extract group limited circular to extract … circular... · 3 action required by extract...
TRANSCRIPT
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTIONThe definitions and interpretations commencing on page 6 of this circular have, where appropriate, been used on this cover page.
If you are in any doubt as to the action you should take, please consult your broker, CSDP, banker, legal advisor, accountant or other professional advisor immediately.
Action requiredIf you have disposed of all your eXtract shares, then this circular, together with the accompanying notice convening the general meeting and form of proxy, should be forwarded to the purchaser to whom, or the broker, agent, CSDP or banker through whom, you disposed of your shares.
Beneficial shareholders who hold dematerialised shares through a CSDP or broker who wish to attend the general meeting must request their CSDP or broker to provide them with the necessary letter of representation to attend the general meeting or must instruct their CSDP or broker to vote on their behalf in terms of their respective agreements with their CSDP or broker.
eXtract shareholders are referred to page 3 of this circular, which sets out the detailed action required of them in respect of the corporate actions set out in this circular.
eXtract does not accept responsibility and will not be held liable for any failure on the part of the CSDP or broker of any holder of dematerialised eXtract shares to notify such shareholder of the corporate actions set out in this circular.
eXtract Group Limited(previously Eqstra Holdings Limited)
(Incorporated in the Republic of South Africa)(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZAE000223202(“eXtract” or “the company”)
CIRCULAR TO EXTRACT SHAREHOLDERSrelating to:• the restructure and recapitalisation of eXtract including:
– the delegation by MCC to enX of its debt owing to Eqstra Corporation under the first mezzanine loan to the value of R876 112 358 less an excluded amount of R250 000 000;
– the voluntary redemption by MCC of the MCC preference shares held by enX for R600 million;
– the set-off of various inter-company loans between eXtract and MCC through the issue of 1 002 234 000 new MCC shares equal in value to R501 117 000;
– the subscription by enX for the MCC designated shares to the value of R1 877 585 979 and the set-off of MCC’s aggregate indebtedness to enX against the subscription price payable by enX for the MCC designated shares;
– the exchange by enX of all of the MCC designated shares held by it for 3 755 171 958 new eXtract shares at 50 cents per eXtract share;
– the unbundling and distribution by enX of 3 861 041 279 eXtract shares to enX shareholders in the ratio of 21.39799 eXtract shares for every one enX share held;
• the approval of a waiver in terms of Regulation 86(4) of the Takeover Regulations requiring enX to make a mandatory offer to the remaining
eXtract shareholders;
• the authorisation to increase the authorised but unissued shares of eXtract;
• the consolidation of eXtract’s shares in the ratio of 200 to 1; and
• the disposal by eXtract of the excess assets over a period of 24 months to third parties,
and enclosing:• a report prepared by the independent expert in respect of the restructure in terms of regulation 86(7) of the Takeover Regulations;
• a report prepared by the independent expert in respect of the excess asset disposal;
• a notice of general meeting of eXtract shareholders;
• a form of proxy to vote at the general meeting of eXtract shareholders (for use by certificated shareholders and dematerialised shareholders who have elected own name registration only); and
• a form of surrender (to be completed by certificated shareholders only).
Joint corporate advisor and sponsor Joint corporate advisor Legal advisor to eXtract
Independent reporting accountants
Independent expert in respect of the restructure
Independent expert in respect of the excess asset disposal
Date of issue: 11 July 2017
This circular is available in English only. Copies of this circular are available on the company’s website at www.eXtractgroup.com and may also be obtained from the offices of eXtract, situated at 61 Maple Street, Pomona, Kempton Park, 1619 during normal office hours from the date of issue of this circular up to and including the date of the general meeting.
This circular should be read with the eXtract revised listing particulars posted with this circular.
CORPORATE INFORMATION
Company secretary and registered office Joint corporate advisorL MöllereXtract Group Limited(Registration number 1998/011672/06)61 Maple StreetPomonaKempton Park, 1619(PostNet Suite X86 Private Bag X7, Aston Manor, 1630)
Java Capital Proprietary Limited(Registration number 2012/089864/07)6A Sandown Valley CrescentSandownSandton, 2196(PO Box 2087, Parklands, 2121)
Sponsor Joint corporate advisorJava Capital Trustees and Sponsors Proprietary Limited(Registration number 2006/005780/07)6A Sandown Valley CrescentSandownSandton, 2196(PO Box 2087, Parklands, 2121)
BSM Black Proprietary Limited(Registration number 2016/342909/07)Ground Floor, Jindal Building22 Kildoon RoadBryanston, 2191
Independent reporting accountants Legal advisorDeloitte & ToucheRegistered Auditors(Practice number 902276)The Woodlands20 Woodlands DriveWoodmead, 2196(Private Bag X6, Gallo Manor, 2052)
Edward Nathan Sonnenbergs Inc.(Registration number 2006/018200/21)150 West StreetSandownSandton, 2196(PO Box 783347, Sandton, 2146)
Independent expert Independent expertKPMG Services Proprietary Limited(Registration number 1999/012876/07)KPMG Crescent, 85 Empire RoadParktown, 2193(Private Bag 9, Parkview, 2122)
BDO Corporate Finance Proprietary Limited(Registration number 1983/002903/07)22 Wellington RoadParktown, 2195(Private Bag X60500, Houghton, 2014)
Transfer secretaries Date and place of incorporation of the companyComputershare Investor Services Proprietary Limited(Registration number 2004/003647/07)Rosebank Towers, 15 Biermann Avenue,Rosebank, 2196(PO Box 61051, Marshalltown, 2107)
Incorporated on 19 June 1998 in the Republic of South Africa
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TABLE OF CONTENTS
The definitions and interpretations commencing on page 6 of this circular have been used in the following table of contents.Page
Corporate information Inside front coverAction required by eXtract shareholders 3Salient dates and times 5Definitions and interpretations 6
Circular to shareholders1. Introduction 132. Overview of eXtract 143. Overview of enX 144. Prospects and strategy of eXtract 15
Part I: The restructure5. Background 166. Rationale for eXtract to reposition and recapitalise 167. Rationale for enX to convert the designated debt to equity and unbundle eXtract shares 178. Material terms of the restructure 189. Conditions precedent 2010. Restructure of debt facilities 2011. Financial support granted by enX 2012. Related party transaction 2013. Waiver of mandatory offer 2114. Vendors 22
Part II: The excess asset disposal15. Introduction and rationale for the excess asset disposal 2316. Excess asset disposal terms and conditions 2317. Categorisation of the excess asset disposal 2618. Cash company 2619. Fairness opinion 2720. Undertakings to vote in favour of the excess asset disposal 27
Part III: The authorised share increase and consolidation21. Authorised share increase 2822. The consolidation 2823. Procedure to be followed in respect of the consolidation 28
Part IV: Financial information24. Pro forma financial information 3025. Historical financial information 3026. Share price history 30
Part V: General27. General meeting 3128. Opinion and recommendation of the eXtract board 3129. Shares in issue 3130. Major and controlling shareholders 3231. Interests of eXtract and its directors in eXtract and enX 33
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Page32. Interests of enX and its directors in eXtract and enX 3533. Material borrowings 3934. Material contracts 3935. Material changes 3936. Adequacy of capital 3937. Litigation statement 4038. Consents 4039. Conflicts of interest 4040. Preliminary and issue expenses 4141. Directors’ responsibility statement 4142. Documents available for inspection 41
Annexure 1 Pro forma financial information 43Annexure 2 Independent reporting accountants’ assurance report on the compilation
of pro forma financial information 51Annexure 3 Historic financial information of eXtract 53Annexure 4 Share price history 129Annexure 5 The independent expert’s report in respect of the restructure 133Annexure 6 The independent expert’s report in respect of the excess asset disposal 136Annexure 7 Table of entitlement 140Annexure 8 Dealings in eXtract shares by shareholders who gave undertakings 143Annexure 9 Material contracts of eXtract 145Annexure 10 Abridged shareholder and funding structure 150
Notice of general meeting of eXtract shareholders 152Form of proxy for eXtract shareholders AttachedForm of surrender (for use by certificated shareholders only) Attached
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ACTION REQUIRED BY EXTRACT SHAREHOLDERS
The definitions and interpretations commencing on page 6 of this circular apply to this section.
If you have disposed of all your eXtract shares, then this circular, together with the accompanying notice convening the general meeting and form of proxy, should be forwarded to the purchaser to whom, or the broker, agent, CSDP or banker through whom, you disposed of your shares.
Please take careful note of the following provisions regarding the action to be taken by shareholders.
1. THE GENERAL MEETING
A shareholders’ general meeting will be held at 10:00 on Thursday, 10 August 2017 at the registered office of eXtract at 61 Maple Street, Pomona, Kempton Park, 1619, for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions required to approve, inter alia, the restructure and the excess asset disposal. A notice convening such general meeting is attached hereto, and forms part of this circular.
1.1 Dematerialised shareholders who do not have own name registration
1.1.1 If you wish to attend the general meeting, you should instruct your CSDP or broker to issue you with the necessary letter of representation to attend the general meeting in person, in the manner stipulated in the custody agreement governing the relationship between you and your CSDP or broker. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature.
1.1.2 If you do not wish to, or are unable to attend the general meeting, but wish to vote thereat, you should provide your CSDP or broker with your voting instructions in the manner stipulated in the custody agreement governing the relationship between you and your broker. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature. If your CSDP or broker does not obtain voting instructions from you, it will be obliged to vote in accordance with the instructions contained in the custody agreement concluded between you and your CSDP or broker.
1.1.3 You must not complete the attached form of proxy.
1.2 Dematerialised shareholders who have own name registration
1.2.1 You may attend, speak and vote at the general meeting in person, subject to sections 57 and 58 of the Companies Act.
1.2.2 If you do not wish to or are unable to attend the general meeting but wish to be represented thereat, you should complete the attached form of proxy in accordance with the instructions contained therein and ensure that it is received by the transfer secretaries, Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 (PO Box 61051, Marshalltown, 2107) ([email protected]) by no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time.
1.3 Certificated shareholders
1.3.1 You may attend the general meeting and speak and vote thereat, subject to sections 57 and 58 of the Companies Act.
1.3.2 If you do not wish to or are unable to attend the general meeting but wish to be represented thereat, you should complete the attached form of proxy in accordance with the instructions contained therein and ensure that it is received by the transfer secretaries, Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 (PO Box 61051, Marshalltown, 2107) ([email protected]) by no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time.
1.4 Electronic participation at the general meeting
Shareholders or their proxies may participate in the general meeting by way of a teleconference call and, if they wish to do so:
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1.4.1 must contact the transfer secretaries (by email to [email protected]) by no later than 10:00 Monday, 7 August 2017 in order to obtain a secure code and instructions to access the conference call;
1.4.2 will be required to provide reasonably satisfactory identification; and
1.4.3 will be billed separately by their own telephone service providers for their telephone call to participate in the general meeting,
provided that shareholders and their proxies will not be able to vote telephonically at the general meeting and will still need to appoint a proxy to vote on their behalf at the general meeting.
2. CONSOLIDATION
The following does not apply to dematerialised shareholders. The accounts of dematerialised shareholders at their CSDP or broker will automatically be updated to reflect the consolidation.
2.1 In order for certificated shareholders to receive new share certificates showing the revised capital structure after the consolidation, they are requested to surrender their original share certificates or other documents of title to the transfer secretaries. A form of surrender which is attached to this circular must be sent, together with the relevant documents of title, to the transfer secretaries.
2.2 Replacement share certificates will be posted by registered post at the risk of the addressee on the dates to be published in the consolidation finalisation announcement, which dates are dependent upon when the requisite resolutions are filed by CIPC. The date by which documents of title are to be received by the transfer secretaries will also be published in the finalisation announcement.
2.3 Additional copies of the form of surrender are available on request from the transfer secretaries. If any person who is not the registered holder of shares in the company or the company lodges with the transfer secretaries a share certificate or a certified transfer deed or other valid document of title for shares in the company together with a properly completed transfer form for registration of the said shares, then a share certificate in the name of the transferee named in the abovementioned transfer form for the appropriate shares will be posted by registered post at the risk of the addressee, to the transferee’s address reflected on such transfer form, provided that no replacement certificates have already been issued in respect of the documents of title so lodged.
2.4 The company uses the “certified transfer deeds and other temporary Documents of Title” procedure approved by the JSE and, therefore, will issue only one “block” certificate for each surrender.
2.5 The new share certificates will be restrictively endorsed if the existing share certificates or other documents of title lodged are restrictively endorsed under the exchange control regulations or if the address of the certificated shareholder concerned is outside the Common Monetary Area. If the share certificates represent blocked assets of a former resident of South Africa, the new certificate will be sent to the authorised dealer in foreign exchange in South Africa controlling such former resident’s blocked assets.
2.6 All non-residents must give the name and address of the authorised dealer in foreign exchange in South Africa to whom, where applicable, share certificates must be sent as set out above in the space provided, on the attached form of surrender. The company will retain the share certificates until such information is provided.
2.7 If the non-resident is not a former resident, the share certificate will be sent to the address of the non-resident concerned appropriately endorsed.
2.8 A new certificate will not be despatched to a holder before that holder has surrendered the relevant certificate or other documents of title in respect of the shares held by him, provided that if any holder produces evidence to the satisfaction of the company that the certificate in respect of any shares has been lost or destroyed, the company may, in its discretion, dispense with the surrender of such certificate against the provision of an indemnity acceptable to the company.
2.9 No receipt will be issued in respect of documents of title which have been surrendered unless specifically requested. Lodging agents who require a receipt should prepare one and lodge it with the documents for stamping.
The company does not accept responsibility and will not be held liable for any failure or omission on the part of the CSDP or broker of a dematerialised shareholder to notify such shareholder of the general meeting or any business to be conducted thereat. The company does not accept responsibility for the failure of any shareholder to comply with any of the procedures set out above.
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SALIENT DATES AND TIMES
The definitions and interpretations commencing on page 6 of this circular apply to this section.
2017
Record date to receive circular (together with the notice convening the general meeting) Friday, 30 June
Circular (together with the notice convening the general meeting) posted Tuesday, 11 July
Announcement relating to the issue of the circular (together with the notice convening the general meeting) released on SENS Tuesday, 11 July
Announcement relating to the issue of the circular (together with the notice convening the general meeting) published in the press Wednesday, 12 July
Last day to trade in order to be eligible to vote at the general meeting Tuesday, 25 July
Voting record date Friday, 28 July
Last day forms of proxy should be lodged with the transfer secretaries for the general meeting (by 10:00), failing which forms of proxy may be handed to the chairman any time Monday, 7 August
General meeting held at 10:00 Thursday, 10 August
Results of the general meeting released on SENS Thursday, 10 August
Special resolutions and CIPC documents for eXtract relating to the consolidation and the authorised share increase submitted to CIPC on Friday, 11 August
Expected date special resolution for eXtract relating to the consolidation and the authorised share increase filed by CIPC Friday, 25 August
Expected date the restructure is implemented Monday, 28 August
Expected date the consolidation finalisation announcement is published on SENS by 11:00 on Tuesday, 12 September
Expected last day to trade in existing eXtract shares prior to the consolidation Tuesday, 19 September
Expected date trading in consolidated eXtract shares under new ISIN ZAE000246013 commences Wednesday, 20 September
Expected date the price for fractional entitlements is announced on SENS by 11:00 on Thursday, 21 September
Expected record date for the consolidation at close of business on Friday, 22 September
Expected date dematerialised shareholders will have their accounts at their CSDP or broker updated to reflect the consolidated eXtract shares Tuesday, 25 September
Expected date of issue of new replacement share certificates to certificated shareholders, provided that the old share certificates have been lodged by 12:00 on Friday, 22 September 2017 (share certificates received after this time will be posted within five business days of receipt) Tuesday, 25 September
Notes:
1. All dates and times in this circular are local dates and times in South Africa.2. The above dates and times are subject to change. Any changes will be released on SENS and, if required, published in the press.3. Shareholders should note that as transactions in eXtract shares are settled in the electronic settlement system used by Strate, settlement of trades takes
place three business days after such trade. Therefore, shareholders who acquire eXtract shares after Tuesday, 25 July 2017 will not be eligible to vote at the general meeting.
4. In order to ensure an orderly arrangement of affairs at the general meeting, forms of proxy should be lodged with the transfer secretaries by 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time.
5. If the general meeting is adjourned or postponed, forms of proxy submitted for the initial general meeting will remain valid in respect of any adjournment or postponement of the general meeting.
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DEFINITIONS AND INTERPRETATIONS
In this circular and the annexures hereto, unless inconsistent with the context, an expression which denotes a gender includes the other genders, a natural person includes a juristic person and vice versa, the singular includes the plural and vice versa and the expressions set out in the first column bear the meaning assigned to them in the second column.
