
-- Strong market share position in circulation and advertising market share maintained.
Broadcasting and Content
The Broadcasting and Content division specialises in the
acquisition, production and distribution of film, music and
television content. Broadcasting and Content is integrated across
film production and distribution, TV production, TV channel
ownership and music which includes ownership of one of South
Africa's largest music catalogues through Gallo Music.
Broadcasting and Content Highlights
-- Films and Music divisions both post strong results;
-- Gallo Music successfully integrated Bula Music and Sheer Sound;
-- Films well placed as premier all-rights distributor in Africa;
-- TV production and channels remain robust with growth prospects; and
-- EBITDA declined during the year under review as a result of
early stage investment in radio and losses in home
entertainment.
Radio
TMG has made significant strides in diversifying into broadcast
markets in South Africa and the broader continent. The focus is
primarily on radio but includes certain developmental TV assets in
Ghana and Kenya. The group now has interests in 14 radio stations
across the continent with at least three more likely to be
finalised in the short to medium term.
In South Africa, TMG is building a network of second tier
stations which offers unique listenership reach across the country.
Investments in radio take time to establish listenership and build
market share. Audience drives the desirability and pricing of
advertising and therefore revenue. Radio typically takes in excess
of four years to breakeven but once this has been achieved,
investments in radio tend to be highly profitable.
Both Durban based Vuma (72% shareholding) and Mpumalanga's Rise
FM (65% shareholding) are producing good listenership growth with
advertising revenues beginning to pick up slowly. Since
acquisition, Vuma listenership has grown 126% to 322,000 and Rise
showed a 33% quarterly increase in the latest audience data
release. TMG has conditionally agreed to purchase a minority stake
and manage North West FM in Rustenburg - a station which offers
good potential growth. All three stations grew listenership in the
latest audience survey in a market where 26 of 38 measured stations
registered declines.
Both Vuma and Rise have shown good revenue growth, and continue
to increase monthly. Vuma and Rise revenues were up 33% and 72%
respectively. In their first full year of operation Vuma and Rise
posted a combined R25 million (GBP1 million) EBITDA loss. Times
Media is looking to outsource sales in the stations to a quality
third party sales house with scale to help deliver further revenue
growth.
African Media Investments (excluding South Africa)
Tiso Blackstar's African Media Investments comprise of its
investments into African businesses outside of South Africa, and
currently include a 49% interest in Radio Africa Group ("RAG") in
Kenya and a 32% interest in Multimedia Group Ghana.
African Media Investments Highlights
-- Kenya revenue and earnings growth maintained and is ahead of expectations and budget;
-- Bamba TV successfully launched in Kenya and to date 135,000
TV boxes have been sold since February 2015;
-- Ghana radio remains resilient and very profitable despite the
weak economy and slow TV recovery; and
-- Recently concluded a radio acquisition in Lagos Nigeria, the
first step in a larger transaction.
We are in the final stages of purchasing a significant minority
stake in two Ugandan radio stations, Capital and Beat FM, and we
have recently finalised the acquisition of a significant minority
stake in a Lagos based radio license, as well as an option to roll
our investment into the Nigerian holding company that has a further
four radio licenses throughout Nigeria. These acquisitions will
extend our footprint in Africa, enhance our exposure to high growth
media markets across the continent and strengthen our partnership
with RAG.
Industrial
Hirt and Carter ("H&C")
H&C is a division of Times Media Proprietary Limited.
H&C uses unique state-of-the-art software and processes to
manage the entire print communication process from origination to
final distribution, using market innovation, technology and trend
monitoring. H&C customers are primarily involved in the retail
sector.
The trading environment for the 12 months to June 2015 proved to
be extremely challenging for H&C. Despite market conditions
H&C grew EBITDA by 16% and extended its customer base. The
software division continues to show outstanding growth.
In order to combat the topline trading pressures, management
focused on reducing overhead costs and improving margins through
commercial negotiations with suppliers and driving efficiencies
within the manufacturing facilities nationally.
Uniprint
Uniprint is a division of Times Media Proprietary Limited.
Uniprint has the following operating divisions:
-- Packaging;
-- Labels; and
-- Forms and Direct Mail.
Uniprint grew EBITDA by 23% during the year under review.
Uniprint continues to dominate the African election work, having
produced the ballet papers for the Mozambique election in 2014.
Kagiso Tiso Holdings Proprietary Limited ("KTH")
Interest - 22.9% | Intrinsic NAV - R1,730 million (GBP91
million) | 39% of Group Intrinsic NAV
Tiso Blackstar acquired a 22.9% equity interest in KTH, one of
the largest privately held pan African investment holding
companies. It has an investment portfolio with a gross asset value
in excess of R15 billion (GBP785 million) and is managed by an
experienced team of investment professionals. It has strong black
empowerment ("BEE") credentials in South Africa and has so far also
made successful forays into the rest of the continent.
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Similar to Tiso Blackstar, KTH is refocusing its portfolio
strategy by establishing key verticals and pursuing growth
opportunities across the African continent. The alignment of KTH's
strategy and composition of their current portfolio allows
potential for mutually beneficial opportunities to be realised
between KTH and Tiso Blackstar.
Over 80% of KTH's Intrinsic NAV (post acquisition of Servest) is
represented by seven assets:
-- 100% interest in Kagiso Media, a market leading African media
company. Kagiso Media's assets include two leading radio stations,
East Coast Radio and Jacaranda FM as well as a major TV production
house, Urban Brew Studios;
-- 15% interest in Fidelity Bank Ghana, ranked amongst the top tier banks in Ghana;
-- 51% interest in Servest, a market leading integrated
facilities management business with global operations across Africa
and the UK (post year end);
-- 19% interest in Actom, the largest privately owned electrical
engineering business in Africa;
-- 7% of MMI, one of the largest listed insurance and financial
service businesses across Africa;
-- 4.2% interest in Exxaro Resources, a South African-based
mining group, listed on the JSE; and
-- 30% interest in Me Cure Healthcare, the leading healthcare
diagnostics business in Nigeria.
The remainder of the portfolio consists of 31 investments. KTH
uses conservative valuation techniques to determine its NAV which
is further verified by an independent expert valuer and retains a
track record of selling assets above carrying value.
Consolidated Steel Industries Proprietary Limited ("CSI")
Interest - 100% | Intrinsic NAV - R365 million (GBP19 million) |
8% of Group Intrinsic NAV
CSI Highlight
-- CSI's African operations continue to show solid growth at higher margins.
CSI comprises Global Roofing Solutions ("GRS") and Stalcor.
GRS is a leading South African roofing material manufacturer. It
consists of GRS Brownbuilt (established in 1964) and GRS HH
Robertson (established in 1958), making it one of the largest metal
roofing manufacturers in South Africa and the African
continent.
Stalcor is one of the top two stockists and distributors of
stainless steel and aluminium products. Stalcor services more than
4,000 customers, drawn from all economic sectors, in particular the
manufacturing, engineering, mining and construction industries.
CSI successfully continued on its growth path during the period
under review. This is attributed to its strong sales efforts
gaining market share in tough local economic conditions, while
retaining margins and managing costs through improved procurement
and intergroup synergies. Approximately 40% of GRS sales are
derived from African markets outside South Africa, representing
significantly increasing exposure to the rest of the continent over
the past six years.
GRS Mozambique is expected to be operational during the first
quarter of 2016 - in time to participate in the well-publicised
international oil and gas infrastructure projects in
Mozambique.