“Act” or “Companies Act” the South African Companies Act, No 71 of 2008, as amended from time to time;
“authorised share increase” the increase of eXtract’s authorised shares, as detailed in paragraph 21 of this circular;
the “board” or “eXtract board” the board of directors of eXtract;
“Buildmax” Buildmax Limited (Registration number 1995/012209/06) a public company duly incorporate in accordance with the laws of South Africa and listed on the main board of the JSE;
“business day” any day other than a Saturday, Sunday or official public holiday in South Africa;
“CapLeverage” CapLeverage Proprietary Limited (Registration number 2012/104071/07) a private company duly incorporated in accordance with the laws of South Africa. The shareholders of CapLeverage are Paul Baloyi (as to 45%), O’Flaherty Projects Proprietary Limited (of which Paul O’Flaherty is a director) (as to 25%), Nombulelo Moholi (as to 20%), Alon Fowler (as to 5%), Paul Kibuka (as to 2.5%) and Letu Matlala (as to 2.5%);
“ certificated shareholders” or “certificated eXtract shareholders”
shareholders who hold certificated shares;
“certificated shares” or “certificated eXtract shares”
shares which have not yet been dematerialised into the Strate system, title to which is represented by physical documents of title;
“CIPC” the Companies and Intellectual Property Commission;
this “circular” or “category 1 circular” or “eXtract circular”
this circular, dated Tuesday, 11 July 2017, including all annexures thereto;
“CGT” capital gains tax as levied in terms of Schedule 8 of the Income Tax Act;
“closing date” the fifth business day following the date upon which the restructure agreement becomes unconditional in all respects, unless a different date is agreed by the parties to the restructure agreement;
“CMPR division” the Contract Mining and Plant Rental division of eXtract, which was the sole remaining asset of eXtract after the implementation of the Eqstra transaction;
“Common Monetary Area” South Africa, the Republic of Namibia and the Kingdoms of Lesotho and Swaziland;
“Common Terms Agreement” the common terms agreement entered into on 21 October 2016 between inter alia, the lenders, eXtract and MCC, as amended from time to time;
“conditions precedent to the restructure” the outstanding conditions precedent to the restructure as set out in paragraph 9 of this circular;
“consolidation” or “share consolidation” the consolidation of the authorised and issued shares of eXtract on a 200 to 1 basis as detailed in paragraph 22 of this circular;
“consolidation finalisation announcement” the announcement to be released on SENS notifying eXtract shareholders that CIPC has filed the special resolution relating to the consolidation, and further notifying shareholders of the salient dates for the consolidation;
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“CSDP” Central Securities Depository Participant;
“ dematerialised shareholders” or “dematerialised eXtract shareholders”
shareholders who hold dematerialised shares;
“ dematerialised shares” or “dematerialised eXtract shares”
shares which have been incorporated into the Strate system, title to which is no longer represented by physical documents of title;
“designated debt” an amount equal to the aggregate balance of the second mezzanine loan, the redemption loan and the enX claim, being an amount of R1 877 585 979;
“director” a director of eXtract;
“documents of title” share certificates, certified transfer deeds, balance receipts and any other documents of title to eXtract shares acceptable to the eXtract board;
“employee transfer date” the first day of the month following the Tharisa effective date;
“enX” enX Group Limited (Registration number 2001/029771/06), a public company listed on the JSE and duly incorporated in accordance with the laws of South Africa;
“enX board” the board of directors of enX;
“enX claim” an amount equal to the outstanding balance of the first mezzanine loan, less the excluded amount, which is delegated by MCC to enX and in relation to which MCC credits a loan account in the name of enX in its books of account in an amount equal to the outstanding balance of the first mezzanine loan less the excluded amount;
“enX group” enX and its subsidiaries as at the last practical date;
“EPS” earnings per share;
“Eqstra Botswana” Eqstra Botswana Proprietary Limited (in Liquidation), a wholly-owned subsidiary of eXtract, (Registration number 2001/1350) a private company registered and incorporated in accordance with the laws of the Republic of Botswana;
“Eqstra Corporation” Eqstra Corporation Limited (Registration number 1984/007045/06), a public company duly incorporated in accordance with the laws of South Africa and wholly-owned by enX;
“Eqstra transaction” the acquisition by enX through a series of related and inter-conditional transactions during November 2016, of the IE division and the FML division from eXtract, as detailed in Annexure 9 to this circular;
“excess assets” mining equipment (including the Tharisa assets), immovable property (including the MCC properties) and moveable property, leasing assets, inventory, investments and other related assets owned by the eXtract group that are no longer required by eXtract group for its operational needs as a result of the termination of mining operations and/or assets being under-utilised;
“excess asset disposal” the proposed disposal by the eXtract group of the excess assets in one or more transactions, including the Tharisa transaction, the Sandton Plant transaction and the Indonesia transaction;
“Exchange Control Regulations” the Exchange Control Regulations, promulgated in terms of section 9 of the Currency and Exchanges Act, No 9 of 1933, as amended from time to time;
“excluded amount” an amount of R250 000 000 which will remain a debt owing by MCC to Eqstra Corporation on substantially the same terms of the first mezzanine loan save that it shall be subordinated to the lenders and shall be interest free, with repayment subject to a waterfall agreed with the lenders and eXtract;
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“eXtract” or “company” eXtract Group Limited (Registration number 1998/011672/06) (formerly Eqstra Holdings Limited), a public company listed on the JSE and duly incorporated in accordance with the laws of South Africa;
“eXtract consideration shares” the 3 755 171 958 eXtract shares to be allotted and issued to enX in terms of the restructure at an issue price of 50 cents per eXtract share;
“eXtract group” or “group” eXtract and its subsidiaries as at the last practical date;
“Financial Markets Act” Financial Markets Act, No. 19 of 2012, as amended or replaced from time to time;
“first mezzanine loan” the loan advanced by Eqstra Corporation to MCC in terms of a written mezzanine loan agreement entered into between MCC and Eqstra Corporation on 21 October 2016. As at the last practical date, the outstanding balance is R876 112 358;
“FML division” eXtract’s Fleet Management and Logistics division, comprising various eXtract subsidiaries, acquired by enX as part of the Eqstra transaction;
“foreign shareholder” an eXtract shareholder who is a non-resident of South Africa, as contemplated in the Exchange Control Regulations;
“general meeting” the general meeting of eXtract shareholders (including any adjournment or postponement thereof ), to be held at 10:00 on Thursday, 10 August 2017 at the registered office of the company, called for the purpose of passing, with or without modification, the resolutions set out in the notice of general meeting attached to this circular;
“HEPS” headline earnings per share;
“IE division” eXtract’s Industrial Equipment division, comprising various eXtract subsidiaries, acquired by enX as part of the Eqstra transaction;
“IFRS” International Financial Reporting Standards;
“Income Tax Act” the Income Tax Act, No. 58 of 1962, as amended from time to time;
“ independent expert in respect of the restructure”
KPMG Services Proprietary Limited (Registration number 1999/012876/07), the independent expert appointed by the eXtract board to provide an opinion, as required in terms of the Companies Act and the Listings Requirements for the restructure;
“ independent expert in respect of the excess asset disposal”
BDO Corporate Finance Proprietary Limited (Registration number 1983/002903/07), the independent expert appointed by the eXtract board to provide an opinion for the excess asset disposal;
“ independent reporting accountants” or “Deloitte”
Deloitte & Touche (practice number 902276), a limited partnership established in South Africa, full details of which are set out in the corporate information section;
“Indonesia agreement” the term sheet dated 1 June 2017, concluded between Buildmax and eXtract regarding the Indonesia transaction;
“Indonesia transaction” the acquisition by Buildmax of 99% of the issued shares in PT MCC from eXtract, as set out more fully in paragraph 16.10 of this circular;
“initial payment date” the date on which R250 million of the purchase consideration for the Tharisa assets is paid, which shall be within 30 days of the fulfilment or waiver, as the case may be, of the Tharisa conditions;
“Investment Fund” an investment company to be established by eXtract to identify funding opportunities;
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“Java Capital” in its capacity as sponsor to the company, Java Capital Trustees and Sponsors Proprietary Limited (Registration number 2006/005780/07), and in its capacity as joint corporate advisor to the company, Java Capital Proprietary Limited (Registration number 2012/089864/07), both private companies duly incorporated in accordance with the laws of South Africa;
“joint restructure announcement” the joint announcement released on SENS on 18 April 2017 by eXtract and enX in respect of the restructure and excess asset disposal, as read with further joint announcement, setting out the revised terms of the restructure, which was released on SENS on 21 June 2017;
the “JSE” JSE Limited (Registration number 2005/022939/06), a public company duly incorporated in accordance with the laws of South Africa and licensed as an exchange under the Financial Markets Act;
the “last practical date” Friday, 30 June 2017, being the last practical date prior to the finalisation of this circular;
“legal advisor” or “ENS” Edward Nathan Sonnenbergs Inc. (Registration number 2006/018200/21), a personal liability company duly incorporated in accordance with the laws of South Africa;
“lenders” ABSA Bank Limited (acting through its Corporate and Investment Banking division), HSBC Bank plc (acting through its Johannesburg branch), Nedbank Limited (acting through its Corporate and Investment Banking division), FirstRand Bank Limited (acting through its Rand Merchant Bank division) and The Standard Bank of South Africa Limited (acting through its Corporate and Investment Banking division);
“Listings Requirements” the Listings Requirements as amended from time to time by the JSE, whether by way of practice note or otherwise;
“mandatory offer” the potential mandatory offer of 50 cents per eXtract share in terms of section 123 of the Companies Act that may be required to be made to eXtract shareholders as a result of the issue of the eXtract consideration shares to enX pursuant to the restructure;
“MCC” MCC Contracts Proprietary Limited (Registration number 1983/008084/07), a private company duly incorporated in accordance with the laws of South Africa, a wholly-owned subsidiary of eXtract;
“MCC designated shares” 3 755 171 958 ordinary no par value shares in the authorised but unissued share capital of MCC;
“MCC preference shares” 400 cumulative redeemable non-participating preference shares having a value of R1 500 000 each in the authorised and issued share capital of MCC held by enX having an aggregate issue price of R600 million;
“MCC properties” the following immovable properties registered in the name of MCC, situated at 60 Rodio Place, Midrand Industrial Park, Gauteng: (1) portion 188 of the Farm Allandale 10; (2) Portion 1 of Erf 15 Commercia Extension 15; (3) Erf 2685 Commercia Extension 5; and (4) Erf 2686 Commercia Extension 8;
“MOI” the existing memorandum of incorporation of eXtract;
“NAV” net asset value;
“NTAV” net tangible asset value;
“ own name dematerialised shareholders” or “own name dematerialised eXtract shareholders”
dematerialised shareholders who/which have elected own name registration;
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“own name registration” dematerialised shareholders who have instructed their CSDP to hold their eXtract shares in their own name on the uncertificated securities register;
“PPM” Pilanesberg Platinum Mines Proprietary Limited (Registration number 2002/015572/07), a private company duly incorporated in accordance with the laws of South Africa;
“PT MCC” PT MCC Extraction Solutions Proprietary Limited (Registration number 127/1/IP/PMA/2017), a private company duly incorporated in accordance with the laws of Indonesia and a wholly-owned subsidiary of eXtract;
“PT MCC loan” the existing shareholder loan claims currently held by eXtract against PT MCC, the gross value of which shall not exceed R20 million;
“R” or “Rand” South African Rand;
“redemption amount” an amount of R600 million in respect of the MCC preference shares;
“register” eXtract’s securities register, including the uncertificated securities register;
“restructure” the series of inter-conditional transactions between eXtract, MCC, Eqstra Corporation and enX, as more fully provided for in the restructure agreement in respect of the restructuring of the eXtract group’s debt and recapitalisation of eXtract and the subsequent unbundling, as detailed in Part I of this circular;
“restructure agreement” the agreement entered into between eXtract, MCC, Eqstra Corporation and enX dated 13 April 2017 in respect of the restructure, as varied by a first addendum thereto dated 1 June 2017 the second addendum thereto dated 21 June 2017 and the third addendum thereto dated 5 July 2017, the salient features of which are set out in Part I of this circular;
“revised listing particulars” the revised listing particulars of eXtract dated Tuesday, 11 July 2017 accompanying this circular and providing additional information in relation to the eXtract group after the implementation of the restructure and excess asset disposal;
“Sandton Plant” Sandton Plant Hire (East) Proprietary Limited (Registration number 2006/020554/07), a private company duly incorporated in accordance with the laws of South Africa;
“Sandton Plant agreement” the agreement of sale and agreement of sale and lease concluded between MCC and Sandton Plant on 2 June 2017 in respect of the disposal of the MCC properties to Sandton Plant;
“Sandton Plant transaction” the disposal by MCC of the MCC properties to Sandton Plant for an aggregate consideration of R52 million;
“SARB” the South African Reserve Bank;
“second mezzanine loan” the loan advanced by enX to in terms of a written mezzanine loan agreement entered into between MCC and enX on 21 October 2016. As at the last practical date the outstanding balance is R651 473 621;
“SENS” the Stock Exchange News Service, the news service operated by the JSE;
“share” or “ordinary share” or “eXtract share” an ordinary share of no par value of the company;
“ shareholders”, “ordinary shareholders” or “eXtract shareholders”
the registered holders of shares;
“South Africa” the Republic of South Africa;
“Strate” Strate Proprietary Limited (Registration number 1998/022242/07), a private company duly incorporated in accordance with the laws of South Africa, which is a registered central securities depository and which is responsible for the electronic settlement system used by the JSE;
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“STT” securities transfer tax levied in terms of the Securities Transfer Act, No. 25 of 2007;
“Takeover Regulations” Chapter 5 of the Regulations to the Companies Act, 2011, published in terms of the Companies Act;
“Tharisa” Tharisa Minerals Proprietary Limited (Registration number 2006/009544/07), a private company duly incorporated in accordance with the laws of South Africa. Tharisa is a subsidiary of Tharisa plc;
“Tharisa agreement” the binding term sheet concluded between MCC, Tharisa plc and Tharisa on 10 May 2017 in respect of the disposal of the Tharisa assets and which term sheet will be encompassed and superseded by a definitive legal agreement to be entered into by the aforesaid parties;
“Tharisa assets” MCC’s existing equipment, strategic components, site infrastructure and spare parts at the Tharisa Mine together with additional excess assets not situated at the Tharisa mine being disposed of for an aggregate consideration of R303 468 428;
“Tharisa conditions” the conditions precedent to the Tharisa agreement, as detailed in paragraph 16.8.2 of this circular;
“Tharisa effective date” the first business day after the fulfilment or waiver, as the case may be, of the Tharisa conditions;
“Tharisa plc” Tharisa plc (Registration number HE223412) a company duly incorporated in accordance with the laws of the Republic of Cyprus and listed on the JSE;
“Tharisa transaction” the disposal of the Tharisa assets to Tharisa in terms of the Tharisa agreement;
“transfer secretaries” or “Computershare” Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07), a private company duly incorporated in accordance with the laws of South Africa;
“TRP” the Takeover Regulation Panel, established pursuant to section 196 of the Companies Act;
“unbundled eXtract shares” the 3 861 041 279 eXtract shares to be unbundled by enX to enX shareholders in terms of the unbundling, being 3 755 171 958 eXtract consideration shares, 101 400 000 eXtract shares enX acquired pursuant to the Eqstra transaction and 4 469 321 eXtract shares held by Eqstra Corporation, which are to be sold by Eqstra Corporation to enX for a purchase consideration of 50 cents per eXtract share;
“unbundling” the unbundling on the unbundling date of the unbundled eXtract shares to enX shareholders registered as such on the unbundling record date, by way of a distribution in specie in terms of section 46 of the Companies Act, in the ratio of 21.39799 eXtract shares for every one enX share held at the close of business on the unbundling record date;
”unbundling date” the date that enX announces on SENS that it will unbundle and distribute the unbundled eXtract shares, and being a date which is not later than 30 days following the closing date (or such later date as the parties may agree in writing), which is expected to be at the commencement of trade on Monday, 11 September 2017;
“unbundling finalisation announcement” the date upon which all conditions precedent to the unbundling are fulfilled and the unbundling becomes irrevocable, which is expected to be Tuesday, 29 August 2017;
“unbundling record date” the date upon which an enX ordinary shareholder must be recorded in the register in order to participate in the unbundling on the unbundling date, which is expected to be at the close of trade on Friday, 8 September 2017;
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“uncertificated securities register” the record of dematerialised eXtract shareholders administered and maintained by a CSDP and which forms part of the register;
“voting record date” the date on, and the time at which a shareholder must be recorded in the securities register of the company in order to vote at the general meeting, being the close of business on the Friday of the week immediately preceding the date of the general meeting, or such other date or time as the JSE may direct;
“VAT” value added tax as defined in the Value Added Tax Act, 1991, as amended;
“VWAP” volume weighted average traded price per eXtract share;
“waiver” the waiver of the mandatory offer in terms of Regulation 86(4) of the Takeover Regulations by more than 50% of eXtract shareholders (excluding enX) by way of a resolution passed at the general meeting; and
“Wild Rose Capital” Wild Rose Capital Proprietary Limited (Registration number 2012/069330/07) a private company duly incorporated in accordance with the laws of South Africa. The shareholders of Wild Rose Capital are Paul Mansour, The David Brouze Trust, The JSF Family Trust (of which Jarrod Friedman is a trustee and beneficiary), Christian Neuberger and The SADES Family Trust (of which Steven Joffe is a trustee and beneficiary).
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eXtract Group Limited(previously Eqstra Holdings Limited)
(Incorporated in the Republic of South Africa)(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZAE000223202(“eXtract” or “the company”)
DirectorsBernard Swanepoel (Executive chairman)Clinton Halsey (Acting chief executive officer)David Chadinha (Financial director)Octavia Matloa*Khetiwe McClain*Sipho Nkosi (Lead)*Jannie Serfontein#
# Non-executive director* Independent non-executive director
CIRCULAR TO SHAREHOLDERS
1. INTRODUCTION
1.1 In the joint restructure announcement released on SENS on 18 April 2017, and the further joint announcement released on SENS on 21 June 2017, enX and eXtract shareholders were informed of the proposed eXtract restructure, recapitalisation and unbundling of eXtract shares to enX shareholders, as set out more fully in Part I of this circular, as well as the proposed excess asset disposal by the eXtract group, as set out more fully in Part II of this circular.
1.2 The restructure, recapitalisation and unbundling comprises a series of inter-conditional transactions. The subscription by enX for the MCC designated shares and the subsequent exchange by enX of the MCC designated shares for the eXtract subscription shares, as set out in steps 4 and 5 of the restructure, constitute a category 1 transaction for eXtract in terms of the Listings Requirements, requiring the approval of eXtract’s shareholders by way of an ordinary resolution passed at a general meeting. As the enX group holds c.20.9% of the eXtract shares in issue, steps 4 and 5 of the restructure also constitute a related party transaction for eXtract in terms of the Listings Requirements, requiring the approval of eXtract’s shareholders by way of an ordinary resolution passed at a general meeting, excluding the votes of enX and its associates. In addition, the restructure will increase the total number of eXtract shares in issue by more than 50%. Accordingly, as is required in terms of the Listings Requirements, revised listing particulars have been prepared and posted to shareholders together with this circular.
1.3 In order to give effect to the restructure, eXtract intends to increase its authorised share capital by the creation of an additional 8.5 billion no par value shares. Following the implementation of the restructure, eXtract intends to consolidate its authorised and issued shares in the ratio of 200 to 1 (such that each shareholder will hold one share post-consolidation for every 200 shares held before the consolidation).
1.4 The excess asset disposal constitutes a category 1 transaction for eXtract in terms of the Listings Requirements, requiring the approval of eXtract’s shareholders by way of an ordinary resolution passed at a general meeting. Pursuant to, and as part of, the excess asset disposal:
1.4.1 as announced on SENS on 11 May 2017, MCC concluded the Tharisa transaction with Tharisa;
1.4.2 as announced on SENS on 9 June 2017, MCC concluded the Sandton Plant transaction; and
1.4.3 eXtract concluded the Indonesia transaction.
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1.5 The purpose of this circular is, inter alia, to:
1.5.1 provide shareholders with information regarding the restructure, the excess asset disposal, the authorised share increase and the consolidation and the manner in which they will be implemented; and
1.5.2 convene a general meeting of shareholders to be held at 10:00 on Thursday, 10 August 2017.
2. OVERVIEW OF EXTRACT
The eXtract group comprises mainly MCC’s CMPR division. MCC is a provider of opencast contract mining services including drilling, blasting, load hauling and rehabilitation. This business has one of the largest opencast contract mining equipment fleets in South Africa. The plant rental and leasing component of the business provides customised short- and long-term rental and leasing of heavy earth moving equipment within the mining sector.
3. OVERVIEW OF enX
enX is a diversified industrial group that provides quality branded industrial, petrochemical, and fleet management and logistics products and services. enX is organised into three business segments as follows:
3.1 enX Equipment (“Equipment”):
3.1.1 EIE provides distribution, rental and value added services for industrial and materials handling equipment in South Africa, other African countries, the United Kingdom (“UK”) and Ireland. EIE in South Africa is the market leader in materials handling and the sole distributor of Toyota Forklifts, BT warehousing equipment and Konecranes heavy duty forklifts and container handling equipment in sub-Sahara Africa. Its UK operation, Impact, is the exclusive distributor for Cat Lift Trucks and Konecranes heavy duty forklifts and container handling equipment in the UK and Ireland (“EIE”);
3.1.2 New Way Power manufactures, installs and maintains diesel generators as well as provides temporary power through Genmatics. It distributes a range of industrial and marine engines and components through PowerO2 which is the sole distributor of John Deere and Mitsubishi industrial engines in South Africa (“Power”); and
3.1.3 Austro Proprietary Limited, a wholly-owned subsidiary of enX, distributes professional woodworking equipment, tooling, edging and provision of associated services such as blade sharpening and equipment maintenance. It is the sole distributor of Biesse equipment and Leitz tooling in South Africa (“Wood”).
3.2 enX Fleet (“Fleet”):
Eqstra Fleet Management and Logistics business provides a full spectrum of passenger vehicle services including leasing, fleet management, outsourcing solutions, maintenance, warranty management and vehicle tracking solutions. It also provides fleet management solutions for commercial vehicle fleet owners and logistics solutions. Its footprint is in South Africa and sub-Saharan Africa. The commercial vehicle operations are supported by a nationwide network of workshops and panel repair shops (“EFML”).
3.3 enX Petrochemicals (“Petrochemicals”):
3.3.1 Centlube and African Group Lubricants produce and market oil lubricants in South Africa. They are the sole distributors of ExxonMobil lubricants (excluding marine and aviation); and
3.3.2 West African International and enX Polymers distribute plastics, polymers, rubber and speciality chemicals into Southern African. They are the sole agents and distributors of ExxonMobil chemicals in South Africa.
enX has a proven track record of acquiring quality industrial assets that have strong market positions, represent leading global brands with committed customer partnerships. enX instils entrepreneurial management to drive returns through the disciplined allocation of capital. enX was founded in 2007, operates in fourteen countries and has over 2400 employees.
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4. PROSPECTS AND STRATEGY OF EXTRACT
4.1 Following the Eqstra transaction, the operating environment for contract mining has been difficult, with the eXtract group continuing to report operational losses at key operations.
4.2 The contract mining business has been under pressure due to several factors, notably the decline in commodity prices in 2015 resulting in mining companies reducing production and in a highly competitive market resulting in lower contract mining rates, wherein the pricing power resides with the mining company and the risks of the operations often reside with the contract miner. During the fourth quarter of 2016, the negative impact was further felt by the opencast mining contract with Boteti Mining Proprietary Limited in Botswana being terminated (as announced on SENS on 5 December 2016). Together with the PPM contract proving to be suboptimal and Tharisa notifying the eXtract group of its intention to pursue an owner operator model.
4.3 The remaining contracts currently operate under a satisfactory model and will be continued until the contracts expire, are terminated by mutual agreement, or the assets within such remaining contracts are disposed of as a going concern, whereby, in management’s view, the value realised by sale is greater than the value of ongoing operations. These elements naturally led to the board of directors and management of eXtract performing a strategic review of the group’s business model and contractual arrangements in order to align the eXtract group’s capital allocations with the current mining environment. eXtract will look to allocate capital to areas where the eXtract board of directors believe eXtract can deliver appropriate returns and create shareholder value.
4.4 Pursuant to this strategic review process, a number of key outcomes, as detailed below, have been identified and eXtract is currently engaging with various stakeholders in this regard. Key outcomes of the strategic review include:
4.4.1 the termination of non-profitable contracts and transitioning the counterparties to such contracts to an owner/operator model where the contracts and underlying assets are sold by eXtract (or, where appropriate, MCC) to such counterparties as a going concern;
4.4.2 the disposal of the excess assets;
4.4.3 significantly reducing the eXtract group’s overhead costs, including a reduction in headcount;
4.4.4 changes to the management of eXtract;
4.4.5 significantly restructuring eXtract group’s debt levels; and
4.4.6 exploring a funding model for potential future investments.
4.5 The approval by the board of this strategy has resulted in the eXtract group impairing a material amount of the value of leasing assets, assets held for sale and inventory as the plan is to realise the majority of its assets through sale as opposed to continuing use. As part of the strategic review, the enX board has agreed to convert the designated debt into equity in eXtract to facilitate this strategy and ensure the ongoing solvency and liquidity of eXtract. It is the intention of management to apply proceeds received from the excess asset disposal to repay its banking and remaining enX debts over the next 12 to 24 months.
4.6 It is further the intention of management, led by Bernard Swanepoel and Clinton Halsey, to reposition eXtract as a diverse investment company. This new strategy shall be the focus as a result of the consensus amongst the management team on opportunities where the listed nature of eXtract may be used to unlock value. The eXtract board is open to considering any opportunity, on a case-by-case basis, and smaller fund-like investments will have certain parameters and hurdle expectations before cash is invested.
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PART I: THE RESTRUCTURE
5. BACKGROUND
5.1 Pursuant to the Eqstra transaction, implemented during November 2016, enX acquired the IE division and the FML division from eXtract, known at the time as Eqstra Holdings Limited, for an aggregate consideration of approximately R7.8 billion, which enX settled by:
5.1.1 the allotment and issue to eXtract of 52 715 390 new enX shares at R21.00 per enX share post the placement;
5.1.2 assuming approximately R5.2 billion of eXtract group’s debt obligations, of which R4.8 billion was within the IE and FML divisions, inclusive of approximately R900 million of senior debt owing by MCC to Eqstra Corporation under and in terms of the first mezzanine loan; and
5.1.3 the recapitalisation of eXtract to the value of approximately R1.4 billion by way of enX:
5.1.3.1 subscribing for 101 400 000 new eXtract ordinary shares at R1.00 per share (being 20% of eXtract’s issued ordinary shares);
5.1.3.2 subscribing for 400 new MCC preference shares for an aggregate subscription price of R600 million; and
5.1.3.3 advancing an amount of R700 million to MCC under the second mezzanine loan.
5.2 The enX shares referred to in paragraph 5.1.1 were subsequently unbundled by eXtract to its shareholders. As a result of the disposals mentioned in 5.1, eXtract’s sole remaining operation was the CMPR division carried on by MCC. The name of Eqstra Holdings Limited was then changed to eXtract.
5.3 The following key events materialised between the date upon which the Eqstra transaction closed and 18 April 2017 (the date on which the restructure was announced on SENS):
5.3.1 a dispute in respect of a major contract in Botswana with Eqstra Botswana, namely the Boteti contract, resulted in the customer withholding payment due and owing to Eqstra Botswana towards the end of November 2016. On 21 December 2016 a petition was lodged with the High Court of Botswana for the winding up of Eqstra Botswana and on 24 February 2017 it was placed in final liquidation. This negatively impacted cash flows and overhead recovery in South Africa and resulted in the need to purchase the liquidation dividend attributable to a secured lender to Eqstra Botswana out of the South African asset pool in April 2017 to the value of R153 million. This purchase was funded from eXtract’s available cash resources (as to R113 million) and a cash guarantee from RMB (as to R44 million);
5.3.2 the contract mining agreement with PPM remained sub-optimal. Accordingly, the parties agreed that this contract will be terminated by mutual agreement with effect from 30 June 2017;
5.3.3 Tharisa notified eXtract of its intention to pursue an owner-operator model. On 10 May 2017 MCC concluded the Tharisa transaction to give effect to this;
5.3.4 a season of heavy summer rains from December 2016 to February 2017 hampered mining production on certain of eXtract’s contracts, resulting in lost revenue of approximately R37 million;
5.3.5 the current and future capital expenditure required by eXtract to maintain its fleet on key contracts exceeded the cash being generated from those contracts, resulting in net cash outflows; and
5.3.6 fewer mining contracts together with reduced profitability and cash flows could no longer support the eXtract engineering and group support infrastructure which had been established to manage what was previously a much larger operation.
5.4 Despite the recent improvement in commodity prices, the long-term outlook for the contract mining sector remains poor. There is an oversupply of contract mining services in the market and the eXtract board does not believe that the pricing power of contractors will improve sufficiently in the medium-term to provide an acceptable return on capital.
6. RATIONALE FOR EXTRACT TO REPOSITION AND RECAPITALISE
6.1 As a result of the events and conclusions reached, the eXtract board critically assessed the long-term vision of eXtract with a view to maximising shareholders’ returns.
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6.2 The eXtract board has accordingly concluded that it wishes to:
6.2.1 engage in a structured exit of its sub-optimal contract mining contracts over time which includes:
6.2.1.1 the disposal of all excess assets;
6.2.1.2 a significant reduction in the eXtract group’s overhead costs, including a reduction in headcount;
6.2.1.3 the restructure and repayment within 18 months of eXtract’s R665 million lending facility; and
6.2.1.4 the conversion of the designated debt into equity and the subsequent unbundling by enX to its shareholders of the unbundled eXtract shares;
6.2.2 create an exciting sustainable future for eXtract by establishing a new funding model for future diverse investments, via the creation of the Investment Fund. The Investment Fund will be open to considering any opportunity on a case-by-case basis and smaller fund-like investments will have certain parameters and hurdle expectations before cash is invested; and
6.2.3 The restructure of eXtract’s banking facilities and the conversion of the designated debt to equity has enabled and will enable eXtract to:
6.2.3.1 attract credible and experienced management talent to oversee the repositioning;
6.2.3.2 align eXtract’s long-term capital structure with the new strategy; and
6.2.3.3 create the necessary time for management to execute their repositioning plan and to unlock value for shareholders.
7. RATIONALE FOR enX TO CONVERT THE DESIGNATED DEBT TO EQUITY AND UNBUNDLE EXTRACT SHARES
7.1 enX has worked closely with eXtract to create greater certainty regarding its investment in eXtract and to unlock value for enX shareholders. In support of the outcome of eXtract’s strategic review process, enX believes that the recapitalisation of eXtract and the subsequent unbundling of enX’s shareholding in eXtract:
7.1.1 moulds enX into a pure-play industrial company with high quality industrial assets;
7.1.2 unlocks value in enX by removing the uncertainty for investors created by enX’s investment in eXtract;
7.1.3 simplifies the analysis of enX’s performance;
7.1.4 enables easier access to debt and equity capital markets;
7.1.5 improves enX’s ability to use its shares as acquisition currency;
7.1.6 improves enX’s return on equity;
7.1.7 leaves R250 million as a debt owing by MCC to Eqstra Corporation which will strengthen enX’s balance sheet and support enX’s goal towards achieving an A rated debt capital markets program. This will further strengthen enX’s initiatives to diversify its sources of funding; and
7.1.8 focuses management time and attention on enX’s industrial businesses and growth opportunities.
7.2 Following the completion of the unbundling of the unbundled eXtract shares:
7.2.1 enX shareholders will have:
7.2.1.1 direct see-through to eXtract’s net asset value;
7.2.1.2 the opportunity and option to participate in the value that the eXtract board aims to create through the repositioning of eXtract;
7.2.1.3 the support of a credible and experienced eXtract leadership team to execute the repositioning plan and create the Investment Fund to identify funding opportunities; and
7.2.1.4 a liquidity option to directly monetise their investment in eXtract should they so choose;
7.2.2 the consolidation will proceed and be implemented.
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8. MATERIAL TERMS OF THE RESTRUCTURE
8.1 On 13 April 2017, eXtract, MCC, enX and Eqstra Corporation concluded the restructure agreement in terms of which, inter alia:
8.1.1 all of the debt owed by MCC to Eqstra Corporation under the first mezzanine loan (less the excluded amount of R250 million) will be delegated to enX, as a result of which MCC will be indebted to enX in an amount equal to the debt so delegated;
8.1.2 the designated debt will be discharged in full by enX subscribing for the MCC designated shares for a consideration which equates to the aggregate value of such debt and the subscription price payable by enX for these MCC shares will be set-off against MCC’s aforementioned debt;
8.1.3 enX will exchange the MCC designated shares for 3 755 171 958 ordinary no par value shares in the authorised but unissued share capital of eXtract at an issue price of 50 cents per eXtract share in terms of an asset for share transaction under section 42 of the Income Tax Act; and
8.1.4 enX will unbundle and distribute to its shareholders, the unbundled eXtract shares, being 3 755 171 958 eXtract consideration shares, the 101 400 000 eXtract shares enX acquired pursuant to the Eqstra transaction and 4 469 321 eXtract shares held by Eqstra Corporation, which are to be sold on the closing date by Eqstra Corporation for a purchase consideration of 50 cents per eXtract share.
8.2 The restructure agreement is constituted by a single composite indivisible transaction made up of the under mentioned steps, the cumulative effect of which will be as follows:
8.2.1 Step 1 – MCC delegation
MCC delegates to enX its debt owing to Eqstra Corporation under the first mezzanine loan, less the excluded amount, in an amount of R626 112 358, as a result of which MCC will be indebted to enX in an amount equal to the enX claim (created as a result of the aforesaid delegation). enX will, following the assumption by it of the first mezzanine loan (less the excluded amount), owe the first mezzanine loan (less the excluded amount) to Eqstra Corporation. Eqstra Corporation will continue to have a separate claim against MCC for the excluded amount.
8.2.2 Step 2 – Redemption of the MCC preference shares
MCC voluntarily redeems for cash the MCC preference shares held by enX in accordance with their terms, for the redemption amount, totalling R600 million. Such redemption will be facilitated using the proceeds of a refinancing in the form of an intra-day bridge loan to be advanced to MCC by a third party financier, for the redemption amount. Upon enX receiving the redemption amount, enX will assume responsibility for discharging MCC’s indebtedness to the aforesaid third-party financier for which purpose MCC shall delegate to enX its liability to such third-party financier. The delegation shall include all liabilities whatsoever (including on the account of fees and other charges) which MCC incurs in respect of the aforementioned funding which it raises. No dividends have been declared or paid on the MCC preference shares since their issue in November 2016. In terms of the restructure agreement to the extent that any dividends may have been accrued or accumulated, enX waives the entitlement to any accrued or accumulated dividends.
8.2.3 Step 3 – eXtract intercompany loans and set-off
The inter-company loan between eXtract and MCC to the value of R501 117 000 is settled by MCC by the issue to eXtract of 1 002 234 000 shares in MCC to the value of R501 117 000. The aforementioned shares shall be pledged to the debt guarantor (as defined in the Common Terms Agreement) on the terms of a security cession and pledge for the benefit of the lenders, who already hold under pledge the existing shares which eXtract holds in MCC.
8.2.4 Step 4 – MCC subscription and set-off
enX will subscribe for the MCC designated shares at a subscription price which equates to the aggregate value of MCC’s debt to enX totalling R1 877 585 979. The excluded amount of R250 million will remain a debt owing by MCC to Eqstra Corporation, as agreed between the parties. Payment of the subscription price for the MCC designated shares (namely an amount of R1 877 585 979) will be set-off against an equivalent amount owing by MCC to enX.
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8.2.5 Step 5 – Asset for share exchange
8.2.5.1 enX exchanges all of the MCC shares acquired under step 4, in consideration for the issue by eXtract to enX of the eXtract consideration shares (being 3 755 171 958 new eXtract ordinary shares at an issue price of 50 cents per eXtract share) in terms of an asset for share transaction under section 42 of the Income Tax Act. As a consequence of this transaction, eXtract will hold the entire issued share capital of MCC (all of which shares shall be subject to the security cession and pledge referred to in paragraph 8.2.3 above) and enX will hold approximately 90% of eXtract’s issued share capital;
8.2.5.2 enX gives eXtract normal customary title warrants in respect of the MCC shares it is exchanging. In addition to normal and customary title warranties, eXtract is also warranting its unaudited consolidated interim financial statements as at 31 December 2016 (as set out in Annexure 3), which have been prepared in accordance with IFRS in respect of the business, inter alia, and affairs of the eXtract group as at 31 December 2016 and the six month period ended on 31 December 2016; and
8.2.5.3 immediately following the completion of step 4, enX acquires from Eqstra Corporation 4 469 321 eXtract shares held by Eqstra Corporation, for a consideration of 50 cents per eXtract share.
8.2.6 Step 6 – enX unbundles the eXtract shares to its shareholders
On the unbundling date, enX unbundles and distributes to enX shareholders registered as such on the unbundling record date (in compliance with section 46 of the Income Tax Act and section 46 of the Companies Act), 3 861 041 279 eXtract shares, which enX then holds. enX shareholders will receive 21.39799 eXtract shares for every enX share held.
8.3 The restructure agreement further includes the following material terms:
8.3.1 interim period undertakings: for the period from the signature date of the restructure agreement to the closing date, each of eXtract and MCC undertake to use its reasonable commercial endeavours to conduct its business and affairs in a manner consistent with the repositioning plan approved at the eXtract board meeting held on 7 April 2017 in good faith and in the best interests of its business and the eXtract group as a whole, subject to changes made to that plan by the lenders. Further interim period restrictions were given by eXtract and MCC which are normal and customary in the circumstances, including providing enX upon request, all information reasonably required by enX to monitor the execution of the aforesaid repositioning plan. Any breach of the interim period undertakings carries with it the same consequences attaching to a breach of the warranties in step 5, as set out in paragraph 8.2.5;
8.3.2 no cancellation: no cancellation of the restructure agreement is permitted after 08:00 on the closing date of the restructure; and
8.3.3 indemnity: if enX has not cancelled or rescinded the restructure agreement, then eXtract and MCC indemnify enX against all direct loss and damage which enX suffers as a result of any breach by eXtract or MCC of any of the warranties and undertaking in the restructure agreement, subject to the following:
8.3.3.1 written notice must be given by enX within 12 months following the closing date and enX must institute legal proceedings prior to the expiry of 18 months following the closing date; and
8.3.3.2 enX is deemed to have suffered a loss in an amount equal to all direct loss and damages suffered as a result of the applicable breach.
8.4 The restructure agreement includes normal and customary warranties and undertakings pertaining to the restructure generally and to enX’s subscription for shares in MCC and eXtract. In particular, enX gives eXtract normal customary title warrants in respect of the MCC shares it is exchanging. In addition, eXtract is also warranting its unaudited consolidated interim financial statements as at 31 December 2016 (as set out in Annexure 3), which have been prepared in accordance with IFRS in respect of the business and affairs of the eXtract group as at 31 December 2016 and the six month period ended on 31 December 2016. This warranty survives for 12 months from closing of the restructure. If any claim is notified within the applicable time period, enX must institute legal proceedings within 18 months of such closing. If any warranty is breached in terms of step 5, enX and/or eXtract may, on written notice, elect to cancel or rescind the restructure agreement.
8.5 An abridged shareholding and funding structure of the enX and eXtract groups before and after the restructure are set out in Annexure 10.
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9. CONDITIONS PRECEDENT
The restructure in its entirety remains conditional upon, inter alia, the following:
9.1 to the extent legally necessary, approval of the restructure by the South African Competition Authorities;
9.2 eXtract shareholders agreeing to waive the benefit of a mandatory offer in the manner provided for in section 123 of the Companies Act as read with paragraph 86(4) of the Takeover Regulations, inasmuch as immediately prior to the unbundling in step 6 of the restructure enX will hold more than 35% of the eXtract shares in issue;
9.3 the TRP approving the restructure, to the extent legally required;
9.4 the shareholders of MCC, eXtract and enX passing the requisite resolutions (including in terms of the JSE Listings Requirements and the Companies Act) to authorise and approve the restructure and its implementation;
9.5 eXtract achieving certain commercial milestones regarding the disposal of its excess assets in terms of the excess asset disposals, including, inter alia, the conclusion of the Tharisa transaction;
9.6 the majority lenders consenting in writing to the restructure;
9.7 the signature of an intra-day bridge loan agreement with a third-party bank to enable MCC to voluntarily redeem the MCC preference shares in cash;
9.8 the agreements between eXtract, the lenders, MCC, enX and Eqstra Corporation being amended to capture the terms of a repayment waterfall in respect of the cash to be received by eXtract and MCC from the disposal of excess assets; and
9.9 the South African Revenue Service furnishing a binding advanced tax ruling in respect of the tax effect and consequences of the restructure, which is not adverse to the parties to the restructure.