Robor Proprietary Limited ("Robor")
Interest - 19.4% | Intrinsic NAV - R80 million (GBP4 million) |
2% of Group Intrinsic NAV
Robor Highlights
-- Tiso Blackstar has agreed to acquire a controlling interest
(51%) in Robor after year end;
-- Robor is the largest manufacturer and supplier of welded
steel tube and pipe in Africa;
-- Exports to over 21 countries throughout the world, mostly in
Africa with exports making up over 20% of revenue and growth;
and
-- It has repositioned itself as an engineering steel, tube and
pipe company with an African focus participating in large
infrastructure growth projects.
At year end the Company held 19.4% of Robor's issued share
capital. Tiso Blackstar has entered into a transaction to increase
its interest in Robor to 51% through a share buyback by the company
from its private equity partner and the issue of 1,740,358 of Tiso
Blackstar shares for R30 million (GBP2 million), being the NAV per
share. Once concluded, the Robor management team will hold the
remaining 49% of the shares in Robor.
Established in 1922, Robor is one of the largest manufacturers
and suppliers of welded steel tube and pipe in Africa and is active
in most industries including, mining, transport - rail and road,
construction, engineering, manufacturing, agriculture, energy,
water and automotive. Robor has an existing and growing African
footprint that will benefit from the increasing infrastructure
spend taking place on the African continent and exports to over 21
countries throughout the world, mostly in Africa (excluding South
Africa) with exports making up over 20% of revenue.
The oil and gas projects in Mozambique are a real opportunity
for Robor and we are actively pursuing and positioning Robor to
capitalise on the growth we believe will come out of Mozambique.
Currently Robor generates turnover in excess of R400 million (GBP22
million) in Africa, outside of South Africa.
Tiso Blackstar Real Estate Proprietary Limited
The disposal of the property portfolio held by TBRE and the
property subsidiaries has progressed well. To date six properties
have been disposed of for an aggregate amount of R167 million (GBP9
million), a return of two times invested money over an average
holding period of two and a half years.
Surplus funds, post settlement of mortgage bonds, currently
estimated to total R65 million (GBP3 million), shall be utilised by
the Group to reduce Tiso Blackstar's term debt. These sales are
expected to close by November 2015.
Financial Review
Tiso Blackstar continues to be considered as an Investment
Entity and therefore measures its investments, including certain
subsidiaries and associates, at fair value through profit and loss
as opposed to consolidating and equity accounting. The following
subsidiaries, which provide services that relate to the Company's
own investment activities, continue to be consolidated: Tiso
Blackstar (Cyprus) Limited ("Tiso Blackstar Cyprus"); Tiso
Blackstar Group Proprietary Limited ("Tiso Blackstar SA"); and
BFM.
As a result of this accounting treatment, the Tiso Blackstar
consolidated balance sheet is more closely aligned with the
Intrinsic NAV of the Group than it would be under the traditional
equity accounting model. The Intrinsic NAV provides shareholders
with an analysis of the inherent value of each investment held as
at year end. References to the Intrinsic NAV are made based on the
30 June 2015 Intrinsic NAV as included in Annexure A.
In June 2015, as a result of the Transactions, Tiso Blackstar
changed its financial year end from 31 December to 30 June. The
current reporting is therefore provided for a six month period
ended 30 June 2015 and comparatives are for the previous 12 months
ended 31 December 2014.
Income for the period ended 30 June 2015 amounted to R405.3
million (GBP22.3 million) which mainly comprises R78.7 million
(GBP4.3 million) generated from investments in the form of support
fees, dividends and interest income and R326.6 million (GBP18.0
million) net gains on investments.
Net gains on investments include R19.7 million (GBP1.1 million)
realised gains on disposal of its smaller investments and R306.9
million (GBP16.9 million) unrealised net fair value gains which
mainly comprises fair value adjustments recognised post acquisition
on the investments in TMG and KTH.
On initial recognition of the equity settled portion of the
investments in KTH and TMG, Tiso Blackstar must comply with EU IFRS
which requires that the investment in KTH initially be measured at
the fair value of the consideration received, being the last traded
share price of Tiso Blackstar shares on that date, and, as TMG is
listed, the investment in TMG must initially be measured at the
fair value of the TMG shares received on that date, calculated
using the last traded TMG share price. This differs from the issue
price of R16.91 (being the Group's Intrinsic NAV per share as at 30
June 2014) which was utilised by all parties concerned in
determining the number of Tiso Blackstar shares to be issued in
exchange for the investments acquired in KTH and TMG. A significant
net unrealised gain has therefore been recognised in profit and
loss on revaluation of the investments in both KTH and TMG to their
fair value as at 30 June 2015 (which is more closely aligned to the
commercial acquisition cost of the investments determined when the
Transactions were agreed upon).
Operating expenses of R66.1 million (GBP3.6 million) mainly
include the day-to-day operational expenses of R14.4 million
(GBP0.8 million) incurred to run Tiso Blackstar and its
consolidated subsidiaries, and exceptional, transaction related and
non-recurring costs of R48.3 million (GBP2.7 million) the majority
of which are costs arising on the Transactions. Operational
expenses for the reporting period amount to 0.3% of the Intrinsic
NAV as at 30 June 2015 and transaction related costs incurred
amounted to 1.3% of the value of the investments acquired. Costs
are closely monitored and action is taken wherever possible to cut
any excess expenditure in order to improve the profitability of the
Group.
Total equity attributable to equity holders of Tiso Blackstar
increased from R1.5 billion (GBP80.6 million) as at 31 December
2014 to R4.4 billion (GBP230.4 million) at 30 June 2015 as a result
of the successful acquisition of the KTH investment and a buyout of
the remaining shares in TMG that it did not already own. The
purchase consideration was settled using debt and a fresh issue of
183,566,216 Tiso Blackstar shares thereby increasing the issued
share capital of the Company to 266,665,287 shares.
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The significant R3.3 billion (GBP169.0 million) increase in
total assets to R4.9 billion (GBP254.9 million) as at 30 June 2015
arose as a result of the acquisitions of KTH and TMG. At 30 June
2015 net investments in subsidiaries include the TMG investment at
a fair value of R2.5 billion (GBP133.0 million) and net investments
in associates include the fair value of the investment in KTH of
R1.7 billion (GBP90.5 million).
On implementation of the TMG and KTH acquisitions, Tiso
Blackstar raised debt of R534 million (GBP28 million) which was
used to settle the existing facility held, transaction related
costs and the cash consideration of the KTH purchase price. The
Group managed to reduce the debt to R440 million (GBP23 million) by
year end utilising proceeds from disposals of smaller investments
and free cash. This secured term facility bears interest at the 3
month Johannesburg Interbank Accepted Rate ("JIBAR") plus 500 basis
points, with interest capitalised quarterly and repayable
semi-annually. Mandatory capital payments calculated based on the
outstanding facility balance are due in December 2016 and 2017,
with a final bullet payment in June 2018.