The restructure is required to become unconditional in all respects by no later than 19:00 on 2 October 2017 or such other time and date as may be agreed in writing by the parties thereto. All conditions which are not regulatory in nature may be waived by the parties to the restructure agreement.
10. RESTRUCTURE OF DEBT FACILITIES
Information regarding the restructure of enX and eXtract’s debt facilities are set out in Annexure 9 of this circular.
11. FINANCIAL SUPPORT GRANTED BY enX
FirstRand Bank Limited, acting through its Rand Merchant Bank division, (“RMB”) has furnished a guarantee in favour of Standard Chartered Bank Botswana Limited (“SCB”) for its exposure to Eqstra Botswana as a secured creditor, in respect of the payment by MCC of an outstanding amount of approximately R44 million. MCC has already paid SCB R113 million as part consideration for MCC’s purchase of SCB’s liquidation dividend expected in due course from Eqstra Botswana. To facilitate the issue of the aforementioned guarantee, enX deposited cash collateral of approximately R44 million into an account in its name with RMB before RMB issued the aforesaid guarantee and over which RMB holds a security cession. enX’s deposit will be reduced by the amount of a liquidation dividend to be received by SCB from Eqstra Botswana.
12. RELATED PARTY TRANSACTION
12.1 In terms of section 10 of the Listings Requirements, the restructure is a related party transaction for eXtract as eXtract is entering into a transaction with a major shareholder, enX, and its wholly-owned subsidiary Eqstra Corporation, which currently hold c.20.9% of the eXtract shares in issue.
12.2 As the restructure is a related party transaction for eXtract, the following is required in terms of the Listings Requirements:
12.2.1 a statement by eXtract confirming whether the restructure is fair insofar as eXtract shareholders are concerned; and
12.2.2 shareholder approval at the general meeting.
12.3 Although enX and its associates will be taken into account in determining the quorum at the general meeting, in terms of the Listings Requirements, the resolutions authorising the restructure must be approved by the majority of eXtract shareholders excluding the votes cast by enX and its associates.
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12.4 As required in terms of the Listings Requirements, the independent expert in respect of the restructure has prepared an opinion in respect of the restructure, a copy of which is set out in Annexure 5, to the effect that the restructure is fair insofar as eXtract shareholders are concerned.
12.5 The eXtract board hereby confirms that, having regard to the independent expert’s opinion in respect of the restructure, it is of the opinion that the restructure is fair insofar as eXtract shareholders are concerned.
13. WAIVER OF MANDATORY OFFER
13.1 Pursuant to step 5 of the restructure, enX will receive 3 755 171 958 eXtract consideration shares, which will result in enX being able to exercise at least 35% of all the voting rights attached to securities of eXtract, thus triggering a mandatory offer to eXtract shareholders at 50 cents per eXtract share in terms of section 123(2) of the Companies Act.
13.2 In terms of regulation 86(4) of the Takeover Regulations, a transaction is exempt from the obligation to make a mandatory offer following publication by a regulated company of a transaction requiring the issue of securities as consideration for an acquisition, a cash subscription or a rights offer, if the independent holders of more than 50% of the general voting rights of all issued securities of the regulated company have agreed to waive the benefit of such mandatory offer in accordance with the principles detailed in section 125(3)(b)(ii) of the Companies Act.
13.3 Accordingly, shareholders will be asked, at the general meeting to approve the proposed waiver of the requirement for enX to make a mandatory offer to eXtract shareholders in terms of regulation 86(4) of the Takeover Regulations.
13.4 The TRP has advised that it is willing to consider the application to grant an exemption from the obligation to make a mandatory offer, if the majority of shareholders of eXtract waive their entitlement to receive the mandatory offer from enX, in accordance with regulation 86(4) of the Takeover Regulations.
13.5 Any shareholder who wishes to make representations relating to the exemption shall have 10 business days from the date of posting this circular to make such representations to the TRP before the ruling is considered. Representations should be made in writing and delivered by hand, posted or faxed to:
If delivered by hand or courier: If posted: If faxed:The Executive DirectorTakeover Regulation Panel
The Executive DirectorTakeover Regulation Panel
The Executive DirectorTakeover Regulation Panel
1st Floor, Block 2, Freestone Park135 Patricia RoadAtholl, 2196
1st Floor, Block 2, Freestone Park135 Patricia RoadAtholl, 2196
+27 86 541 2238
and should reach the TRP by no later than the close of business on Tuesday, 25 July 2017 in order to be considered. If any submissions are made to the TRP within the permitted timeframe, the TRP will consider the merits before making a ruling.
13.6 Included in this circular is the notice of general meeting and the resolution for the waiver of the mandatory offer for shareholders to consider and, if deemed fit, to approve at the general meeting. Should the requisite majority of independent votes be cast in favour of the waiver, subsequent application will be made to the TRP for the exemption by the TRP from the obligation to make a mandatory offer.
13.7 As required in terms of regulation 86(7) of the Takeover Regulations, KPMG has been appointed by the eXtract board to provide a fair and reasonable opinion on the restructure, which opinion is set out in Annexure 5 of this circular. The independent expert’s opinion in respect of the restructure supports the value at which the restructure is being effected.
13.8 eXtract shareholders are informed that eXtract has obtained undertakings from shareholders representing 18.65% of the total issued share capital of eXtract and 23.57% of the shareholders eligible to vote, in favour of all of the resolutions contained herein. The following parties have furnished undertakings to vote the number of eXtract shares stated below:
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PartyShares subject
to undertaking
Percentageholding
in eXtract
Percentage holding
in eXtract of shareholders eligible to vote
PSG Asset Managers 77 677 381 15.33 19.40Peregrine Equities 42 742 128 8.43 10.66N Brown 33 000 000 6.51 8.23Protea Asset Management LLC 30 818 227 6.08 7.68Flagship Asset Management 25 340 000 5.00 6.32Newshelf 1256 (Bernard Swanepoel) 8 000 000 1.58 1.99Conduit Capital Limited 5 638 329 1.11 1.40Cadiz Asset Management 5 389 268 1.06 1.34Ruber Itinere Investments (Clinton Halsey) 2 000 000 0.39 0.5Jannie Serfontein 504 000 0.10 0.13
Total 231 109 333 45.59 57.65
13.9 The dealings of eXtract shareholders who have provided undertakings to vote in favour of the waiver during the six month period from the date the restructure was announced to the last practical date are set out in Annexure 8 of this circular.
13.10 The shareholders who have provided undertakings to vote in favour of the waiver have not provided a specific undertaking to eXtract not to dispose of any shares prior to the general meeting.
13.11 Save as set out in this Part I of this circular, there are no special arrangements, undertakings or agreements relating to the potential mandatory offer between enX and eXtract entered into the preceding twelve months from the date of this circular, or with persons who were holders of eXtract shares within the preceding twelve months.
14. VENDORS
14.1 eXtract and MCC are the vendors in respect of the restructure. The eXtract group has not purchased any material assets in the last three years.
14.2 Save as set out in step 5 referred in paragraph 8.2.5 above, the restructure agreement contains warranties which are usual and normal for transactions of this nature.
14.3 There are no liabilities for accrued taxation that will be settled in terms of the restructure agreement.
14.4 Any tax liabilities of eXtract, including tax liabilities for accrued taxation to date of the restructure, will be settled in the ordinary course by eXtract from available cash reserves.
14.5 The restructure agreement does not preclude enX from carrying on business in competition with eXtract after the implementation of the restructure nor does the restructure agreement impose any other restrictions on enX. No payment in cash or otherwise has been made in relation to the aforegoing.
14.6 Other than in their capacity as shareholders (both directly and indirectly) of enX and eXtract as at the last practical date, no director or promoter of eXtract (or any partnership, syndicate or other association in which a promoter or director had an interest) has any beneficial interest, direct or indirect in the restructure.
14.7 In respect of the restructure no cash or securities have been paid or benefit given to any director within the three preceding years of this circular or is proposed to be paid or given to any promoter (not being a director).
14.8 Pursuant to the restructure, enX will acquire the eXtract consideration shares which it will thereafter unbundle and distribute to enX shareholders. As such, the eXtract consideration shares to be acquired in terms of the restructure have not been (and will not prior to the restructure agreement becoming unconditional in all respects, and as part of its implementation, be) transferred to enX. The eXtract consideration shares have not, as at the last practical date, been ceded or pledged to any third party. In terms of the restructure agreement the eXtract consideration shares will only be issued to enX on the closing in the context of implementation of step 5 (referred in paragraph 8.2.5 above).
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PART II: THE EXCESS ASSET DISPOSAL
15. INTRODUCTION AND RATIONALE FOR THE EXCESS ASSET DISPOSAL
15.1 As indicated in paragraph 5.3 of Part I of the circular, the following key events materialised between the date the Eqstra transaction closed and 18 April 2017 (the date on which the restructure was announced on SENS):
15.1.1 a dispute in respect of the Boteti contract, a major contract in Botswana with Eqstra Botswana, resulted in the customer withholding payment towards the end of November 2016. On 21 December 2016 a petition was lodged with the High Court of Botswana for the winding up of Eqstra Botswana which on 24 February 2017 was placed in final liquidation. This negatively impacted cash flows and overhead recovery in South Africa and resulted in the need to settle a secured lender to Eqstra Botswana out of the South African asset pool in April 2017 to the value of R153 million. This settlement was funded from eXtract’s available cash resources (as to R113 million) and a cash guarantee from RMB (as to R44 million);
15.1.2 the contract mining agreement with PPM remained sub-optimal. Accordingly, the agreement has been terminated by mutual agreement with effect from 30 June 2017;
15.1.3 Tharisa notified eXtract of its intention to pursue an owner-operator model. On 10 May 2017 MCC concluded the Tharisa transaction, as detailed in paragraph 16.8 below, to give effect to this;
15.1.4 a season of heavy summer rains hampered mining production on certain of eXtract’s contracts, resulting in lost revenue of c.R37 million;
15.1.5 the current and future capital expenditure required by eXtract to maintain its fleet on key contracts exceeded the cash being generated from those contracts, resulting in net cash outflows; and
15.1.6 fewer mining contracts together with reduced profitability and cash flows could no longer support the eXtract engineering and group support infrastructure which had been established to manage what was previously a much larger operation.
15.2 Despite the recent improvement in commodity prices, the long-term outlook for the contract mining sector remains poor. There is an oversupply of contract mining services in the market and the eXtract board does not believe that the pricing power of contractors will improve sufficiently in the medium-term to provide an acceptable return on capital.
15.3 The above circumstances gave the eXtract board an opportunity to conduct a strategic review of the eXtract business. The following key decisions were made:
15.3.1 eXtract’s current operating model, prospects and capital allocation decisions need to be revised. To this end, eXtract intends to exit its sub-optimal mining contracts over time and:
15.3.1.1 it has impaired excess assets to reflect their realisable value and intends to dispose of all excess assets over a period of 24 months, from the date eXtract shareholders approve the excess asset disposal; and
15.3.1.2 significantly reduce eXtract’s overhead costs, including a reduction in headcount, and the responsibilities and functions of management need to be revised;
15.3.2 eXtract’s bank debt needs to be restructured and settled over the next 12 to 18 months and the restructure implemented.
15.4 The proceeds of the excess asset disposal, together with the restructure, will be used to repay eXtract’s South African bank debt and will alleviate eXtract’s tight liquidity position.
16. EXCESS ASSET DISPOSAL TERMS AND CONDITIONS
16.1 As set out in eXtract’s results for the six months ended 31 December 2016, eXtract has impaired its leasing assets by R1.329 billion to R1.547 billion (comprised of leasing assets of R677 million and assets held for sale of R870 million).
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16.2 Set out below is a summary of the excess assets:
AssetsExcess assets at 31 December 2016
R’million
Property, plant and equipment 85Leasing assets 677Inventory 78Assets held for sale 870
Total 1 710
The excess assets were all acquired before 2014.
16.3 The eXtract board has resolved to approve the disposal of excess assets, owned by the eXtract group, subject to the following terms and conditions:
16.3.1 the excess assets will be disposed of for cash or assets (including equity) on the most favourable commercial terms eXtract can achieve, but the aggregate consideration for the disposal of the excess assets shall not be less than R1.197 billion (inclusive of the proceeds of the disposal of the Tharisa transaction, the Sandton Plant transaction and the Indonesia transaction), being an amount equal to 70% of the value of such excess assets;
16.3.2 the excess assets will be disposed of within a period of 24 months, calculated from the date upon which eXtract shareholders adopt the resolution approving the excess asset disposal;
16.3.3 the excess assets will be sold on an arms-length basis to independent third parties and will not be sold to related parties, as defined in section 10.1 of the Listings Requirements; and
16.3.4 the excess assets may be disposed of either by way of a sale of assets (either on auction or to independent third parties by way of agreement) or through the disposal of a going concern.
16.4 The excess asset disposal will be subject to the following conditions precedent:
16.4.1 the requisite majority of eXtract shareholders approving the terms of the excess asset disposal at the general meeting as a category 1 transaction;
16.4.2 all applicable regulatory and statutory approvals being obtained; and
16.4.3 if required in terms of any debt funding agreement entered into by the eXtract group, the consent of the lenders in terms of such agreement to the disposal of the relevant excess assets.
16.5 The authority granted by eXtract shareholders for the excess asset disposal will remain in force for a period of 24 months, calculated from the date upon which eXtract shareholder adopt the resolution approving the excess asset disposal, whereafter such authority shall lapse and be of no further force and effect.
16.6 All agreements to be concluded in respect of the excess asset disposal will be subject to terms and conditions, and contain warranties and indemnities which are normal for agreements of this nature.
16.7 There are no special arrangements, undertakings or agreements relating to the excess asset disposal entered into by eXtract in the preceding 12 months from the date of this circular, with persons who were holders of eXtract shares within the preceding 12 months.
16.8 The Tharisa transaction
16.8.1 As part of the excess asset disposal and as announced on SENS on 11 May 2017, MCC has concluded a binding term sheet with Tharisa in terms of which Tharisa will acquire the Tharisa assets as a going concern for an aggregate consideration of R303 468 428 (exclusive of VAT), subject to certain adjustments to take into account the employee liabilities as at the Tharisa effective date and certain site de-establishment costs.
16.8.2 The Tharisa transaction remains subject to the fulfilment of the following conditions precedent:
16.8.2.1 all relevant shareholder approvals required in terms of the Listings Requirements being obtained by eXtract;
16.8.2.2 a substantive written agreement in respect of the Tharisa transaction being concluded between the parties;
16.8.2.3 Tharisa concluding new third party service agreements with certain of MCC’s service providers at the Tharisa mine; and
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16.8.2.4 Tharisa obtaining the requisite approvals from its bankers to implement the Tharisa transaction.
The Tharisa conditions must be fulfilled or waived, as the case may be, by 30 September 2017.
16.8.3 The Tharisa assets will be disposed of by MCC with effect from the Tharisa effective date. R250 million of the purchase consideration for the Tharisa assets will be paid to MCC within 30 days of the initial payment date. The balance of the purchase consideration for the Tharisa assets will be paid to MCC in six equal instalments on the last working day of the six months after the initial payment date (less costs of R24 163 032 relating to de-establishment and leave and severance pay deductions). The estimated purchase consideration for the Tharisa transaction net of costs and adjustments is R279 305 396.
16.8.4 All MCC employees deployed at the Tharisa mine on the Tharisa effective date will be transferred to and employed by Tharisa in accordance with section 197 of the Labour Relations Act, No. 66 of 1995 with effect from the Tharisa transfer date.
16.8.5 The existing mining works contract between Tharisa and MCC will automatically terminate on the effective date and the Tharisa assets located at the Tharisa mine will be delivered to Tharisa on the Tharisa effective date.
16.8.6 The payment by Tharisa of the purchase consideration will be guaranteed by Tharisa plc.
16.9 The Sandton Plant transaction
16.9.1 As part of the excess asset disposal and as announced on SENS on 9 June 2017, MCC has concluded a sale agreement and a sale and lease agreement with Sandton Plant in terms of which Sandton Plant will acquire the MCC properties for an aggregate consideration of R52 million, with effect from the date of registration of transfer of the MCC properties into Sandton Plant’s name.
16.9.2 The purchase price is payable in cash upon registration of transfer.
16.9.3 The Sandton Plant transaction remains conditional upon eXtract shareholder approval.
16.9.4 eXtract shall remain in occupation of a portion of the MCC properties for two years from the transfer date for a nominal rental and shall be liable for all expenses directly related to its use thereof.
16.10 The Indonesia transaction
16.10.1 As part of the excess asset disposal, eXtract has concluded an agreement with Buildmax for it to acquire 99% of the issued shares in PT MCC.
16.10.2 Buildmax and eXtract are of the view that the issued shares in PT MCC have a nominal or negative value and, as such, have agreed that Buildmax will acquire 99% of the issued shares in PT MCC for R1.00, with effect from 1 July 2017 (the “Indonesia effective date”).
16.10.3 Pursuant to the Indonesia transaction, the PT MCC loan will be restructured as follows:
16.10.3.1 the gross value of the PT MCC loan will not exceed R20 million;
16.10.3.2 the aggregate value of the PT MCC loan will be reduced by the amount of working capital provided by Buildmax to PT MCC;
16.10.3.3 the PT MCC loan will be repayable in 12 equal monthly instalments, with the first instalment due at the end of the month in which the last of the conditions precedent to the Indonesia transaction has been fulfilled or waived, as the case may be;
16.10.3.4 Buildmax will guarantee the repayment of the PT MCC loan; and
16.10.3.5 eXtract will guarantee the repayment of the working capital provided by Buildmax to PT MCC in the event that the conditions precedent to the Indonesia transaction are not fulfilled or waived.
16.10.4 The Indonesia transaction remains subject to the fulfilment or waiver of the following conditions precedent:
16.10.4.1 all applicable regulatory approvals in respect of the Indonesia transaction being obtained;
16.10.4.2 the approval of the Indonesia transaction by the financiers of eXtract and Buildmax and, to the extent required, the shareholders of eXtract and Buildmax;
16.10.4.3 written confirmation from eXtract that no guarantees or suretyships have been given to third parties in relation to PT MCC;
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16.10.4.4 notice of the Indonesia transaction being published in a national newspaper in Indonesia and announced to the employees of PT MCC and any resultant claims by creditors or objections by employees being resolved;
16.10.4.5 the Indonesian Investment Coordinating Board approving the Indonesia transaction;
16.10.4.6 Buildmax receiving confirmation that certain agreements in respect of PT MCC’s operations have been signed on terms satisfactory to Buildmax and that a change in control will not affect the validity of such agreements;
16.10.4.7 a sale of equipment agreement being concluded between MCC and Buildmax Equipment Proprietary Limited;
16.10.4.8 Buildmax enters into an agreement for training and simulator services from certain eXtract service providers; and
16.10.4.9 the provision of due diligence information to Buildmax in respect of certain of eXtract’s contracts.