Cash and cash equivalents declined by R43.3 million (GBP2.4
million) during the current financial year to an amount of R19.7
million (GBP1.0 million). Significant cash flow movements during
the year include a R3.1 billion (GBP171.8 million) cash outflow on
acquisitions of investments (mainly the total cost of the KTH and
TMG acquisitions), a R110.1 million (GBP6.1 million) cash inflow on
realisation of investments including repayments of loan
receivables; R74.5 million (GBP4.1 million) cash inflow in respect
of dividends and interest income; R367.3 million (GBP20.2 million)
cash inflow on acquisition finance net of repayments and R2.6
billion (GBP144.7 million) cash inflow from the issue of Tiso
Blackstar shares to settle part of the consideration for the
investments in KTH and TMG.
Dividends
Tiso Blackstar recognises that regular dividends are an
important part of shareholder wealth creation. Following the
completion of the Transactions, Tiso Blackstar's focus in the short
to medium term will be on reducing the Tiso Blackstar debt. Post
review of the interim results to 31 December 2015, the Board will
consider an interim dividend taking into consideration the fact
that Tiso Blackstar has been able to settle acquisition debt in
advance of initial targets.
Post year end and looking forward
Part of the Tiso Blackstar strategy is to have meaningful
interests in its underlying investments in order to have a degree
of influence on the investee companies' strategies, as well as the
ability to impact NAV growth of the Company. In line with this,
Tiso Blackstar disposed of certain of its smaller investments
including its 25% stake in Navigare and its investment in the
Blackstar Special Opportunities Fund prior to year end, and post
year end the Group sold its 70% stake in BFM and realised its
property portfolio.
In line with the aforementioned strategy, and as previously
announced, Tiso Blackstar is in the process of concluding a
transaction (subject to approval from the South African Competition
Authorities) to increase its interest in Robor to 51%. This will be
achieved through the purchase of additional ordinary shares in
Robor for a consideration of R30 million (GBP2 million) and Robor
completing a share buyback from its private equity partner.
Tiso Blackstar believes that steel is at a low point in the
cycle and therefore it is acquiring its additional shareholding in
Robor at both an attractive time and price, acquiring control at a
significant discount to the tangible balance sheet NAV (excluding
goodwill and intangible assets). With a strong balance sheet and an
aligned management team Robor is well positioned for expansion and
growth in Africa's infrastructure sector.
Following the completion of the Transactions on 8 June 2015,
Tiso Blackstar has identified four Investment Silos. Subsequent to
the year end, the Company's investments (which include a
restructuring of TMG) have been allocated within each Investment
Silo and will be reported as such. The number and description of
investments within identified Investment Silos, and the Investment
Silos themselves, may vary from time to time dependent upon the
returns generated from the investments.
Outlook
Tiso Blackstar is currently investigating the possibility of
transferring its current trading on AIM to a listing on the Premium
Segment of the Official List of the Financial Conduct Authority
under Chapter 15 of the Listing Rules (Closed-Ended Investment
Funds) and to trading on the London Stock Exchange Main Market for
listed securities in order to enhance the Company's visibility and
share liquidity. If a transfer is achieved, the Company's shares
would simultaneously be admitted to the Main Board of the JSE
Limited. The Company will update shareholders in due course.
The Company is currently considering the migration of its
registered office from Malta to the United Kingdom ("UK") so as to
ensure that its business operations and listing operate from a
single jurisdiction and facilitate ease of understanding by
investors of its structure. Further updates in this regard will be
provided as interactions with the various relevant regulators
progress. Subject to the necessary approvals being obtained, the
migration of the Company's registered office will take place in the
first half of 2016 given the regulatory and administrative
requirements both in Malta and the UK that need to be met in order
to move its registered office.
The successful integration and management of the assets acquired
through the Transactions and successful implementation of strategy
will be enhanced by the migration of the Company's registered
office. The migration and listing will further enable investors'
accessibility to and understanding of Tiso Blackstar.
The Group endeavours to present investors with the exclusive
opportunity of accessing largely untapped African markets via a
London based, premium listed structure underpinned by a sustainable
capital base offering leverage and access to unique value
opportunities. Tiso Blackstar supports the investment proposition
presented by the fast-emerging African continent. The initial
stages of the Group's development have now been achieved by
successfully positioning the Company to competitively access high
quality, market leading opportunities within some of the highest
growth markets in the world. We look forward to developing this
position into realised value for our stakeholders over the next
phase of the Group's maturation.
We would like to thank the Tiso Blackstar Board and our
management team for their dedication and hard work in implementing
our complex and diverse transactions during the last year as well
as the staff at TMG for embracing significant and positive changes
in the business, designed to help secure its long term future.
AD Bonamour DKT Adomakoh
Non-executive Director Non-executive Chairman
5 October 2015
Annexure A - Intrinsic NAV
Intrinsic NAV as at 30 June 2015
Unaudited Unaudited
30 June 30 June
2015 2015
R'000 GBP'000
----------------------------------------------- --------- ---------
Times Media Group Limited 2,541,707 133,033
Kagiso Tiso Holdings Proprietary Limited 1,729,513 90,522
Consolidated Steel Industries Proprietary
Limited 365,100 19,109
Robor Proprietary Limited 80,000 4,187
Tiso Blackstar Real Estate Proprietary Limited
and the property subsidiaries 76,598 4,009
Other listed & unlisted investments(4) 25,866 1,354
Cash and cash equivalents of consolidated
companies 22,777 1,192
Access facility (440,000) (23,030)
----------------------------------------------- --------- ---------
Intrinsic NAV 4,401,561 230,376
----------------------------------------------- --------- ---------
Number of shares in issue net of treasury
shares 266,665 266,665
Intrinsic NAV/Share (in Rands/Pounds Sterling) 16.51 0.86
----------------------------------------------- --------- ---------
Notes:
1. The Intrinsic NAV provides a measure of the underlying value
of the Group's assets and does not indicate when the investments
will be realised, nor does it guarantee the value at which the
investments will be realised.
2. For the purposes of determining the intrinsic values, listed
investments on recognised stock exchanges are valued using quoted
bid prices and unlisted investments are shown at Directors'
valuation, determined using the discounted cash flow methodology
("DCF"). This methodology uses reasonable assumptions and
estimations of cash flows and terminal values, and applies an
appropriate risk-adjusted discount rate that quantifies the
investment's inherent risk to calculate a present value. Given the
subjective nature of valuations, the Group is cautious and
conservative in determining the valuations and has a track record
of selling its unlisted investments in the ordinary course of
business above the levels at which it values them.
3. All amounts have been translated using the closing exchange
rates at 30 June 2015. The ZAR/GBP closing exchange rate at 30 June
2015 was 19.106.
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October 05, 2015 02:32 ET (06:32 GMT)
4. Other listed and unlisted investments include investments in
Shoprite Holdings Limited (Zambia) and Bataung Capital Advisors
Proprietary Limited. This number also includes the net asset value
of the Group's consolidated entities.
Annexure B - Overview of Tiso Blackstar's Investments
TMG - Ownership 100%, Valuation R2,542 million (GBP133 million)
- 58% of NAV
Income Statement
Twelve months Twelve months Twelve months Twelve months
to to to 30 June to 30 June
30 June 2015 30 June 2014 2015 2014
R'million R'million(3) GBP'million GBP'million(3)
---------- ------------- ------------- ------------- --------------
Revenue 3,946 3,984 219 236
EBITDA 344 404 19 24
EBIT 228 297 13 18
---------- ------------- ------------- ------------- --------------
Valuation Summary
30 June 2015
R'million
--------------------------- ------------
EBITDA 344
Multiple 8.81
--------------------------- ------------
Enterprise value 3,031
Net debt(1) (860)
Minority investments(2) 371
--------------------------- ------------
Equity value R'million 2,542
--------------------------- ------------
Equity value GBP'million 133
--------------------------- ------------
Notes:
1. Net debt is made up of term debt of R800 million (GBP42 million),
asset based finance of R113 million (GBP6 million) and net cash
of R53 million (GBP3 million).