16.10.5 The minority shareholder in PT MCC will be required to waive its pre-emptive rights to acquire the shares in PT MCC that Buildmax wishes to acquire, failing which the Indonesia effective date will be delayed until eXtract has complied with the applicable pre-emptive rights process, and such minority shareholder has not exercised its pre-emptive rights to acquire any of the shares held by eXtract in PT MCC.
16.10.6 The country manager for PT MCC will be retained on his current employment terms and conditions and will be transferred to Buildmax on implementation of the Indonesia transaction.
16.11 Vendors
16.11.1 eXtract and MCC, a wholly-owned subsidiary of eXtract, are the vendors in respect of the excess asset disposal. The eXtract group has not purchased any material assets in the last three years.
16.11.2 All agreements to be concluded in respect of the excess asset disposal will be subject to terms and conditions, and contain warranties and indemnities which are normal for agreements of this nature.
16.11.3 There are no liabilities for accrued taxation that will be settled in terms of the agreements to be concluded in respect of the excess asset disposal.
16.11.4 Any tax liabilities of eXtract, including tax liabilities for accrued taxation to date of each transaction comprising the excess asset disposal, will be settled in the ordinary course by eXtract from available cash reserves.
16.11.5 No agreement concluded pursuant to the excess asset disposal will preclude eXtract from carrying on business in competition with the entity acquiring the excess assets after the implementation of such agreement, nor will such agreement impose any other restrictions on eXtract and therefore no payment in cash or otherwise will been made in this regard.
16.11.6 Other than in their capacity as shareholders (both directly and indirectly) of eXtract as at the last practical date, no director or promoter of eXtract (or any partnership, syndicate or other association in which a promoter or director had an interest) has any beneficial interest, direct or indirect, in the excess asset disposal.
16.11.7 In respect of the excess asset disposal no cash or securities have been paid or benefit given to any director within the three preceding years of this circular or is proposed to be paid or given to any promoter (not being a director).
17. CATEGORISATION OF THE EXCESS ASSET DISPOSAL
17.1 In terms of section 9 of the JSE Listings Requirements, the excess asset disposal is regarded as a category 1 transaction.
18. CASH COMPANY
18.1 Pursuant to the excess asset disposal, eXtract intends to dispose of its entire contract mining business over a 24-month period. eXtract intends establishing a new funding model for future diverse investments, via the creation of the Investment Fund.
18.2 Shareholders are advised that to the extent that eXtract’s assets consist wholly or mainly of cash due to the excess asset disposal, eXtract will be classified as a cash company by the JSE. Further information in this regard will be announced on SENS in due course.
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18.3 In accordance with paragraph 3.26 of the Listings Requirements:
18.3.1 should a cash company, within six months after classification as a cash company fail to enter into an agreement and make an announcement relating to the acquisition of viable assets that satisfy the conditions of listing set out in section 4 of the Listings Requirements, its listing will be suspended; and
18.3.2 if a cash company fails, within three months of suspension, to obtain approval from the JSE for a circular relating to the acquisition of viable assets that satisfy the conditions of listing set out in section 4 of the Listings Requirements, its listing will be terminated.
19. FAIRNESS OPINION
19.1 The independent expert has prepared an opinion in respect of the excess asset disposal, a copy of which is set out in Annexure 6, to the effect that the terms and conditions of the excess asset disposal are fair insofar as eXtract shareholders are concerned.
19.2 The eXtract board hereby confirms that, having regard to the independent expert’s opinion in respect of the excess asset disposal, it is of the opinion that the terms and conditions of the excess asset disposal are fair insofar as eXtract shareholders are concerned.
20. UNDERTAKINGS TO VOTE IN FAVOUR OF THE EXCESS ASSET DISPOSAL
20.1 eXtract shareholders are advised that eXtract has obtained undertakings from shareholders representing 40.41% of the total issued share capital of eXtract to vote in favour of the Tharisa transaction. The following parties have provided undertakings to vote the stated number of eXtract shares:
PartyShares subject
to undertaking
Percentage holding in eXtract
%
enX 101 400 000 20.00Protea Asset Management 71 724 963 14.15Conduit Capital 17 232 535 3.40Newshelf 1256 8 000 000 1.58Eqstra Corporation 4 469 321 0.88Ruber Itenere Investments 2 000 000 0.40
Total 204 826 819 40.41
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PART III: THE AUTHORISED SHARE INCREASE AND CONSOLIDATION
21. AUTHORISED SHARE INCREASE
21.1 In order for eXtract to issue the eXtract consideration shares, it is necessary to increase the authorised shares of the company. Accordingly, shareholders will be requested to approve the special resolution necessary to implement an increase in the authorised shares of the company from 1 500 000 000 ordinary shares of no par value to 10 000 000 000 ordinary shares of no par value by the creation of an additional 8 500 000 000 ordinary shares of no par value.
21.2 Shareholders will be requested to approve the special resolution necessary to approve the authorised share increase at the general meeting. In order for the special resolution to be adopted, the support of at least 75% of the total votes exercisable on the resolution by shareholders present in person or represented by proxy is required.
22. THE CONSOLIDATION
22.1 Pursuant to the implementation of the restructure, it is proposed that eXtract consolidates its authorised and issued shares on a 200 to 1 basis such that each shareholder will hold 1 share post-consolidation for every 200 shares held before the consolidation. eXtract’s 10 000 000 000 authorised ordinary shares will, as a consequence, be reduced to 50 000 000 authorised ordinary shares and eXtract’s 4 262 074 955 issued ordinary shares will be reduced to 21 310 374 issued ordinary shares.
22.2 In implementing the consolidation, the company is required by the JSE to apply the rounding principle, that is, a shareholder becoming entitled to a fraction of a share arising from a consolidation will be rounded down to the nearest whole number, resulting in allocations of whole eXtract shares and a cash payment for the fraction. The value of such cash payment will be the volume weighted average traded price less 10% on the first day of trade after the last day to trade in order to participate in the consolidation, and will be announced on SENS on the second day of trade after the last day to trade in order to participate in the consolidation. The last day to trade in order to participate in the consolidation is expected to be Tuesday, 12 September 2017.
22.3 The implementation of the consolidation is subject to shareholders approving the resolution required to increase the authorised shares and the restructure.
22.4 The table of entitlement in respect of the consolidation is set out in Annexure 7.
22.5 Shareholders will accordingly be requested to consider and, if deemed fit, approve, with or without modification, special resolution number 4 as set out in the notice of general meeting to give effect to the consolidation.
22.6 Subject to the filing by CIPC of the special resolution and the MOI amendment, the consolidation will be effective from the date that the special resolution regarding the consolidation is filed with and accepted by CIPC.
22.7 The JSE has agreed to amend the listing of eXtract’s shares to make provision for the consolidation with effect on and as from the date to be announced in the consolidation finalisation announcement under the new ISIN ZAE000246013.
22.8 The record date for purposes of determining those shareholders whose shares will be subject to the consolidation will be detailed in the finalisation announcement and is dependent upon when the requisite special resolution is filed and accepted by CIPC (the “consolidation record date”). The last day to trade in eXtract’s shares on the JSE in order to be recorded as a shareholder on the consolidation record date will also be detailed in the finalisation announcement.
23. PROCEDURE TO BE FOLLOWED IN RESPECT OF THE CONSOLIDATION
23.1 Procedure to be followed by certificated shareholders for the consolidation
Subject to the passing and the filing with the CIPC of the special resolution necessary for the consolidation, it is necessary to recall share certificates from certificated shareholders in order to replace them with certificates reflecting the consolidation.
To facilitate the timeous receipt by certificated shareholders of replacement share certificates, certificated shareholders who wish to anticipate the implementation of the consolidation and who do not wish to deal in their existing shares prior to the consolidation are requested to surrender their certificates, under cover of the form of surrender (a copy of which is attached to and forms part of the circular), to the transfer secretaries, at the address set out in that form, prior to the consolidation record date.
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Share certificates so received will be held in trust by the transfer secretaries pending the consolidation becoming unconditional. In the event that the consolidation does not become unconditional, the transfer secretaries will, within five business days thereafter, return the certificates to the certificated shareholders concerned, by registered post, at the risk of such shareholders.
The results of the general meeting will be announced on SENS on Thursday, 10 August 2017. Should the consolidation be approved and implemented, shareholders who have not already surrendered their share certificates will be required to do so under cover of the attached form of surrender, which should be retained for that purpose as no further form of surrender will be circulated to shareholders. Additional copies may be requested from the transfer secretaries, Computershare Investor Services Proprietary Limited at Rosebank Towers, 15 Biermann Ave, Rosebank, Johannesburg, 2196.
In the case of certificated shareholders whose registered addresses in the company’s register in South Africa are outside the Common Monetary Area, or where the relevant certificates are restrictively endorsed in terms of the South African Exchange Control Regulations, the following will apply:
• Non-residents who are emigrants from the Common Monetary AreaThe replacement share certificate reflecting the consolidation will be restrictively endorsed in terms of the South African Exchange Control Regulations and will be sent to the shareholders’ authorised dealer in foreign exchange in South Africa controlling their blocked assets.
• All other non-residentsThe replacement share certificate reflecting the consolidation will be restrictively endorsed “non-resident” in terms of the South African Exchange Control Regulations.
23.2 Procedure to be followed by dematerialised shareholders for the consolidation
Dematerialised shareholders must not do anything as their accounts at their CSDP or broker will automatically be updated.
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PART IV: FINANCIAL INFORMATION
24. PRO FORMA FINANCIAL INFORMATION
24.1 The pro forma statement of financial position and statement of comprehensive income of eXtract, after the restructure, excess asset disposal and consolidation are set out in Annexure 1 of this circular.
24.2 The pro forma statement of financial position and statement of comprehensive income of eXtract, including the assumptions on which they are based and the financial information from which they have been prepared, are the responsibility of the board of eXtract.
24.3 The independent reporting accountants’ assurance report on the compilation of pro forma statement of financial position and statement of comprehensive income of eXtract is set out in Annexure 2 of this circular.
25. HISTORICAL FINANCIAL INFORMATION
The audited historic consolidated financial statements of eXtract for the years ended 30 June 2016, 30 June 2015 and 30 June 2014 are set out in Annexure 3 of this circular.
25.1 The unaudited consolidated financial statements of eXtract for the six months ended 31 December 2016 are set out in Annexure 3 of this circular.
26. SHARE PRICE HISTORY
The share price history of enX and eXtract’s shares is set out in Annexure 4.
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PART V: GENERAL
27. GENERAL MEETING
A general meeting of eXtract shareholders will be held at 10:00 on Thursday, 10 August 2017 at the offices of the company for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions set out in the notice of general meeting. A notice convening such general meeting is attached hereto and forms part of this circular.
28. OPINION AND RECOMMENDATION OF THE eXtract BOARD
28.1 Opinion and recommendation in respect of the restructure
28.1.1 The eXtract board, after evaluating the rationale for and the terms and conditions of the restructure, is of the opinion that the transaction is beneficial to eXtract shareholders and recommends that eXtract shareholders vote in favour of the resolutions necessary to implement each of the restructure, the authorised share increase and the consolidation.
28.1.2 The directors who hold eXtract shares intend voting their shares in favour of all resolutions proposed at the general meeting.
28.2 Opinion and recommendation in respect of the excess asset disposal
The eXtract board, after evaluating the rationale for and the terms and conditions of the excess assets disposal, is of the opinion that the transaction is beneficial to eXtract shareholders and recommends that eXtract shareholders vote in favour of the resolutions necessary to implement the excess asset disposal.
The directors who hold eXtract shares intend voting their shares in favour of all resolutions proposed at the general meeting in respect of the excess asset disposal.
29. SHARES IN ISSUE
eXtract’s authorised and issued shares as at the last practical date and after the restructure, the authorised share increase and the consolidation are set out below.
29.1 As at the last practical date
R
Authorised1 500 000 000 ordinary shares of no par value each –Issued506 902 997 ordinary shares of no par value each –Stated capital 1 891 997 393
Total issued 1 891 997 393
No shares are held in treasury
29.2 After the authorised share increase
R
Authorised10 000 000 000 ordinary shares of no par value each –Issued506 902 997 ordinary shares of no par value each –Stated capital 1 891 997 393
Total issued 1 891 997 393
Pursuant to the restructure no shares will be held in treasury.
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29.3 After the restructure
R
Authorised10 000 000 000 ordinary shares of no par value each –
Issued4 262 074 955 ordinary shares of no par value each –Stated capital 3 769 583 372
Total issued 3 769 583 372
Pursuant to the restructure no shares will be held in treasury.
29.4 After the consolidation
R
Authorised50 000 000 ordinary shares of no par value each –
Issued21 310 374 ordinary shares of no par value each –Stated capital 3 769 583 372
Total issued 3 769 583 372
Pursuant to placement no shares will be held in treasury.
30. MAJOR AND CONTROLLING SHAREHOLDERS
30.1 Set out below are the names of shareholders (other than directors) that are directly or indirectly, beneficially interested in 5% or more of the issued shares of eXtract shares as at the last practical date.
Beneficial
Name of shareholder Directly Indirectly Total% of shares
in issue
enX 101 400 000 4 469 321 105 869 321 20.88Protea Asset Management 71 724 963 – 71 724 963 14.15PSG 64 540 844 – 64 540 844 12.73Peregrine Group 31 515 208 – 31 505 208 6.22
Total 268 920 598 4 469 321 273 389 919 53.98
30.2 Set out below are the names of shareholders (other than directors) that will be directly or indirectly, beneficially interested in 5% or more of the issued shares of eXtract after the restructure and the unbundling of the eXtract consideration shares to enX shareholders.
Beneficial
Name of shareholder Directly Indirectly Total% of shares
in issue
K2015269141 2 687 203 – 2 687 203 12.6Samvenice Trading 1 367 895 – 1 367 895 6.4Wild Rose Capital 1 235 629 – 1 235 629 5.8Government Employees Pension Fund 1 173 202 – 1 173 202 5.5Peregrine Group 1 799 909 – 1 799 909 8.5Protea Asset Management 1 356 225 – 1 356 225 6.4PSG 1 136 830 – 1 136 830 5.3
Total 10 756 893 – 10 756 893 50.5
30.3 As at the last practical date eXtract did not have a controlling shareholder. Assuming implementation of the restructure and unbundling, it is anticipated that eXtract will not have a controlling shareholder.
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31. INTERESTS OF EXTRACT AND ITS DIRECTORS IN EXTRACT AND enX
31.1 As at the last practical date, eXtract does not hold any enX shares. Pursuant to the implementation of the Eqstra transaction 52 715 390 enX shares were allotted and issued to eXtract at an issue price of R21.00. These enX shares were unbundled to eXtract shareholders on 21 November 2016. Save as aforesaid, there has been no trade by eXtract in enX shares in the period commencing six months before the date of the joint restructure announcement and ending on the last practical date.
31.2 Directors and management
31.2.1 There will be no change in the directors or management of eXtract pursuant to the restructure or the excess asset disposal.
31.2.2 Details of the directors and management of eXtract are set out in paragraph 3 of the revised listing particulars.
31.3 Directors’ emoluments
31.3.1 The emoluments of the directors of eXtract are set out in Annexure 3 of the revised listing particulars.
31.3.2 There will be no change in the remuneration of the directors of eXtract pursuant to the restructure or the excess asset disposal.
31.4 Directors’ service contracts
31.4.1 Upon the implementation of the Eqstra transaction, Jannie Serfontein resigned as an executive director of the company and his service contract with the company was terminated accordingly. Save for the new service contracts concluded for Bernard Swanepoel, Clinton Halsey and David Chadinha in the aforesaid six month period (the details of which are set out in Annexure 3 to the revised listing particulars), no other service contracts of eXtract directors have been amended/concluded in the period commencing six months before the date of the joint restructure announcement and ending on the last practical date.
31.4.2 Service contracts with the executive directors of eXtract as well as the company secretary have been concluded with terms and conditions that are standard for such appointments and contain normal terms of employment. The service contracts are available for inspection as detailed in paragraph 42 of this circular. There are no service contracts in place in respect of non-executive directors of eXtract.
31.5 Directors’ interests in eXtract shares
31.5.1 The direct and indirect beneficial interests of directors (and their associates), including any director who resigned during the last 18 months, in the issued shares of eXtract as at the last practical date were as follows.
DirectorDirect
holdingIndirect holding
Total shares held
% of issued shares
Bernard Swanepoel 8 000 000 – 8 000 000 1.58Clinton Halsey 2 000 000 – 2 000 000 0.39Jannie Serfontein 504 000 – 504 000 0.10David Chadinha 45 819 – 45 819 –Justin Colling* – – – –
Total 10 549 819 – 10 549 819 2.07
* Resigned as a director with effect from 31 March 2017. Following his resignation, Justin Colling disposed of the 352 502 eXtract shares previously held by him.
31.5.2 There have been no dealings in eXtract shares by the directors in the period commencing six months before the date of the joint restructure announcement and ending on the last practical date save for:
31.5.2.1 the acquisition by Bernard Swanepoel of 8 000 000 eXtract shares on 28 November 2016 at 30 cents per share, for an aggregate consideration of R2 400 000, pursuant to an off-market transaction;
31.5.2.2 the acquisition by Clinton Halsey of 2 000 000 eXtract shares on 28 November 2016 at 30 cents per share, for an aggregate consideration of R600 000, pursuant to an off-market transaction;
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31.5.2.3 the delivery of 306 555 eXtract shares to Jannie Serfontein on 8 November 2016, pursuant to a deferred bonus plan and matching scheme in terms of which eXtract was obliged to deliver eXtract shares to participants; and
31.5.2.4 the disposal by Jannie Serfontein of 306 555 eXtract shares on 7 December 2016 at 35 cents per share, for an aggregate consideration of R107 294.25. The shares were disposed of pursuant to an on-market transaction in order to settle tax expenses in respect of the aforesaid deferred bonus plan and matching scheme.
31.5.3 Pursuant to the implementation of the restructure (including the unbundling) and the consolidation, the directors of eXtract will have the following interests in eXtract shares:
DirectorDirect
holdingIndirect holding
Total shares held
% of issued shares
Bernard Swanepoel 40 000 – 40 000 0.14Clinton Halsey 10 000 – 10 000 0.03Jannie Serfontein 2 520 – 2 520 –David Chadinha 229 – 229 –
Total 52 749 – 52 749 0.17
31.6 Directors’ interests in enX shares
31.6.1 The direct and indirect beneficial interests of directors (and their associates), including any director who resigned during the last 18 months, in the issued shares of enX as at the last practical date were as follows.
DirectorDirect
holdingIndirect holding
Total shares held
% of issued shares
Jannie Serfontein 264 849 469 464 734 313 0.41Justin Colling* – – – –
Total 264 849 469 464 734 313 0.41
* Resigned as a director with effect from 31 March 2017. Following his resignation, Justin Colling disposed of the 6 506 enX shares previously held by him.