2. Minority investments comprise a 32% shareholding in Multimedia
Ghana (R144 million, GBP8 million), a 49% shareholding in Radio
Africa Kenya (R195 million, GBP10 million), a 50% shareholding
in Smartcall Technology Solutions Proprietary Limited (R22 million,
GBP1 million) and Other investments (R9 million, GBP0.5 million).
All of these are held at acquisition cost.
3. Prior year numbers have been restated for IFRS allocations.
4. Equity value equates to the blended buyout price of R24.05
per TMG share which equates to R22.00 per share for all shares
which were settled in cash and R24.50 per share for all shares
that were settled in new Tiso Blackstar shares.
5. AMD and ELS ceased trading during the year and have since
been closed. The two businesses sustained a combined trading
loss of R14 million (GBP1 million) which will not reoccur.
TMG is well placed in the market to deliver growth and
sustainability. Management is focused on diversification to
broadcast in South Africa and the rest of Africa as well as
realignment of print to digital first, while retaining its market
leading position in traditional print media. Restructuring of the
fixed cost base has occurred and management expects the benefits to
flow in next year. There is also a focus on key variable costs in
the coming year to deliver further benefit.
Media
Media produced core EBITDA of R179 million (GBP10 million)
before exceptional items for the twelve months ended 30 June 2015
(FY2014 R202 million, GBP11 million). Restructuring costs of R33
million (GBP2 million) were related primarily to management
restructuring and the closure and reorganisation of unviable
digital ventures and provisioning in respect of our investment in
Allied Publishing.
Advertising revenues remained soft as the effects of weak
general economic performance continued to be felt. Total newspaper
advertising revenue declined 9%. Circulation revenues grew 2% as a
result of a combination of price increases and a mild decline in
sales. Digital revenues grew at a fast rate of 35% but remain at a
low base relative to print.
The newspaper business underwent significant restructuring and
streamlining of management layers towards the end of the financial
year, resulting in flatter and more accountable structures that we
believe will allow for higher levels of innovation, integration,
communication and efficiency.
A number of these changes and cost savings initiatives in
response to the decline in revenue will only bear fruit in the year
to come. Further initiatives are in process including improving
subscriber sales and retention and improving distribution
efficiency. These should have a material impact in improving profit
margins. Investment made in infrastructure, design and workflows to
create a digital first news environment should also improve both
quality and production cost of content.
Change remains a constant theme in the industry and further
changes to the newspaper business model are inevitable as market
readership and advertising patterns shift. One consistent theme
though is the requirement for quality, unbiased and interesting
content, an area where TMG continues to invest despite the recent
downturn.
From a market share perspective, our titles have performed well
in both advertising and circulation, albeit in a climate of a
declining print market. Latest circulation figures will reflect
declines in certain titles as we reduce our sale of low-yielding
copy sales in order to create a more sustainable future for our
products. The lower numbers are likely to represent the core of
readership base and provide a profitable platform from which to
deliver an integrated digital offering.
The flagship Sunday Times suffered from a decline in economic
activity, both in traditional brand advertising markets as well as
a declining jobs market. The title remains SA's largest newspaper
by circulation, advertising and size and significant focus is being
given to build readership and revenue for the Sunday Times. New
initiatives such as quality subscriber magazines, property guides
and a renewed digital focus will ensure the paper remains at the
helm of SA's newspaper and digital market.
The Sowetan and Sunday World posted a R15 million (GBP1 million)
EBITDA turnaround to both trade profitably, while Eastern Cape
titles The Herald and Daily Dispatch grew core EBITDA a combined
66% to R26 million (GBP2 million) before one-off restructuring
costs of R8 million (GBP0.4 million). These gains were despite flat
revenues, reflecting solid cost management and a focus on
margins.
Business Day and Financial Mail performed well in the face of
difficult operating conditions in the sectors they serve. Financial
Mail almost doubled EBITDA. Combined, the two produced an EBITDA of
R23 million (GBP1 million) for the financial year ended 30 June
2015, including BDLive earnings.
Magazines posted a solid performance and had a particularly
strong last quarter. The division generated EBITDA of R16 million
(GBP1 million). It made significant gains in producing magazines
for the group's sizeable newspaper subscriber base, and SA
HomeOwner remains a star performer in a difficult consumer magazine
marketplace.
Times Media's new events business contributed positively to
earnings and reflected the potential of substantial new revenues
from this area. Newspapers provide a perfect platform from which to
launch events that are relevant to their consumers and advertisers
and offer an opportunity to diversify and sustain overall revenues.
Successful events in the year include the Sunday Times Generation
Next Conference, The Future of Media Conference and the MTN Radio
Awards. Our digital publishing websites also showed solid revenue
growth in line with market trends. Events and digital revenues are
becoming major revenue generators for publishers internationally,
and there is no reason that South Africa cannot mirror that
trend.
While both augur well for the future, the revenue and cost base
of the business remain print driven for the moment.
Media Outlook
The business is increasingly gearing itself for the transition
to digital from a reader and advertising perspective. We are
investing in a new multi-media content management system to enable
our newsrooms to become digitally integrated and be prepared for a
digital-first world. At the same time we are investing in new and
diverse means of revenue generation from web to mobile to
innovative technology-based advertising solutions.
We are also investing in the best talent and have made a series
of appointments to bring in international and outside expertise
which we believe will aid the business going forward. A key area of
innovation will be positioning our titles to remain relevant in an
increasingly digital and fragmented news marketplace. To this end,
we have engaged world class designers to create fresh looks for our
titles and experts to support the digital integration of our
newsrooms.
Further to the innovation and growth initiatives within Media,
this year will see a major focus on circulation and we have begun a
project to unlock significant value in our distribution platform
nationwide. The current newspaper distribution model is structured
for a different era and we will be drawing on international best
practice to create efficiencies and reduce costs in the coming
months. We believe this is crucial for the sustainability of
newspapers and pilot projects have already shown significant
benefits to the group.
Broadcast and Content
TMG's core Broadcast and Content businesses performed well
despite difficult market conditions. The division is comprised of
businesses in South Africa and across the African continent and
represent part of the long term strategy for TMG's business
sustainability and growth.
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Profitability in South Africa is lower overall as a result of
investment in certain early stage businesses such as radio and
video on demand and restructuring of the physical home
entertainment business. Core divisional revenues were steady and
earnings higher despite soft advertising markets. As a result of
investment costs in radio the division reported an EBITDA decline
from ongoing operations to R21 million (GBP1 million).
The South African division comprises:
-- African Business Channel ("ABC");
-- Ochre Moving Pictures;
-- Radio - Vuma FM and Rise FM;
-- TM Films; and
-- Music - Gallo Records and Publishing (which incorporates Bula Music and Sheer Sound).
TMG's Content businesses are showing earnings growth as
increased focus on rights ownership and their commercialisation
yields results. The films distribution business operates in a fast
changing market and has good prospects as a market leader in its
field. It posted an 8% increase in EBITDA to R37 million (GBP2
million). In order to sustain earnings, TM Films, is investing in
local distribution and production as well as in local films capable
of international release.