31.6.2 There have been no dealings in enX shares by the directors in the period commencing six months before the date of the joint restructure announcement and ending on the last practical date save for:
31.6.2.1 the grant and acceptance by Jannie Serfontein of 429 612 enX shares on 15 December 2016 pursuant to the enX Forfeitable Share Scheme for an aggregate consideration of R7 818 293.982, being the total deemed value, calculated using the 30 day VWAP prior to the transaction date, being R18.1985 per enX share. The shares were acquired pursuant to the grant and acceptance of options pursuant to the enX Forfeitable Share Scheme. The shares are registered in his name but are held in escrow subject to the rules of the enX Forfeitable Share Scheme. They will vest in Serfontein on 14 December 2019 provided that Serfontein remains on that day in the full time employ of enX, with no breaks in his employment prior to that date. Pending their vesting and release from escrow, Serfontein retains all shareholder rights attaching to the shares including the right to vote and the right to participate in distributions, subject only to the forfeiture and disposal restrictions stipulated in the rules of the aforesaid scheme. If, prior to vesting, Serfontein ceases to be employed as a result of death, redundancy, medical disability or retirement, he will be entitled to a pro rata portion of his scheme shares, determined in accordance with the rules of the scheme;
31.6.2.2 the acquisition by Jannie Serfontein of 199 329 enX shares on 20 December 2016 at R21.00 per share for an aggregate consideration of R4 185 909 pursuant to an on-market acquisition;
31.6.3 There will be no change in the interests of the directors of eXtract in enX shares Pursuant to the implementation of the restructure.
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31.7 Directors’ interests in transactions
31.7.1 No director of the group, including any director who has resigned during the last 18 months, has any direct or indirect beneficial interest in the restructure or excess asset disposal or any transactions effected by eXtract during the current or preceding financial year or effected during an earlier financial year which remains in any respect outstanding or unperformed. eXtract has not acquired any property during the current or preceding financial year.
31.7.2 Save that Jannie Serfontein is a non-executive director eXtract and an executive director of enX, there is no relationship between any promoter, manager, director, management company (or its subsidiary or holding company) and any other person where a duty in relation to that other person may be seen to conflict with a duty owed to eXtract.
32. INTERESTS OF enX AND ITS DIRECTORS IN EXTRACT AND enX
32.1 As at the last practical date, enX holds 101 400 000 eXtract shares, acquired pursuant to the implementation of the Eqstra transaction at R1.00 per share on 15 November 2016. Eqstra Corporation, a wholly-owned subsidiary of enX owns 4 469 321 eXtract shares.
32.2 Save for the acquisition of eXtract shares by enX pursuant to the Eqstra transaction, as set out above, there has been no trade by enX in eXtract shares in the period commencing six months before the date of the joint restructure announcement and ending on the last practical date.
32.3 enX directors’ interests in enX shares
32.3.1 The direct and indirect beneficial interests of directors of enX (and their associates), including any director who resigned during the last 18 months, in the issued share capital of enX as at the last practical date were as follows.
DirectorDirect
holdingIndirect holding
Total shares held
% of issued shares
Paul Mansour 303 095 577 451^ 880 546 0.5Jannie Serfontein@ 264 849 469 464 734 313 0.4Irwin Lipworth@ – 80 357 80 357 –Jarrod Friedman§ 462 302 577 451^ 1 039 753 0.6Steven Joffe 314 335 4 042 156* 4 356 491 2.4Paul O’Flaherty – 3 196 318$ 3 196 318 1.7Paul Baloyi – 5 753 372# 5 753 372 3.2Tyrone Moodley∞ – – – –
Total 1 344 581 14 696 569 16 041 150 8.8
§ Resigned as a director with effect from 15 April 2016.^ Held indirectly by virtue of a 5% shareholding in Wild Rose Capital.* Held indirectly by virtue of a 35% shareholding in Wild Rose Capital.$ Held indirectly by virtue of a 25% shareholding in CapLeverage.# Held indirectly by virtue of a 45% shareholding in CapLeverage.@ Includes the enX shares indirectly beneficially held pursuant to the enX Forfeitable Share Scheme.∞ Although Tyrone Moodley has no direct or indirect beneficial interest in enX shares, he is a shareholder in entities which he
controls, including Midbrook Lane, Protea Asset Management (which, although itself not a beneficial shareholder, advises certain funds and managed accounts), Riskowitz Capital Management (which is the general partner of Ithuba Investments and the Riskowitz Value Fund LP) and Conduit Capital Limited, which between them own or control an aggregate of 14 233 806 enX shares.
32.3.2 There have been no dealings in enX shares by the directors between 31 August 2016 and the last practical date, save for:
32.3.2.1 the grant and acceptance by Irwin Lipworth of 80 357 enX shares on 15 December 2016 pursuant to the enX Forfeitable Share Scheme for an aggregate consideration of R1 462 376.8645, being the total deemed value, calculated using the 30 day VWAP prior to the transaction date, being R18.1985 per enX share. The shares were acquired pursuant to the grant and acceptance of options pursuant to the enX Forfeitable Share Scheme. The shares are registered in his name but are held in escrow subject to the rules of the enX Forfeitable Share Scheme. They will vest in Irwin Lipworth on 14 December 2019 provided that Irwin Lipworth remains on that day in the full time employ of enX, with no breaks in his employment prior to that date. Pending
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their vesting and release from escrow, Irwin Lipworth retains all shareholder rights attaching to the shares including the right to vote and the right to participate in distributions, subject only to the forfeiture and disposal restrictions stipulated in the rules of the aforesaid scheme. If, prior to vesting, Irwin Lipworth ceases to be employed as a result of death, redundancy, medical disability or retirement, he will be entitled to a pro rata portion of his scheme shares, determined in accordance with the rules of the scheme;
32.3.2.2 the grant and acceptance by Jannie Serfontein of 429 612 enX shares on 15 December 2016 pursuant to the enX Forfeitable Share Scheme for an aggregate consideration of R7 818 293.982, being the total deemed value, calculated using the 30 day VWAP prior to the transaction date, being R18.1985 per enX share. The shares were acquired pursuant to the grant and acceptance of options pursuant to the enX Forfeitable Share Scheme. The shares are registered in his name but are held in escrow subject to the rules of the enX Forfeitable Share Scheme. They will vest in Serfontein on 14 December 2019 provided that Serfontein remains on that day in the full time employ of enX, with no breaks in his employment prior to that date. Pending their vesting and release from escrow, Serfontein retains all shareholder rights attaching to the shares including the right to vote and the right to participate in distributions, subject only to the forfeiture and disposal restrictions stipulated in the rules of the aforesaid scheme. If, prior to vesting, Serfontein ceases to be employed as a result of death, redundancy, medical disability or retirement, he will be entitled to a pro rata portion of his scheme shares, determined in accordance with the rules of the scheme;
32.3.2.3 the acquisition by Jannie Serfontein of 199 329 enX shares on 20 December 2016 at R21.00 per share for an aggregate consideration of R4 185 909 pursuant to an on-market acquisition;
32.3.2.4 the acquisition by Protea Asset Management LLC (“Protea”) of 39 840 enX shares on 16 May 2017 at R15.00 per share for an aggregate consideration of R597 600, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.5 the acquisition by Protea, for the benefit of accounts managed by it, of 250 000 enX shares on 17 May 2017 at R15.30 per share for an aggregate consideration of R3 825 000.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.6 the acquisition by Protea, for the benefit of accounts managed by it, of 100 357 enX shares on 22 May 2017 at a weighted average traded price of R15.29333 per share for an aggregate consideration of R1 534 789.71, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.7 the acquisition by Protea, for the benefit of accounts managed by it, of 9 840 enX shares on 25 May 2017 at R15.30 per share for an aggregate consideration R150 552.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.8 the acquisition by Protea, for the benefit of accounts managed by it, of 49 918 enX shares on 2 June 2017 at R16.25 per share for an aggregate consideration of R811 167.50, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.9 the transfer of 14 092 enX shares from the Horatio Share Trust to Paul Mansour on 2 June 2017 at R16.40 per share, for a total value of R231 108.80. The Horatio Share Trust held the enX shares as a nominee for Paul Mansour following the unbundling of enX consideration shares to Eqstra Group Limited (renamed eXtract Group Limited) shareholders. Accordingly, Paul Mansour’s interest in the enX shares ceased to be an indirect beneficial interest and became a direct beneficial interest;
32.3.2.10 the acquisition by Protea, for the benefit of accounts managed by it, of 156 256 enX shares on 5 June 2017 at R16.50 per share for an aggregate consideration of R2 578 244.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.11 the acquisition by Protea, for the benefit of accounts managed by it, of 36 814 enX shares on 6 June 2017 at R16.50 per share for an aggregate consideration of R607 431.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.12 the acquisition by Protea, for the benefit of accounts managed by it, of 398 558 enX shares on 7 June 2017 at a weighted average traded price of R16.4975 per share for an aggregate consideration of R6 426 732.72, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
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32.3.2.13 the acquisition by Protea, for the benefit of accounts managed by it, of 100 000 enX shares on 8 June 2017 at a weighted average traded price of R16.49282 per share for an aggregate consideration of R1 649 280.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.14 the acquisition by Protea, for the benefit of accounts managed by it, of 400 000 enX shares on 14 June 2017 at R15.49 per share for an aggregate consideration of R6 196 000.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.15 the acquisition by Protea, for the benefit of accounts managed by it, of 150 000 enX shares on 21 June 2017 at R15.76 per share for an aggregate consideration of R2 364 000.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.16 the acquisition by Protea, for the benefit of accounts managed by it, of 55 861 enX shares on 22 June 2017 at a weighted average traded price of R15.2999 per share for an aggregate consideration of R854 667.71, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.17 the acquisition by Protea, for the benefit of accounts managed by it, of 446 739 enX shares on 23 June 2017 at R15.75 per share for an aggregate consideration of R7 036 139.25, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.18 the acquisition by Protea, for the benefit of accounts managed by it, of 171 313 enX shares on 26 June 2017 at a weighted average traded price of R15.6269 per share for an aggregate consideration of R2 677 091.12, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.19 the acquisition by Protea, for the benefit of accounts managed by it, of 395 442 enX shares on 27 June 2017 at a weighted average traded price of R16.1981 per share for an aggregate consideration of R6 405 409.06, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.20 the acquisition by Protea, for the benefit of accounts managed by it, of 27 594 enX shares on 28 June 2017 at R16.26 per share for an aggregate consideration of R448 678.44, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.3.2.21 the acquisition by Protea, for the benefit of accounts managed by it, of 120 000 enX shares on 30 June 2017 at R16.5992 per share for an aggregate consideration of R1 991 904, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea.
These shares are included in the numbers reflected above.
32.3.3 There will be no change in the interests of the directors of enX in enX shares pursuant to the implementation of the restructure.
32.4 enX directors’ interests in eXtract shares
32.4.1 The direct and indirect beneficial interests of directors (and their associates), including any director who resigned during the last 18 months, in the issued shares of eXtract as at the last practical date were as follows.
DirectorDirect
holdingIndirect holding
Total shares held
% of issued shares
Paul Mansour 108 400 – 108 400 –Jannie Serfontein 504 000 – 504 000 0.1Jarrod Friedmann§ 2 000 000 – 2 000 000 0.4Steven Joffe 300 000 – 300 000 0.1Tyrone Moodley∞ – – – –
Total 2 912 400 – 2 912 400 0.6
§ Resigned as a director with effect from 15 April 2016.∞ Although Tyrone Moodley has no direct or indirect beneficial interest in eXtract shares, he is a shareholder in entities which he controls, including Midbrook Lane, Protea Asset Management (which, although itself not a beneficial shareholder, advises certain funds and managed accounts), Riskowitz Capital Management (which is the general partner of Ithuba Investments and the Riskowitz Value Fund LP) and Conduit Capital Limited, which between them own or control an aggregate of 88 957 498 eXtract shares.
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32.4.2 There have been no dealings in eXtract shares by the directors of enX in the period commencing six months before the date of the joint restructure announcement and ending on the last practical date save for:
32.4.2.1 the acquisition by Protea of 100 000 eXtract shares on 19 October 2016 at R2.89 per share for an aggregate consideration of R289 000.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.4.2.2 the acquisition by Protea of 28 747 eXtract shares on 21 October 2016 at R2.80 per share for an aggregate consideration of R80 491.60, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.4.2.3 the acquisition by Protea of 250 000 eXtract shares on 28 October 2016 at R2.65 per share for an aggregate consideration of R662 500, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.4.2.4 the acquisition by Protea of 200 000 eXtract shares on 7 November 2016 at R2.55 per share for an aggregate consideration of R510 000.00, pursuant to an on-market purchase of shares. Tyrone Moodley is a senior advisor of Protea;
32.4.2.5 the delivery of 306 555 eXtract shares to Jannie Serfontein on 8 November 2016, pursuant to a deferred bonus plan and matching scheme in terms of which eXtract was obliged to deliver eXtract shares to participants; and
32.4.2.6 the disposal by Jannie Serfontein of 306 555 eXtract shares on 7 December 2016 at 35 cents per share, for an aggregate consideration of R107 294.25. The shares were disposed of pursuant to an on-market transaction in order to settle tax expenses in respect of the aforesaid deferred bonus plan and matching scheme;
32.4.2.7 the transfer of 108 400 eXtract shares from the Horatio Share Trust to Paul Mansour on 2 June 2017 at 9 cents per share, for an aggregate value of R9 756. The Horatio Share Trust held the eXtract shares as a nominee for Paul Mansour following the unbundling of enX consideration shares to Eqstra Group Limited (renamed eXtract Group Limited) shareholders. Accordingly, Paul Mansour’s interest in eXtract ceased to be an indirect beneficial interest and became a direct beneficial interest.
32.4.3 Pursuant to the implementation of the restructure (including the unbundling) and the consolidation, the directors of enX will have the following interests in eXtract shares:
DirectorDirect
holdingIndirect holding
Total shares held
% of issued shares
Paul Mansour 32 970 61 781^ 94 751 0.3Jannie Serfontein 30 856 50 228 81 084 0.3Irwin Lipworth – 8 597 8 597 –Jarrod Friedman§ 59 462 61 781^ 121 243 0.4Steven Joffe 35 131 432 470* 467 601 1.6Paul O’Flaherty – 341 974$ 341 974 1.2Paul Baloyi – 615 553# 615 553 2.2
Total 158 419 1 572 385 1 730 803 6.0
§ Resigned as a director with effect from 15 April 2016.^ Held indirectly by virtue of a 5% shareholding in Wild Rose Capital.* Held indirectly by virtue of a 35% shareholding in Wild Rose Capital.$ Held indirectly by virtue of a 25% shareholding in CapLeverage.# Held indirectly by virtue of a 45% shareholding in CapLeverage.
32.5 Directors’ interests in transactions
Jannie Serfontein is a non-executive director of eXtract. enX directors who hold enX shares will receive eXtract shares pursuant to the unbundling. Save as aforesaid, there will be no changes to the directors’ interests in transactions pursuant to the restructure and unbundling.
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33. MATERIAL BORROWINGS
33.1 Details of material loans made to the eXtract group, as at the last practical date and pursuant to the implementation of the restructure and excess asset disposal are set out in Annexure 7 of the revised listing particulars.
33.2 The proceeds of the excess asset disposal will be used to repay the material loans of eXtract, as set out in Annexure 7 of the revised listing particulars and would significantly enhance the group’s cash liquidity position.
33.3 The eXtract group has no loan capital outstanding.
33.4 Other than the inter-company loans forming part of the restructure, as detailed in Part I of this circular, and as set out in Annexure 2 of the revised listing particulars, the eXtract group has not entered into any other material inter-company or other transactions.
33.5 As at the last practical date, the eXtract group has not undertaken any off-balance sheet financing.
33.6 As at the last practical date eXtract did not have any material loans receivable.
34. MATERIAL CONTRACTS
34.1 The eXtract group has the following material contracts:
34.1.1 MCC had a contract mining agreement with PPM, which contract terminated on 30 June 2017.
34.1.2 MCC has a contract mining agreement with Tharisa. This agreement will terminate automatically upon the implementation of the Tharisa agreement.
34.2 The details of the remaining material contracts of eXtract are set out in Annexure 9 of this circular.
34.3 Save as aforesaid and as set out in Annexure 9 and the restructure as detailed in Part I of this circular, there are no material contracts which have been entered into in writing by the eXtract group, being restrictive funding arrangements, a contract entered into otherwise than in the ordinary course of the business carried on, within the two years prior to the date of this circular; or entered into at any time and containing an obligation or settlement that is material to the eXtract group.
35. MATERIAL CHANGES
35.1 The termination of the eXtract group’s existing mining contracts, as indicated in Part II of the eXtract circular will have a substantial effect on the MCC business when comparing year-on-year revenue and profit as disclosed in eXtract’s interim results for the six months ended 31 December 2016. As set out in paragraph 33.2, the proceeds of the excess asset disposal will be used to repay the material loans of eXtract. Further information in respect of the material loans of eXtract after the restructure are set out in Annexure 7 of the revised listing particulars.
35.2 Save for the Eqstra transaction, detailed in the circular issued to eXtract shareholders on 26 August 2016, and as set out in this circular, there has been no change in the business or trading objects of eXtract during the past five years.
35.3 Save as set out in this circular, there has been no major change in the nature of property, plant and equipment and in the policy regarding the use thereof.
35.4 Save for the Eqstra transaction, detailed in the circular issued to eXtract shareholders on 26 August 2016 and as set out in this circular, there has been no material change in the nature of business of eXtract.
35.5 There has been no material fact or circumstance that has occurred between 31 December 2017, being the latest interim financial period of eXtract and the date of this circular, other than as disclosed in this circular.
36. ADEQUACY OF CAPITAL
The eXtract board has considered the effects of the restructure and the excess asset disposal and is of the opinion that, pursuant to the implementation of the restructure and excess asset disposal, for a period of 12 months subsequent to the date of this circular:
36.1 the eXtract group will in the ordinary course of business be able to pay its debts;
36.2 the assets of the eXtract group, as impacted by the excess asset disposal, fairly valued, will be in excess of its liabilities. For this purpose the assets and liabilities are recognised and measured in accordance with the accounting policies applied to the latest audited financial results;
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36.3 the share capital and reserves of the eXtract group, as impacted by the restructure and excess asset disposal, will be adequate for ordinary business purposes; and
36.4 the working capital of the eXtract group, as impacted by the restructure and excess asset disposal, will be adequate for ordinary business purposes.
37. LITIGATION STATEMENT
37.1 A dispute in respect of a major contract in Botswana with eXtract’s subsidiary, Eqstra Botswana, resulted in the customer withholding payment towards the end of November 2016. On 21 December 2016 a petition was lodged with the High Court of Botswana for the winding up Eqstra Botswana and on 24 February 2017 it was placed in final liquidation.
37.2 An urgent application was instituted in the High Court of South Africa, Gauteng Division, Johannesburg, on about 19 May 2017 for an order that MCC be placed in final liquidation, alternatively provisional liquidation. The claim which founds the liquidation application is based on an alleged failure by MCC to pay for consultancy services. MCC believes that the application is vexatious, spurious and opportunistic and is aimed at scuppering the transaction which is presently underway. Furthermore, MCC has a defence on the merits of the claim and is able to pay its debts as and when they fall due. Moreover, should be unsuccessful in defending the monetary claim, which is unlikely, it will be able to settle the applicant’s alleged claim. The parties are currently exploring settlement of the matter, alternatively, the possibility of referring the dispute to arbitration. Should the matter not become settled or be referred to arbitration, it is anticipated that the application will be heard on 11 July 2017 in the High Court where MCC will continue to oppose the application.
37.3 Save as set out above, the board of directors of eXtract are not aware of any legal or arbitration proceedings, including any proceedings that are pending or threatened, that may have or have had in the recent past (being the previous 12 months) a material effect on eXtract group’s financial position.
38. CONSENTS
38.1 Each of the corporate advisors, sponsor, independent reporting accountants, transfer secretaries, legal advisor, independent expert in respect of the restructure, independent expert in respect of the excess asset disposal and company secretary have consented in writing to act in the capacities stated and to their names appearing in this circular and have not withdrawn their consent prior to the publication of this circular.
38.2 The independent reporting accountants and the independent experts have consented to the inclusion of their reports in the form and context in which they appear in this circular, which consents have not been withdrawn prior to the publication of this circular.
39. CONFLICTS OF INTEREST
Java Capital is acting as corporate advisor and sponsor to both enX and eXtract in respect of the restructure. In order to ensure that eXtract’s interests in the restructure are adequately protected, BSM Black Proprietary Limited has been appointed as joint corporate advisor to eXtract. Java Capital’s role as corporate advisor in respect of the restructure is limited to the documentation of the terms of the restructure agreed between the enX group, the eXtract group and their other advisors and advising enX and eXtract jointly on the JSE Listings Requirements. Java Capital has confirmed its view that this does not affect its independence. However, as required in terms of the JSE Listings Requirements, it is confirmed that in order to manage any potential or perceived conflicts of interest that might arise as a result of Java Capital acting in these roles, Java Capital has in place appropriate checks and balances to manage any potential or perceived conflicts of interests, including procedures to assess the independence of Java Capital in respect of a transaction (and, should it be determined that Java Capital is not independent, the appointment of an independent transaction sponsor).
41
40. PRELIMINARY AND ISSUE EXPENSES
The expenses (excluding VAT) relating to the restructure and excess asset disposal which have been incurred or that are expected to be incurred are presented in the table below.
Expense RecipientAmount
(R’000)
Joint corporate advisor fees Java Capital 1 500Joint corporate advisor fee BSM Black 4 000Independent reporting accountants’ fees Deloitte 388Independent expert fees KPMG 500Independent expert fees BDO 170Legal fees* ENS 7 000JSE documentation inspection fees JSE 201JSE listing fees JSE 392Printing, publication and distribution costs Ince 200Transfer secretary Computershare 10Settlement fees Strate 10Other costs 100Contingency costs 29
Total 15 000
* The joint fee of R7 million is payable by enX and eXtract in respect of the restructure.
41. DIRECTORS’ RESPONSIBILITY STATEMENT
The directors of eXtract, collectively and individually accept full responsibility for the accuracy of the information given in relation to eXtract, certify that to the best of their knowledge and belief there are no facts in relation to eXtract the omission of which would make any statement false or misleading, certify that they have made all reasonable enquiries to ascertain such facts; and certify that this circular contains all information in relation to eXtract required by law and the Listings Requirements.
42. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at any time during normal business hours on business days from the date of issue of this circular to the date of the general meeting at the registered office of eXtract:
42.1 the MOI of eXtract and its major subsidiaries;
42.2 the restructure agreement;
42.3 the Tharisa agreement;
42.4 the Sandton Plant agreement;
42.5 the Indonesia agreement
42.6 the material contracts set out in Annexure 9;
42.7 the shareholder undertakings;
42.8 a signed copy of this category 1 circular and revised listing particulars;
42.9 the independent reporting accountants’ report, a copy of which is set out in Annexure 2;
42.10 the independent experts’ report in respect of the restructure, a copy of which are set out in Annexure 5;
42.11 the independent experts’ report in respect of the excess asset disposal, a copy of which are set out in Annexure 6;
42.12 eXtract’s corporate governance statement;
42
42.13 the letter issued by the TRP approving this circular in terms of section 119 of the Companies Act;
42.14 the material contracts referred to in paragraph 34;
42.15 the letters of consent referred to in paragraph 38;
42.16 the service contracts of the directors of eXtract; and
42.17 the audited consolidated financial statements of eXtract for the years ended 30 June 2016, 30 June 2015 and 30 June 2014 and the unaudited interim results of eXtract for the six months ended 31 December 2016.
For and on behalf of eXtract Group Limited
This circular was signed in Johannesburg on behalf of all the directors in terms of a written resolution signed by each of the directors on or about 3 July 2017.
Signed on behalf of the board
Clinton Halsey
11 July 2017
43
Annexure 1
PRO FORMA FINANCIAL INFORMATION
The pro forma statement of financial position and statement of comprehensive income of eXtract (the “pro forma financial information”) after the excess asset disposal, restructure and share consolidation (the “transaction”) is set out below. The pro forma financial information is the responsibility of the directors of eXtract and has been prepared for illustrative purposes only to provide eXtract’s shareholders with information on how the transaction may have impacted financial position and financial performance of eXtract. Due to their nature, the pro forma financial information may not provide a fair reflection of eXtract’s financial position, changes in equity, results of operations and cash flows subsequent to the transaction.
The pro forma financial information is presented in accordance with the Companies Act, the JSE Listings Requirements, the Guide on Pro forma Financial Information issued by The South African Institute of Chartered Accountants and the measurement and recognition requirements of IFRS.
The pro forma financial information has been prepared using accounting policies that are consistent with IFRS and with the basis on which the historical financial information has been prepared in terms of eXtract’s accounting policies as at 31 December 2016.
The pro forma financial information has been reviewed by the independent reporting accountants whose report thereon is set out in Annexure 2.
44
PR
O F
OR
MA
STA
TE
ME
NT
OF
FIN
AN
CIA
L P
OSI
TIO
N
The
pro
form
a sta
tem
ent o
f fin
anci
al p
ositi
on o
f eX
trac
t set
out
bel
ow h
as b
een
prep
ared
on
the
assu
mpt
ion
that
the
tran
sact
ion
was
impl
emen
ted
on 3
1 D
ecem
ber 2
016.
eXtr
act a
s at
31 D
ecem
ber
2016
(u
naud
ited
)E
xces
s as
set d
ispo
sal
Res
truc
ture
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al
and
rest
ruct
ure
Shar
e co
nsol
idat
ion
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
ASS
ET
SN
on-c
urre
nt a
sset
s76
2(7
62)
––
––
Prop
erty
, pla
nt a
nd e
quip
men
t85
(85)
––
––
Leas
ing
asse
ts67
7(6
77)
––
––
Cur
rent
ass
ets
1 62
569
–1
694
1 69
4
Inve
ntor
ies
78(7
8)–
––
–Tr
ade
and
othe
r rec
eiva
bles
and
der
ivat
ives
515
––
515
–51
5C
ash
and
cash
equ
ival
ents
162
1 01
7–
1 17
9–
1 17
9As
sets
held
for s
ale
870
(870
)–
––
–
Tota
l ass
ets
2 38
7(6
93)
–1
694
–1
694
EQ
UIT
Y A
ND
LIA
BIL
ITIE
SC
apit
al a
nd r
eser
ves
Stat
ed c
apita
l1
891
–1
878
3 76
9–
3 76
9O
ther
rese
rves
374
––
374
–37
4Ac
cum
ulat
ed lo
ss(3
256
)(1
20)
–(3
376
)–
(3 3
76)
(Defi
cit)
Equi
ty a
ttrib
utab
le
to o
wne
rs o
f the
par
ent
(991
)(1
20)
1 87
876
7–
767
Tota
l equ
ity
(991
)(1
20)
1 87
876
7–
767
Non
-cur
rent
liab
ilit
ies
2 29
4–
(1 8
78)
416
–41
6
Inte
rest-
bear
ing
borr
owin
gs2
256
–(1
878
)37
8–
378
Def
erre
d ta
x lia
bilit
ies
38–
–38
–38
45
eXtr
act a
s at
31 D
ecem
ber
2016
(u
naud
ited
)E
xces
s as
set d
ispo
sal
Res
truc
ture
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al
and
rest
ruct
ure
Shar
e co
nsol
idat
ion
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
Cur
rent
liab
ilit
ies
1 08
4(5
73)
–51
0–
510
Cur
rent
por
tion
of in
tere
st-be
arin
g bo
rrow
ings
465
(465
)–
––
–Tr
ade
and
othe
r pay
able
s, pr
ovisi
ons a
nd
deriv
ativ
es42
090
–51
0–
510
Liab
ilitie
s dire
ctly
ass
ocia
ted
with
ass
ets h
eld
for
sale
199
(199
)–
––
–
Tota
l equ
ity
and
liabi
litie
s2
387
(693
)–
1 69
4–
1 69
4
Num
ber
of s
hare
s in
issu
e (m
illio
n)50
7–
3 75
54
262
(4 2
41)
21
Num
ber
of s
hare
s in
issu
e (n
et o
f tre
asur
y)
(mil
lion)
499
3 75
54
254
(4 2
33)
21N
AV p
er s
hare
(cen
ts)
(198
.8)
(198
.8)
183
605.
9T
NAV
per
sha
re (c
ents
)(1
98.8
)(1
98.8
)18
3 60
5.9
Not
es:
1.
Extr
acte
d, w
ithou
t adj
ustm
ent,
from
the
unau
dite
d in
terim
resu
lts o
f eX
trac
t for
the
six m
onth
s end
ed 3
1 D
ecem
ber 2
016.
2.
Repr
esen
ts th
e fo
llow
ing
adju
stmen
ts fo
r the
exc
ess a
sset
disp
osal
:2.
1 As
set o
ut in
par
agra
ph 1
6.2,
the
exce
ss a
sset
s com
prise
pro
pert
y, pl
ant a
nd e
quip
men
t, le
asin
g as
sets,
inve
ntor
y an
d as
sets
held
for s
ale
with
a c
ombi
ned
carr
ying
val
ue o
f R1
710
mill
ion
at 3
1 D
ecem
ber 2
016.
2.2
The
exc
ess a
sset
s are
ass
umed
to b
e so
ld fo
r an
aggr
egat
e co
nsid
erat
ion
of R
1 68
1 m
illio
n re
ceiv
ed in
cas
h co
mpr
ising
:2.
2.1
for t
he T
haris
a as
sets,
a c
onsid
erat
ion
of R
303
mill
ion
redu
ced
by d
e-es
tabl
ishm
ent c
osts
and
leav
e an
d se
vera
nce
pay
dedu
ctio
ns o
f R24
mill
ion;
2.2.
2 fo
r the
MC
C p
rope
rtie
s in
term
s of t
he S
andt
on P
lant
tran
sact
ion,
a c
onsid
erat
ion
of R
52 m
illio
n;2.
2.3
for 9
9% o
f the
issu
ed sh
ares
of P
T M
CC
, a n
omin
al c
onsid
erat
ion
of R
1; a
nd2.
2.4
for t
he b
alan
ce o
f the
exc
ess a
sset
s, an
ass
umed
con
sider
atio
n of
R1
350
mill
ion,
bei
ng th
eir c
arry
ing
valu
e at
31
Dec
embe
r 201
6.2.
3 A
loss
on
sale
of a
sset
s of R
29 m
illio
n, b
eing
the
diffe
renc
e be
twee
n th
e ag
greg
ate
cons
ider
atio
n of
R1
681
mill
ion
and
the
carr
ying
val
ue o
f the
exc
ess a
sset
s at 3
1 D
ecem
ber 2
016
of R
1 71
0 m
illio
n, is
reco
gnise
d.2.
4 T
he a
ggre
gate
pro
ceed
s of R
1 68
1 m
illio
n ar
e ap
plie
d to
settl
e in
tere
st-be
arin
g bo
rrow
ings
of R
465
mill
ion
and
liabi
litie
s dire
ctly
ass
ocia
ted
with
ass
ets h
eld
for s
ale
of R
199
mill
ion,
with
the
bala
nce
of R
1 01
7 m
illio
n be
ing
allo
cate
d to
cas
h an
d ca
sh e
quiv
alen
ts.2.
5 Ac
cum
ulat
ed lo
ss is
incr
ease
d by
R12
0 m
illio
n co
mpr
ising
:2.
5.1
the
loss
on
sale
of a
sset
s of R
29 m
illio
n; a
nd2.
5.2
a pr
ovisi
on o
f R91
mill
ion
rela
ting
to th
e re
trenc
hmen
t of e
mpl
oyee
s, ot
her r
estr
uctu
re re
late
d co
sts a
nd e
Xtr
act’s
por
tion
of o
nce-
off t
rans
actio
n co
sts.
3.
Repr
esen
ts th
e fo
llow
ing
adju
stmen
ts fo
r the
restr
uctu
re:
3.1
enX
subs
crib
es fo
r new
ord
inar
y sh
ares
in M
CC
at a
subs
crip
tion
pric
e of
app
roxi
mat
ely
R1
878
mill
ion,
whi
ch e
quat
es to
the
aggr
egat
e va
lue
of M
CC
’s de
bt o
win
g to
enX
bei
ng th
e de
signa
ted
debt
.3.
2 T
he su
bscr
iptio
n pr
ocee
ds a
re u
tilise
d by
MC
C to
redu
ce th
e de
signa
ted
debt
in fu
ll. e
nX e
xcha
nges
all
of th
e sh
ares
it h
olds
in M
CC
for 3
755
171
958
eX
trac
t sha
res a
t 50
cent
s per
shar
e.4.
Re
pres
ents
the
adju
stmen
t for
the
shar
e co
nsol
idat
ion
in th
e ra
tio o
f 200
to 1
.
5.
The
re a
re n
o ot
her s
ubse
quen
t eve
nts t
hat r
equi
re a
djus
tmen
ts to
the
pro
form
a sta
tem
ent o
f fin
anci
al p
ositi
on.
46
PR
O F
OR
MA
STA
TE
ME
NT
OF
CO
MP
RE
HE
NSI
VE
INC
OM
E
The
pro
form
a sta
tem
ent o
f com
preh
ensiv
e in
com
e of
eX
trac
t set
out
bel
ow h
as b
een
prep
ared
on
the
assu
mpt
ion
that
the
tran
sact
ion
was
impl
emen
ted
on 1
July
201
6.
eXtr
act
for
the
six
mon
ths e
nded
31
Dec
embe
r 20
16
(una
udit
ed)
Exc
ess
asse
t dis
posa
lR
estr
uctu
re
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al a
nd r
estr
uctu
reSh
are
cons
olid
atio
n
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
Con
tinu
ing
oper
atio
nsR
even
ue1
152
(1 1
52)
––
––
Prof
it fr
om o
pera
tion
s bef
ore
depr
ecia
tion
, am
orti
sati
on a
nd r
ecou
pmen
ts20
0(2
00)
––
––
Dep
reci
atio
n an
d am
ortis
atio
n(1
71)
171
–
––
–Pr
ovisi
on fo
r ret
renc
hmen
t cos
ts–
(91)
–(9
1)–
(91)
Prov
ision
for h
ead
office
cos
ts–
(10)
–(1
0)–
(10)
Reco
upm
ents
––
––
––
Ope
rati
ng p
rofi
t29
(130
)–
(101
)(1
01)
Net
fore
ign
exch
ange
(los
ses)
gai
ns–
––
––
–N
et im
pairm
ent o
f ass
ets
(1 1
41)
––
(1 1
41)
–(1
141
)
Los
s bef
ore
net f
inan
ce c
osts
(1 1
12)
(130
)–
(1 2
42)
–(1
242
)N
et fi
nanc
e co
sts(1
34)
1711
7–
––
Fina
nce
costs
incl
udin
g fa
ir va
lue
gain
s(1
44)
2711
7–
––
Fina
nce
inco
me
10(1
0)–
––
–
Loss
on
sale
of a
sset
s–
(29)
–(2
9)–
(29)
(Los
s) p
rofi
t bef
ore
taxa
tion
(1 2
46)
(142
)11
7(1
271
)–
(1 2
71)
Inco
me
tax
expe
nse
(47)
40(3
3)(4
0)–
(40)
(Los
s) p
rofi
t for
the
peri
od fr
om c
onti
nuin
g op
erat
ions
(1 2
93)
(102
)84
(1 3
11)
–(1
311
)
Dis
cont
inue
d op
erat
ions
(Los
s) p
rofit
for t
he p
erio
d fro
m
disc
ontin
ued
oper
atio
ns(2
40)
261
–21
–21
(Los
s) p
rofi
t for
the
peri
od(1
533
)15
984
(1 2
90)
–(1
290
)
47
eXtr
act
for
the
six
mon
ths e
nded
31
Dec
embe
r 20
16
(una
udit
ed)
Exc
ess
asse
t dis
posa
lR
estr
uctu
re
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al a
nd r
estr
uctu
reSh
are
cons
olid
atio
n
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
Att
ribu
tabl
e to
:O
wne
rs o
f the
par
ent
(1 5
35)
159
84(1
292
)–
(1 2
92)
–(L
oss)
pro
fit fo
r the
per
iod
from
co
ntin
uing
ope
ratio
ns(1
293
)(1
02)
84(1
311
)–
(1 3
11)
–(L
oss)
pro
fit fo
r the
per
iod
from
di
scon
tinue
d op
erat
ions
(242
)26
1–
19–
19
Non
-con
trolli
ng in
tere
sts2
––
2–
2
(Los
s) p
rofi
t for
the
peri
od(1
533
)15
984
(1 2
90)
–(1
290
)
Wei
ghte
d av
erag
e nu
mbe
r of
sha
res
(net
of t
reas
ury
shar
es) (
mil
lion)
405
–3
755
4 16
0(4
139
)21
Cen
tsC
ents
Cen
tsC
ents
Cen
tsC
ents
(Los
s) e
arni
ngs p
er s
hare
from
co
ntin
uing
ope
rati
ons
–Ba
sic a
nd d
ilute
d (lo
ss) e
arni
ngs p
er sh
are
(319
.4)
1 26
5.4
(1 3
37.6
)(3
1.5)
(6 2
71.7
)(6
303
.2)
(Los
s) e
arni
ngs p
er s
hare
from
dis
cont
inue
d op
erat
ions
–Ba
sic a
nd d
ilute
d (lo
ss) e
arni
ngs p
er sh
are
(59.
8)60
.2–
0.5
90.9
91.3
Hea
dlin
e (L
oss)
ear
ning
s per
sha
re fr
om
cont
inui
ng o
pera
tion
s –
Basic
and
dilu
ted
(loss
) hea
dlin
e ea
rnin
gs
per s
hare
(116
.5)
1 62
5.4
(1 5
20.8
)(1
1.3)
(2 2
41.3
)2
252.