Our Music division continued its turnaround following a
fundamental shift in the business model. We believe the music
division is well positioned for the new models being forged in the
industry. We have invested in a music events business to complement
the earlier acquisitions of the Bula Music and Sheer Sound
catalogues. Gallo is the largest independent catalogue in SA and
the acquisitions bring increased scale in the face of declining
physical markets. Digital income continues to build and represents
an increasingly important revenue stream. Once finalised, the
business will provide a 360 degree offering including events and
artist management. From being a loss maker two years ago, our
combined music business now produces EBITDA of almost R9 million
(GBP1 million).
TV production business Ochre and channels business ABC both
produced solid core earnings growth producing EBITDA of R6 million
(GBP0.3 million) and R12 million (GBP1 million) respectively.
Ochre's year-on-year EBITDA decline of R2 million (GBP0.1 million)
was the result of lower throughput as a result of the cyclical
nature of TV production. ABC posted good EBITDA growth of 41%. Both
are successfully working on expanding their market position and
earnings in a competitive environment with ABC securing a further
channel on the DSTV platform focusing on health and fitness and
Ochre shortlisted for a slate of new productions in the current
fiscal period.
Our physical Home Entertainment business is in managed decline
in line with the reduced consumption of DVDs in the market. It has
been restructured to take into account market conditions and showed
a R21 million (GBP1 million) exceptional cost related to stock
write downs and retrenchments, legal costs as well as an EBITDA
loss of
R9 million (GBP1 million). The model for Home Entertainment is
now based largely on a variable cost structure and is significantly
leaner. It is in the process of being wound down as the contracts
with studios expire.
Radio is a long term investment as it takes time to establish
listenership and build market share from an audience and revenue
perspective. The unit is an early stage development business with
two start-up regional radio stations still establishing a footprint
in their markets. Both Durban based Vuma (72% shareholding) and
Mpumalanga's Rise FM (65% shareholding) are producing good
listenership growth with advertising revenues beginning to pick up
slowly. Vuma is currently SA's fastest growing commercial radio
station in terms of audience. In their first full year of operation
Vuma and Rise posted a combined R25 million (GBP1 million) EBITDA
loss.
50%-owned Smartcall Technology Services ("STS") is showing
strong revenue growth in mobile services, providing products across
sub-Saharan Africa producing EBITDA of R12 million (GBP1 million).
STS has more than doubled EBITDA since we bought into STS in
2013.
The business holds and manages video-on-demand platform VIDI,
which has struggled to gain traction in the market. Management is
working hard at reengineering the business in light of weak market
penetration and the slow pace of meaningful broadband growth in
SA.
TMG sold its Interactive Junction business to Saon Group in
January as part of a strategy to dispose of its non-core
assets.
African Media Investments (excluding South Africa)
Radio Africa Group Kenya
RAG in Kenya, the leading independent radio business in Kenya,
owns three of the top five radio stations in Nairobi: Jambo,
Classic and Kiss. It also owns the Star newspaper and free-to-air
Digital Terrestrial Television ("DTT") platform Bamba TV. RAG has
delivered 37% EBITDA growth to R47 million (GBP3 million) in the
year to
June 2015 from its established brands. Including investment in
the costs of launching Bamba, EBITDA was up 11% to R38 million
(GBP2 million). Demand for the Bamba service is high and over
130,000 boxes have already been sold in Kenya since its launch in
January. The Star newspaper produced a breakeven result after
posting a loss in the prior year.
Multimedia Group
Based in Ghana, 32% held Multimedia Group produced flat results
as a result of difficult economic conditions, but radio remains
highly profitable producing an EBITDA of R30 million (GBP2 million)
for its year to end December 2014 and is on track for this
financial year. Multimedia is the leading independent broadcaster
in the country. Its Joy (Joy is No 1 radio station in Accra) and
Adom radio stations command significant audience and advertising
market share, reaching 43% of the Accra radio market, while TV
platform Multi TV has over 2 million boxes in homes in Ghana for a
viewing market share of 25%, and with further reach across the rest
of West Africa. This position provides a significant opportunity
for growth but the business has been hampered by weak
macro-economic and advertising markets. TV remains under pressure
and has recently consolidated its positioning to focus on three key
channels from seven. As an advertising led business it will rely on
an improvement in economic performance in the country for any
upside. The TV business has received several partnership proposals
by international TV players to partner them in Ghana using Multi TV
as the platform.
We are in the final stages of purchasing a significant minority
stake in two Ugandan radio stations, Capital and Beat FM, and have
agreed a memorandum of understanding for the acquisition of a
significant minority stake in a Lagos based radio license, as well
as an option roll of our investment into the Nigerian holding
company that has a further four radio licenses throughout Nigeria.
These acquisitions will extend our footprint in Africa and enhance
our exposure to high growth media markets across the continent.
Industrial
Hirt and Carter ("H&C")
The focus on margins and overheads allowed the group to deliver
a 16% growth in EBITDA to R145 million
(GBP8 million) for the twelve months ended 30 June 2015. On a
like for like basis excluding Bates Printing ("Bates"), H&C
delivered a 11% growth in EBITDA to R126 million (GBP7 million).
Bates grew EBITDA from the prior year by 66% to R20 million (GBP1
million), although the prior year measure only included eight
months of trading due to acquisition timing.
The cornerstone of H&C strategy continues to be a focus on
the key Retail FMCG and Retail Apparel customers, to expand the
H&C service offering and ensure alignment with customer's
growth strategies. In terms of driving "strategic entanglement"
with customers, H&C have positioned the data and analytics
businesses as well as the software business to drive growth.
The launch of loyalty and reward programs in South Africa by the
major Retail FMCG players has allowed H&C to grow its product
and services offering. The retailers need to ensure that they have
the latest consumer market pricing information, and H&C are
integrating these services into retailer's back-end decision making
processes.
In addition to pursuing growth in the South Africa market, most
of our customers are driving an Africa expansion strategy. We are
well placed to grow our business on the back of this strategy. Our
Africa team has seen excellent growth over the past two years,
delivering solutions to the beverage and branded goods
manufacturers in Africa.
H&C Software division, which developed the country's leading
Advertising Marketing and Promotions System ("AMPS") software, was
separated into a stand-alone business during the year. Management
has focused on ensuring that each instance of our software
solutions has a direct billing, at a value that delivers the right
returns. Software solutions also provide annuity revenue for the
business.
The business is being positioned to capitalise on the growth in
the data and software offerings, while also ensuring that we
continue to offer products in the "print that performs"
category.
H&C are currently reviewing their print based products, and
looking to exit any sectors of the market that may have been
commoditised in favour of investing in technology that will grow
the business and deliver the best returns.
Uniprint
Uniprint was able to increase its turnover by 24% to R520
million (GBP29 million) (FY2014 R421 million, GBP23 million) for
the year ended 30 June 2015, despite a difficult economic climate
in South Africa. As a result of the increase in turnover, EBITDA
increased by 23% to R67 million (GBP4 million) (FY2014 R55 million,
GBP3 million). Management of Uniprint did an outstanding job
keeping overheads under control. All operating divisions of
Uniprint performed reasonably well in the period under review.
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The Labels division successfully integrated Ferroprint
Proprietary Limited ("Ferroprint") during the period under review.
The result of the Ferroprint acquisition was that Uniprint is able
to achieve benefits of scale and increased market share in its key
markets and create one of the largest manufacturers of labels and
sleeves for FMCG markets in Africa. The labels market is currently
under pressure due to the high levels of imported materials which
effects prices and many customers are struggling to achieve market
growth.
The Forms and Direct Mail division of Uniprint had severe
challenges due to the non-functioning of SA Post Office. Many of
Uniprint's customers elected to switch their communication channel
away from SA Post Office. As a result the Forms division lost
turnover of approximately R70 million (GBP4 million). During the
period under review the division was underpinned by contracts
obtained in Africa for election work. Due to the lost turnover,
Uniprint acquired the tally roll converting business from Bytes
Technology Group on 1 April 2015. This business has now been
successfully integrated into Uniprint and is expected to contribute
approximately R60 million (GBP3 million) of turnover in the new
financial year.
The Packaging division remains small and the intention is to
grow this division both organically and through acquisitions.
Uniprint has identified Africa (excluding South Africa) as a
core growth market and has recruited staff to exploit these markets
further. Uniprint has already been awarded a contract to produce
the election material for Tanzania and are busy negotiating for
several other contracts in Africa.
KTH - Interest 22.9%, Valuation R1,730 million (GBP91 million) -
39% of NAV
KTH Investment Portfolio(1)
30 June 2015
R' million
--------------------------------------------------- ---------------------
MMI Holdings Limited(2) 3,059
Kagiso Media Proprietary Limited(3) 2,845
Fidelity Bank Ghana Limited(4) 417
Exxaro Resources Limited(5) 378
AECI Limited(6) 378
Other assets(7) 3,259
Net debt and Other liabilities(8) (1,129)
--------------------------------------------------- ---------------------
Total NAV 9,207
--------------------------------------------------- ---------------------
Discount 18.0%
Total NAV post discount 7,553
Tiso Blackstar shareholding 22.9%
Tiso Blackstar value R'million 1,730
--------------------------------------------------- ---------------------
Tiso Blackstar value GBP'million 91
--------------------------------------------------- ---------------------
Notes:
1. The values as at 30 June 2015 represent the value of the
underlying investment after deducting net debt at an individual
asset level.
2. KTH's investment in MMI Holdings Limited ("MMI") is held
through a special purpose vehicle and comprises an aggregate
exposure to 113.6 million MMI ordinary shares with closing
price of R30.15 (GBP1.58) per share as at 30 June 2015 through
an interest in 32.23 million MMI A3 Preference Shares and 81.37
million MMI ordinary shares. MMI A3 Preference Shares accrue
dividends and are convertible into MMI ordinary shares on a
one-to-one basis without restriction save for mandatory redemption
on 30 June 2017, however, pursuant to a lock-in arrangement,
50 million of the MMI ordinary shares and/or MMI A3 Preference
Shares may not be sold before 30 June 2017. A 5% liquidity
discount has been applied to the 50 million MMI ordinary shares
and/or MMI A3 Preference Shares subject to the trading restriction.
The MMI A3 Preference Shares are valued using an option pricing
model and the MMI ordinary shares are valued at the closing
price less the liquidity discount.
3. Investment value of Kagiso Media has been determined using
a DCF methodology. For the financial year ended 30 June 2015
Kagiso Media's EBITDA was R435 million (GBP24 million) and
net external debt totalled R746 million (GBP41 million). Its
enterprise value has been determined as R3,591 million (GBP198
million) representing an EV/EBITDA of 8.2x.
4. KTH holds a 15% investment in the ordinary shares and a
19% investment in the preference shares of Fidelity Bank. KTH
purchased US$10 million preference shares in April 2014 which
are non-redeemable, non-cumulative and convertible into ordinary
equity. The preference shares have a right to receive a US
Dollar denominated dividend of 10.5%, semi-annually on the
nominal value (US$10 million). These preference shares are
valued at R144.4 million (GBP8 million). The ordinary equity
value was determined using the market multiple valuation methodology
based on a price to earnings multiple as the primary methodology,
and a price to book multiple as the secondary methodology.
The value attributable to KTH's ordinary shares in Fidelity
Bank is equal to R233.6 million (GBP12 million) equating to
a price to earnings ratio of 7.2x after deducting liquidity
discounts.
5. KTH holds an indirect interest of 7.97% in Mainstreet 333
Proprietary Limited ("Mainstreet") which in turn owns 52.09%
of the ordinary shares in Exxaro. The shares in Exxaro have
been valued at the closing price of R86.92 (GBP4.55) as at
30 June 2015 and a lock in discount of 2.5% has been applied
to this value. Following the deduction of liabilities of R3,771
million (GBP197 million), Mainstreet has a NAV of
R12,039 million (GBP630 million). Further minority and liquidity
discounts of 20% are applied to KTH's interest in Mainstreet.
This value is further reduced by liabilities attached to KTH's
interest in Mainstreet to establish the NAV of the indirect
interest in Exxaro via, inter alia, Mainstreet.
6. KTH indirectly holds 3,509,000 shares in AECI which had
a closing price of R114.50 (GBP5.99) per share as at 30 June
2015. A 2.5% lock in discount has been applied which falls
away on 31 December 2015. Liabilities attached to the holding
net of cash amounted to R12.5 million (GBP1 million).
7. Other assets include R217 million (GBP11 million) in listed
assets and R2,994 million (GBP157 million) of unlisted assets,
amongst others. Assets valued above R100 million (GBP5 million)
include investments in Actom Investment Holdings, First Rand
Empowerment Trust, ERIS, Idwala Industrial Holdings, Infrastructure
Finance Corporation, Kagiso Asset Management, Me Cure Health
Limited, Metropolitan Health Corporate, Mototolo Joint Venture,
and Sea Harvest Holdings.
8. Includes the present value of KTH's forecast head office
overheads.
9. The valuation of the KTH investment portfolio is independently
performed by the corporate finance division of a top 4 accounting
firm in South Africa.
10. Tiso Blackstar has applied a further discount of 18% to
KTH's Intrinsic NAV to account for head office costs and any
potential CGT liability that would be realised on disposal
of the investments held by KTH.
CSI - Ownership 100%, Valuation R365 million (GBP19 million) -
8% of NAV
Income Statement(1)
Twelve months Twelve months
to to
30 June 2015 30 June 2015
R'million GBP'million
---------- ------------- -------------
Revenue 1,907 106
EBITDA 67 4
EBIT 52 3
---------- ------------- -------------
Note:
1. Income statement represents a 12 month pro-forma period from
1 July 2014 to 30 June 2015. No consolidated results are available
for the comparative period as a result of the change in the
year end from 31 December to 30 June.
Valuation Summary
30 June 2015
R'million
--------------------------- ------------
EBITDA 67
Multiple 5.73
--------------------------- ------------
Enterprise value 384
Net debt (19)
--------------------------- ------------
Equity value R'million 365
--------------------------- ------------
Equity value GBP'million 19
--------------------------- ------------
CSI African operations continued to reflect impressive results
with annualised sales growth of 31.8% and profits ahead of budget.
Growth in sales to the contractor market is also improving for the
pierced fix products. Despite the trading environment in the South
African market proving to be very challenging, compared to the same
period last year, CSI has increased its gross revenues by 10.7% and
held its prime gross profit margin.
CSI African operations
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October 05, 2015 02:32 ET (06:32 GMT)
CSI currently has operational presence in Namibia, Botswana,
Zambia, Zimbabwe and Ghana with manufacturing equipment for GRS
Mozambique expected to be operational during the first quarter of
2016 - in time to participate in the well-publicised international
oil and gas infrastructure projects in Mozambique. In addition, CSI
has been awarded preferred supplier status for a unique housing
development in Abidjan, Cote d'Ivoire, co-funded by the Industrial
Development Corporation of South Africa Limited, which project is
expected to commence during the latter part of 2015. Currently,
sales through CSI's African operations comprise more than one third
of all sales made by GRS and at higher margins. We expect this
growth to continue as we enter new territories. The principal
projects giving rise to Africa growth are shopping centre
developments.
Robor - Ownership 19.4%, Valuation R80 million (GBP4 million) -
2% of NAV
Price to Book Valuation
30 June 2015
R'million
---------------------------------------- ------------
Robor tangible balance sheet NAV 519
Robor 100% Equity value per valuation 412
Discount to balance sheet 21%
---------------------------------------- ------------
Valuation Summary
30 June 2015
R'million
EBITDA(1) 130
Multiple 3.65
------------------------------------------ ------------
Enterprise value 474
Net debt (62)
------------------------------------------ ------------
Equity value 412
------------------------------------------ ------------
Tiso Blackstar shareholding 19.4%
Tiso Blackstar Equity value R'million 80
------------------------------------------ ------------
Tiso Blackstar Equity value GBP'million 4
------------------------------------------ ------------
Notes:
1. EBITDA is for the Robor financial year ended 30 September
2014.
2. Current Robor management accounts forecast an EBITDA to year
end 30 September 2015 of
R30 million (GBP2 million), which excludes the steel price
devaluation of R60 million (GBP3 million).
Robor has had a difficult year given the current issues in the
steel markets, slow down in the general economy and delays in the
proposed South African infrastructure spend. During the period
under review, Robor restructured its business to adapt to the
changing market conditions which resulted in R75 million (GBP4
million) in annual cost savings. Most of these savings were negated
by stock devaluations in the current year. Volumes and margins were
impacted due to the overcapacity in the South African market.
Robor's objectives have shifted from being a commodity supplier,
to an engineering steel, tube and pipe company with an African
focus participating in large infrastructure growth projects. The
markets where Robor sees growth are all critical for South Africa.
Water is a key focus, in all areas and this is receiving extra
attention. As a large tube and pipe producer Robor is well placed
to assist with the ageing infrastructure in sewerage, portable
water and the rising level of acid mining water.
The energy segment is also key, and Robor has just acquired 100%
of Tricom Structures which designs, develops and manufactures steel
structures for telecom tower companies, cell phone operators and
power sectors. The demand for Tricom products/solutions is growing
in Africa and will add value to Robor's capabilities in terms of
providing solutions across various market segments. This, coupled
with Robor's proven track record in solar makes it a meaningful
player in the energy infrastructure roll out plans. Robor has a new
mill coming on line in the first quarter of next year which will
position it very well in the oil and gas sector and the
opportunities on the continent in particular Mozambique.
All Robor's offerings are ideal for Africa and management is
focusing on growing its footprint in the region significantly. The
objective in Africa is to be a local partner of choice with
additional capacity in South Africa. Infrastructure development
plays a critical role in job creation and economic performance. The
goals of South Africa's Infrastructure Development Plan will have a
marked impact on Robor when they are implemented.
Consolidated statement of comprehensive income
for the six months ended 30 June 2015
Twelve months Six months Six months Twelve months
ended ended ended ended
31 December 30 June 30 June 31 December
2014 2015 2015 2014
R'000 R'000 GBP'000 GBP'000
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
245,289 405,274 Income 22,316 13,737
(92,172) (66,126) Operating expenses (3,638) (5,162)
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
153,117 339,148 Operating profit 18,678 8,575
(7,266) (5,330) Net finance costs (294) (407)
1,458 517 Finance income 28 82
(8,724) (5,847) Finance costs (322) (489)
----------------------- ------------------- -------------------- ---------------------------
145,851 333,818 Profit before taxation 18,384 8,168
137 289 Taxation 15 8
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
145,988 334,107 Profit for the period 18,399 8,176
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Other comprehensive loss -
items that may subsequently
be reclassified to profit
and loss:
Currency translation
differences
on the translation of Rand
- - denominated Group entities (12,900) (2,431)
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Total other comprehensive
loss recognised directly in
- - equity (12,900) (2,431)
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Total comprehensive income
145,988 334,107 for the period 5,499 5,745
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Profit for the period
attributable
to:
Equity holders of the
146,584 334,277 parent 18,408 8,210
(596) (170) Non controlling interests (9) (34)
---------------------------
145,988 334,107 18,399 8,176
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Total comprehensive
(MORE TO FOLLOW) Dow Jones Newswires
October 05, 2015 02:32 ET (06:32 GMT)
income/(loss)
attributable to:
Equity holders of the
146,584 334,277 parent 5,508 5,779
(596) (170) Non controlling interests (9) (34)
145,988 334,107 5,499 5,745
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Basic and diluted earnings
per ordinary share
attributable
to equity holders (in
181.77 317.81 cents/pence) 17.50 10.18
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Weighted average number of
shares (net of treasury
shares,
80,642 105,181 in thousands) 105,181 80,642
----------------------- ------------------- ---------------------------- -------------------- ---------------------------
Basic and diluted
headline
earnings per share ^
Profit for the period
attributable
to equity holders of the
146,584 334,277 parent 18,408 8,210
Adjusted for:
Loss on disposal of
- 62 equipment 3 -
- 875 Impairment of goodwill 46 -
Total tax effects of
- (262) adjustments (14) -
146,584 334,952 Headline earnings 18,443 8,210
----------------------- ------------------- --- -------------------------- -------------------- ---------------------------
Basic and diluted
headline
earnings per ordinary
share
attributable to equity
holders
181.77 318.45 (in cents/pence) 17.53 10.18
----------------------- ------------------- --- -------------------------- -------------------- ---------------------------
^ Disclosure of headline earnings has been provided in accordance with
the JSE Listings Requirements.
Consolidated statement of changes in equity
for the six months ended 30 June 2015
Capital Treasury Attributable Non
Share Share redemption shares Retained to equity controlling Total
capital premium reserve reserve earnings holders interests equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
---------- -------- ----------- --------- ---------- ------------- ------------ ----------
Balance as at 1
January
2014 574,672 21,468 52,173 (18,848) 674,101 1,303,566 365 1,303,931
Total comprehensive
income
for the year - - - - 146,584 146,584 (596) 145,988
Income for the
year - - - - 146,584 146,584 (596) 145,988
Other
comprehensive
income
for the year - - - - - - - -
---------- -------- ----------- --------- ---------- ------------- ------------ ----------
Transactions with
owners:
Purchase of
treasury
shares - - - (20,449) - (20,449) - (20,449)
Treasury shares
issued
for property
acquisition - 240 - 6,360 - 6,600 - 6,600
Treasury shares
issued
during the
year as part
of long term
Management
Incentive
Scheme - 1,435 - 23,653 (25,088) - - -
Equity settled
share based
payment - - - - 32,730 32,730 - 32,730
Reduction in
non
controlling
interests
arising on
acquisition
of further
shares in BFM - - - - (175) (175) 25 (150)
Dividend paid - - - - (18,464) (18,464) - (18,464)
Balance as at 31
December
2014 574,672 23,143 52,173 (9,284) 809,688 1,450,392 (206) 1,450,186
-------------------- ---------- -------- ----------- --------- ---------- ------------- ------------ ----------
Total comprehensive
income
for the period - - - - 334,277 334,277 (170) 334,107
---------- -------- ----------- --------- ---------- ------------- ------------ ----------
Income for the
period - - - - 334,277 334,277 (170) 334,107
Other
comprehensive
income
for the period - - - - - - - -
---------- -------- ----------- --------- ---------- ------------- ------------ ----------
Transactions with
owners:
Shares issued
for investment
acquisitions 1,950,299 677,038 - - - 2,627,337 - 2,627,337
Issue of shares
as part
of long term
Management
Incentive
Scheme 10,471 1,503 - - (11,974) - - -
Treasury shares
issued
during the
period as part
of the long
term
Management
Incentive
Scheme - 97 - 9,284 (9,381) - - -
Equity settled
share based
payment - - - - 2,432 2,432 - 2,432
Reduction in
non
controlling
interests
arising on
acquisition
of further
interest in
BFM - - - - (42) (42) 42 -
Dividends paid - - - - (11,748) (11,748) - (11,748)
Balance as at 30
June
2015 2,535,442 701,781 52,173 - 1,113,252 4,402,648 (334) 4,402,314
-------------------- ---------- -------- ----------- --------- ---------- ------------- ------------ ----------
Consolidated statement of changes in equity continued
for the six months ended 30 June 2015
Foreign
Currency
Capital Treasury Translation Attributable Non
Share Share redemption shares Reserve Retained to equity controlling Total
capital premium reserve reserve ("FCTR") earnings holders interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ----------- --------- ------------ --------- ------------- ------------ ---------
Balance as at 1
January
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October 05, 2015 02:32 ET (06:32 GMT)
2014 55,347 1,930 4,599 (1,248) (26,331) 40,485 74,782 22 74,804
Total comprehensive
income
for the year - - - - (2,431) 8,210 5,779 (34) 5,745
Income for the
year - - - - - 8,210 8,210 (34) 8,176
Other
comprehensive
loss
for the year - - - - (2,431) - (2,431) - (2,431)
-------- -------- ----------- --------- ------------ --------- ------------- ------------ ---------
Transactions with
owners:
Purchase of
treasury
shares - - - (1,147) - - (1,147) - (1,147)
Treasury shares
issued
for property
acquisition - 14 - 357 - - 371 - 371
Treasury shares
issued
during the
year as part
of long term
Management
Incentive
Scheme - 80 - 1,325 - (1,405) - - -
Equity settled
share based
payment - - - - - 1,833 1,833 - 1,833
Reduction in
non
controlling
interests
arising on
acquisition
of further
shares in BFM - - - - - (10) (10) 1 (9)
Dividend paid - - - - - (1,034) (1,034) - (1,034)
Balance as at 31
December
2014 55,347 2,024 4,599 (713) (28,762) 48,079 80,574 (11) 80,563
-------------------- -------- -------- ----------- --------- ------------ --------- ------------- ------------ ---------
Total comprehensive
income
for the period - - - - (12,900) 18,408 5,508 (9) 5,499
-------- -------- ----------- --------- ------------ --------- ------------- ------------ ---------
Income for the
period - - - - - 18,408 18,408 (9) 18,399
Other
comprehensive
loss
for the
period - - - - (12,900) - (12,900) - (12,900)
-------- -------- ----------- --------- ------------ --------- ------------- ------------ ---------
Transactions with
owners:
Shares issued
for investment
acquisitions 107,386 37,279 - - - - 144,665 - 144,665
Issue of shares
as part
of long term
Management
Incentive
Scheme 577 83 - - - (660) - - -
Treasury shares
issued
during the
period as part
of the long
term
Management
Incentive
Scheme - 5 - 713 - (516) 202 - 202
Equity settled
share based
payment - - - - - 134 134 - 134
Reduction in
non
controlling
interests
arising on
acquisition
of further
interest in
BFM - - - - - (2) (2) 2 -
Dividends paid - - - - - (647) (647) - (647)
Balance as at 30
June 2015 163,310 39,391 4,599 - (41,662) 64,796 230,434 (18) 230,416
-------------------- -------- -------- ----------- --------- ------------ --------- ------------- ------------ ---------
A 2013 final dividend of 14 South African cents, 0.80 pence, per ordinary share was paid on 30 May 2014.
A 2014 interim dividend of 9 South African cents, 0.49 pence per ordinary share was paid on 10 November
2014.
A 2014 final dividend of 14 South African cents, 0.77 pence per ordinary share was paid on 8 June 2015.
Consolidated statement of financial position
as at 30 June 2015
31 December 30 June 30 June 31 December
2014 2015 2015 2014
R'000 R'000 GBP'000 GBP'000
------------ ---------- -------------------------------------- --------- ------------
Assets
875 - Goodwill - 49
2,777 3,208 Deferred tax assets 167 154
1,189 1,079 Equipment 56 66
Financial assets at fair value
1,467,639 4,813,605 through profit and loss 251,944 81,532
468,218 2,983,436 Net investments in subsidiaries 156,153 26,011
867,612 1,734,013 Net investments in associates 90,758 48,199
131,809 96,156 Financial assets held for trading 5,033 7,322
Investments classified as loans
7,888 - and receivables - 438
155 150 Current tax assets 9 9
1,923 32,317 Trade and other receivables 1,691 107
63,020 19,727 Cash and cash equivalents 1,032 3,501
1,545,466 4,870,086 Total assets 254,899 85,856
------------ ---------- -------------------------------------- --------- ------------
Liabilities
(55) (141) Deferred tax liabilities (7) (3)
(15) (22) Other financial liabilities (1) (1)
(72,673) (440,000) Borrowings (23,030) (4,037)
- (72) Current tax liabilities (4) -
(22,537) (27,537) Trade and other payables (1,441) (1,252)
(95,280) (467,772) Total liabilities (24,483) (5,293)
------------ ---------- -------------------------------------- --------- ------------
1,450,186 4,402,314 Total net assets 230,416 80,563
------------ ---------- -------------------------------------- --------- ------------
Equity
574,672 2,535,442 Share capital 163,310 55,347
23,143 701,781 Share premium 39,391 2,024
52,173 52,173 Capital redemption reserve 4,599 4,599
(9,284) - Treasury shares reserve - (713)
Foreign currency translation
- - reserve (41,662) (28,762)
809,688 1,113,252 Retained earnings 64,796 48,079
Total equity attributable to
1,450,392 4,402,648 equity holders 230,434 80,574
(206) (334) Non controlling interests (18) (11)
1,450,186 4,402,314 Total equity 230,416 80,563
------------ ---------- -------------------------------------- --------- ------------
Net asset value per share (in
1,784 1,651 cents/pence) 86 99
------------ ---------- -------------------------------------- --------- ------------
Actual number of shares in
81,297 266,665 issue (net of treasury shares) 266,665 81,297
------------ ---------- -------------------------------------- --------- ------------
Consolidated statement of cash flows
for the six months ended 30 June 2015
Twelve months Six months Six months Twelve months
ended ended ended ended
31 December 30 June 30 June 31 December
2014 2015 2015 2014
R'000 R'000 GBP'000 GBP'000
-------------- ------------ ----------------------------------- ----------- --------------
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