6H
eadl
ine
(Los
s) e
arni
ngs p
er s
hare
from
di
scon
tinu
ed o
pera
tion
s –
Basic
and
dilu
ted
(loss
) hea
dlin
e ea
rnin
gs
per s
hare
109.
0(9
7.8)
–11
.22
236.
22
247.
5
48
eXtr
act
for
the
six
mon
ths e
nded
31
Dec
embe
r 20
16
(una
udit
ed)
Exc
ess
asse
t dis
posa
lR
estr
uctu
re
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al a
nd r
estr
uctu
reSh
are
cons
olid
atio
n
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
Reco
ncili
atio
nB
asic
ear
ning
s(1
293
)(1
02)
84(1
311
)–
(1 3
11)
Add
back
: Im
pairm
ent o
f lea
sing
asse
ts1
141
––
1 14
1–
1 14
1Ad
d ba
ck: L
oss o
n sa
le o
f ass
ets
–29
2929
Tax
effec
t(3
19)
(8)
–(3
28)
–(3
28)
Hea
dlin
e ea
rnin
gs(4
71)
(81)
84(4
69)
–(4
69)
49
eXtr
act
for
the
six
mon
ths e
nded
31
Dec
embe
r 20
16 (u
naud
ited
)E
xces
s as
set d
ispo
sal
Res
truc
ture
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al a
nd r
estr
uctu
reSh
are
cons
olid
atio
n
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
Dis
cont
inue
d op
erat
ions
Rev
enue
2 45
9(5
83)
–1
876
–1
876
Prof
it fr
om o
pera
tion
s bef
ore
depr
ecia
tion
, am
orti
sati
on a
nd r
ecou
pmen
ts61
3(5
5)–
558
–55
8D
epre
ciat
ion
and
amor
tisat
ion
(21)
21–
––
–
Ope
rati
ng p
rofi
t59
2(3
4)–
558
–55
8N
et fo
reig
n ex
chan
ge g
ains
(los
ses)
(24)
12–
(12)
–(1
2)N
et im
pairm
ent o
f ass
ets
(248
)23
9–
(9)
–(9
)IF
RS
5 Ad
justm
ent
(439
)–
–(4
39)
–(4
39)
(Los
s) p
rofi
t bef
ore
net f
inan
ce c
osts
(119
)21
7–
98–
98N
et fi
nanc
e co
sts(1
30)
14–
(116
)–
(116
)
Fina
nce
costs
(231
)14
–(2
17)
–(2
17)
Fina
nce
inco
me
101
––
101
–10
1
(Los
s) p
rofi
t bef
ore
taxa
tion
(249
)23
1–
(18)
–(1
8)In
com
e ta
x in
com
e (e
xpen
se)
75(3
3)–
42–
42
(Los
s) p
rofi
t for
the
peri
od(1
74)
198
–24
–24
Los
s on
sale
of s
ubsi
diar
ies
(3)
––
(3)
–(3
)D
econ
solid
atio
n of
sub
sidi
ary
(63)
63–
––
–
Tota
l los
s for
the
peri
od
from
dis
cont
inue
d op
erat
ions
(240
)26
1–
21–
21
50
eXtr
act
for
the
six
mon
ths e
nded
31
Dec
embe
r 20
16 (u
naud
ited
)E
xces
s as
set d
ispo
sal
Res
truc
ture
Pro
form
a af
ter
the
exce
ss a
sset
di
spos
al a
nd r
estr
uctu
reSh
are
cons
olid
atio
n
Pro
form
a af
ter
the
tran
sact
ion
Not
e 1
Not
e 2
Not
e 3
Not
e 4
Rm
Rm
Rm
Rm
Rm
Rm
Amou
nts r
epre
sent
ed to
show
com
para
tive
resu
lts
from
disc
ontin
ued
oper
atio
ns.
Reco
ncili
atio
n
Bas
ic e
arni
ngs
(242
)26
1–
19–
19Ad
d ba
ck: I
mpa
irmen
t of l
easin
g as
sets
248
(239
)–
9–
9IF
RS
5 fa
ir va
lue
adju
stmen
t43
9–
–43
9–
439
Loss
on
sale
of s
ubsid
iarie
s3
––
3–
3D
econ
solid
atio
n of
subs
idia
ry63
(63)
––
––
Taxa
tion
effec
t(6
9)66
–(3
)–
(3)
Hea
dlin
e ea
rnin
gs44
225
–46
7–
467
Not
es:
1.
Extr
acte
d, w
ithou
t adj
ustm
ent,
from
the
unau
dite
d in
terim
resu
lts o
f eX
trac
t for
the
six m
onth
s end
ed 3
1 D
ecem
ber 2
016.
2.
Repr
esen
ts th
e fo
llow
ing
adju
stmen
ts fo
r the
exc
ess a
sset
disp
osal
:2.
1 A
loss
on
sale
of a
sset
s of R
29 m
illio
n, b
eing
the
diffe
renc
e be
twee
n th
e ag
greg
ate
cons
ider
atio
n of
R1
681
mill
ion
and
the
carr
ying
val
ue o
f the
exc
ess a
sset
s at 3
1 D
ecem
ber 2
016
of R
1 71
0 m
illio
n, is
reco
gnise
d. T
he
carr
ying
val
ue a
t 31
Dec
embe
r 201
6 is
afte
r a n
et im
pairm
ent c
harg
e of
R1
141
mill
ion
whi
ch is
ther
efor
e le
ft un
chan
ged.
2.2
The
agg
rega
te p
roce
eds o
f R1
681
mill
ion
are
appl
ied
to se
ttle
inte
rest-
bear
ing
borr
owin
gs o
f R46
5 m
illio
n an
d lia
bilit
ies d
irect
ly a
ssoc
iate
d w
ith a
sset
s hel
d fo
r sal
e of
R19
9 m
illio
n, w
ith th
e ba
lanc
e of
R1
017
mill
ion
bein
g al
loca
ted
to c
ash
and
cash
equ
ival
ents,
resu
lting
in a
redu
ctio
n of
net
fina
nce
costs
by
R27
mill
ion.
2.3
All i
ncom
e an
d ex
pens
es re
late
d to
the
exce
ss a
sset
s com
prisi
ng re
venu
e of
R1
152
mill
ion,
pro
fit fr
om o
pera
tions
of R
200
mill
ion,
dep
reci
atio
n an
d am
ortis
atio
n of
R17
1 m
illio
n an
d fin
ance
inco
me
of R
10 m
illio
n ar
e re
vers
ed.
2.4
A pr
ovisi
on o
f R91
mill
ion
rela
ting
to th
e re
trenc
hmen
t of e
mpl
oyee
s as w
ell a
s oth
er re
struc
ture
rela
ted
costs
, tog
ethe
r with
ass
umed
ong
oing
hea
d of
fice
costs
of R
10 m
illio
n ha
ve b
een
prov
ided
for.
2.5
The
tax
impa
ct o
f the
adj
ustm
ents
is ca
lcul
ated
bas
ed o
n th
e sta
tuto
ry ta
x ra
te o
f 28%
.3.
Re
pres
ents
the
follo
win
g ad
justm
ents
for t
he re
struc
ture
:3.
1 en
X su
bscr
ibes
for n
ew o
rdin
ary
shar
es in
MC
C a
t a su
bscr
iptio
n pr
ice
of a
ppro
xim
atel
y R
1 87
8 m
illio
n, w
hich
equ
ates
to th
e ag
greg
ate
valu
e of
MC
C’s
debt
ow
ing
to e
nX b
eing
the
desig
nate
d de
bt le
ss th
e ex
clud
ed
amou
nt o
f R25
0 m
illio
n.3.
2 T
he su
bscr
iptio
n pr
ocee
ds a
re u
tilise
d by
MC
C to
redu
ce th
e de
signa
ted
debt
in fu
ll. e
nX e
xcha
nges
all
of th
e sh
ares
it h
olds
in M
CC
for 3
755
171
958
eX
trac
t sha
res a
t 50
cent
s per
shar
e.3.
3 N
et fi
nanc
e co
sts re
latin
g to
the
desig
nate
d de
bt o
f R11
7 m
illio
n, to
geth
er w
ith ta
xatio
n th
ereo
n, is
reve
rsed
.4.
Re
pres
ents
the
adju
stmen
t for
the
shar
e co
nsol
idat
ion
in th
e ra
tio o
f 200
to 1
.5.
T
here
are
no
othe
r sub
sequ
ent e
vent
s tha
t req
uire
adj
ustm
ents
to th
e pr
o fo
rma
state
men
t of c
ompr
ehen
sive
inco
me.
6.
All a
djus
tmen
ts ot
her t
han
loss
on
sale
of a
sset
s, pr
ovisi
ons f
or re
trenc
hmen
t and
restr
uctu
re re
late
d co
sts a
nd tr
ansa
ctio
n co
sts a
re e
xpec
ted
to h
ave
a co
ntin
uing
effe
ct.
51
Annexure 2
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION
“4 July 2017
The DirectorseXtract Group Limited61 Maple StreetPomonaKempton Park, 1619
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION INCLUDED IN A JSE CIRCULAR
We have completed our assurance engagement to report on the compilation of pro forma financial information of eXtract Group Limited (the company) compiled by the directors. The pro forma financial information, as set out in Annexure 1 of the JSE Circular (“the circular”), to be dated on or about 11 July 2017, consists of the statement of comprehensive income and the statement of financial position and related notes. The pro forma financial information has been compiled on the basis of the applicable criteria specified in the JSE Limited (“JSE”) Listings Requirements.
The pro forma financial information has been compiled by the directors to illustrate the impact of the corporate action or event, described in Part I, II and III of the circular, on the company’s financial position as at 31 December 2016 and the company’s financial performance for the period then ended, as if the corporate action had taken place at 1 July 2016, being the commencement date of the financial period for the purposes of the statement of comprehensive income and at 31 December 2016, being the last day of the financial period for the purposes of the statement of financial position. As part of this process, information about the company’s financial position and financial performance has been extracted by the directors from the company’s unaudited interim financial results for the six months ended 31 December 2016.
Directors’ Responsibility for the Pro Forma Financial Information
The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in Annexure 1 of the circular.
Quality control
The firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Independence and other ethical requirements
We have complied with the independence and other ethical requirements of the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code), which is consistent with Parts A and B of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, and is founded on the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
Reporting Accountant’s Responsibility
Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the directors on the basis specified in the JSE Listings Requirements based on our procedures performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, which is applicable to an engagement of this nature. This standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.
52
As the purpose of pro forma financial information included in a prospectus is solely to illustrate the impact of a significant corporate action or event on unadjusted financial information of the entity as if the corporate action had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do not provide any assurance that the actual outcome of the event or transaction at 31 December 2016 would have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used in the compilation of the pro forma financial information provides a reasonable basis for presenting the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether:
• The related pro forma adjustments give appropriate effect to those criteria; and• The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial
information.
Our procedures selected depend on our judgement, having regard to our understanding of the nature of the company, the corporate action or event in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.
Our engagement also involved evaluating the overall presentation of the pro forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements and described in Annexure 1 of the circular.
Deloitte & ToucheRegistered AuditorPer: Mark RayfieldPartner
Deloitte & ToucheRegistered Auditors(Practice number 902276)The Woodlands20 Woodlands DriveWoodmead, 2196(Private Bag X6, Gallo Manor, 2052)”
53
Annexure 3
HISTORIC FINANCIAL INFORMATION OF EXTRACT
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT
Notes 30 June 2016 30 June 2015 30 June 2014Rm Rm Rm
ASSETSNon-current assets 2 201 10 739 10 822Intangible assets 4 37 220 167Property, plant and equipment 5 77 468 519Leasing assets 6 2 044 9 950 9 991Deferred tax assets 7 41 65 67Finance lease receivables 8 1 16 12Other investments and loans 9 1 20 66Current assets 9 321 3 127 3 054
Derivative financial assets 10 – 28 48
Finance lease receivables 8 1 16 31Other investments and loans 9 – 58 42Inventories 11 87 1 062 1 117Trade and other receivables 12 952 1 742 1 704Taxation in advance 6 18 19Cash and cash equivalents 13 148 203 93Assets held for sale 14 8 127 – –
Total assets 11 522 13 866 13 876
EQUITY AND LIABILITIESCapital and reservesStated capital 15 1 839 1 839 1 839Other reserves 16 449 330 272Retained (loss) income (688) 1 569 1 314
Equity attributable to owners of the parent 1 600 3 738 3 425Non-controlling interests 29 32 26
Total equity 1 629 3 770 3 451Non-current liabilities 2 588 6 351 5 665
Interest-bearing borrowings 17 2 539 5 601 4 912Deferred tax liabilities 7 9 750 753
Current liabilities 7 305 3 745 4 760
Derivative financial liability 10 – 3 3Current portion of interest-bearing borrowings 17 92 1 918 3 064Trade and other payables 18 675 1 779 1 664Current tax liabilities 15 45 29Liabilities associated with assets held for sale 14 6 523 – –
Total equity and liabilities 11 522 13 866 13 876
54
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED
Notes 30 June 2016 30 June 2015*Rm Rm
Continuing operationsRevenue 19 2 964 2 801Net operating expenses 20 (2 401) (2 276)
Profit from operations before depreciation, amortisation and profit on disposal 563 525Depreciation and amortisation 21 (412) (422)Profit on disposal of property, plant and equipment 21 – 1
Operating profit 151 104Net foreign exchange gains 20 1 –Net impairment of property, plant and equipment 22 (17) –Net impairment of leasing assets 22 (536) (79)
(Loss) profit before net finance costs (401) 25Net finance costs 23 (219) (200)
Finance costs 23 (248) (208)Finance income 23 29 8
Loss before taxation (620) (175)Income tax 24 157 45
Loss for the year (463) (130)
Attributable to:Owners of the parent (463) (131)Non-controlling interests – 1
Loss for the year from continuing operations (463) (130)
Discontinued operations(Loss) profit for the year from discontinued operations 25 (1 790) 384
(Loss) profit for the year (2 253) 254
Attributable to:
Loss for the year from continuing operations (463) (131)(Loss) profit for the year from discontinued operations (1 794) 374
Non-controlling interests 4 11
(Loss) profit for the year (2 253) 254
Cents Cents
Loss per share from continuing operationsBasic and diluted loss per share 26 (118.3) (33.5)(Loss) earnings per share from discontinued operationsBasic and diluted (loss) earnings per share 26 (458.5) 94.3Headline (loss) earnings per share (total continuing and discontinued operations) (29.9) 78.7
* The amounts for 30 June 2015 have been re-presented in terms of IFRS 5 to show the comparative results from continuing operations.
55
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED
30 June 2015 30 June 2014Rm Rm
Revenue 9 463 9 978Net operating expenses (6 393) (6 974)
Profit from operations before depreciation, amortisation and profit on recoupments 3 070 3 004Depreciation and amortisation (2 034) (2 067)Recoupments 1 1
Operating profit 1 037 938Net foreign exchange gains (losses) 14 (1)Net impairment of leasing assets (97) (2)Impairment of investment – (63)
Profit before net finance costs 954 872Net finance costs (653) (603)
Finance costs including fair value gains (672) (628)Finance income 19 25
Profit before taxation 301 269Income tax (47) (18)
Profit for the year 254 251
Attributable to:Owners of the parent 243 240Non-controlling interests 11 11
Profit for the year 254 251
Cents Cents
Earnings per shareBasic earnings per share 61.3 60.6Diluted earnings per share 61.3 60.6Headline earnings per share 78.7 76.7
56
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOMEFOR THE YEARS ENDED
30 June 2016 30 June 2015 30 June 2014Rm Rm Rm
(Loss) profit for the year (2 253) 254 251Total other comprehensive income for the year, net of taxationItems that may be reclassified subsequently to profit or loss 132 109 68
Exchange differences on translation of foreign subsidiaries 124 92 60Net fair value gain on cash flow hedges and other fair value reserves 8 17 8
Total comprehensive (loss) income for the year, net of taxation (2 121) 363 319
Attributable to:Owners of the parent (2 125) 352 308Non-controlling interests 4 11 11
(2 121) 363 319
57
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEARS ENDED
Statedcapital
Otherreserves
Retained(loss)
income
Non-controlling
interests TotalRm Rm Rm Rm Rm
Balance at 1 July 2014 1 816 218 1 222 19 3 275Total comprehensive income for the year – 68 240 11 319
Profit for the year – – 240 11 251Other comprehensive income for the year, net of taxation – 68 – – 68Net share-based payment expenses – (2) – – (2)Vesting of share incentive scheme – (19) (2) – (21)Devaluation of Lereko call option – 3 – – 3Dividends paid – – (146) (4) (150)Disposal of treasury shares 23 – – – 23Deferred taxation effect on items recorded directly in equity – 4 – – 4
Balance at 30 June 2014 1 839 272 1 314 26 3 451
Total comprehensive income for the year – 109 243 11 363
Profit for the year – – 243 11 254Other comprehensive income for the year, net of taxation – 109 – – 109
Net share-based payment expenses – 2 – – 2Vesting of share incentive scheme – (2) – – (2)Devaluation of Lereko call option – (16) – – (16)Derecognition of Lereko call option – (23) – – (23)Dividends paid – – – (5) (5)Realisation of currency translation reserve – (12) 12 – –
Balance at 30 June 2015 1 839 330 1 569 32 3 770
Total comprehensive income for the year – 132 (2 257) 4 (2 121)
Loss for the year – – (2 257) 4 (2 253)Other comprehensive income for the year, net of taxation – 132 – – 132
Net share-based payment expense – 5 – – 5Vesting of share incentive scheme – (1) – – (1)Goodwill reserve arising on additional interest in subsidiary – (16) – – (16)Dividends paid – – – (7) (7)Deferred taxation effect on items recorded directly in equity – (1) – – (1)
Balance at 30 June 2016 1 839 449 (688) 29 1 629
58
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEARS ENDED
30 June 2016 30 June 2015 30 June 2014Notes Rm Rm Rm
Cash flows from operating activitiesCash receipts from customers 9 426 9 463 9 911Cash paid to suppliers and employees (5 993) (5 561) (6 489)
Cash generated from operations 27A 3 433 3 902 3 422Interest received 23 45 19 25Interest paid 23 (651) (672) (628)Income taxation paid 27B (101) (33) (27)
Net cash flows from operating activities 2 726 3 216 2 792
Cash flows from investing activitiesDisposal (acquisition) of business 27C 42 (12) (16)Purchase of intangible assets 4 (39) (71) (91)Purchase of property, plant and equipment 5 (32) (33) (59)Purchase of leasing assets 6 (2 305) (2 447) (2 987)Proceeds on disposal of property, plant and equipment 5 49 19 3Proceeds on disposal on leasing assets 6 32 12 4(Increase) decrease in finance lease receivables 8 (6) 11 44Proceeds on disposal of other investments and loans 9 2 – (15)
Net cash flows from investing activities (2 257) (2 521) (3 117)
Cash flows from financing activitiesPurchase of non-controlling interest (16) (3) –Decrease in derivative financial instruments – – 64Dividends paid (7) (5) (150)Net (decrease) in interest-bearing borrowings (324) (590) 199
Net cash flows from financing activities (347) (598) 113
Net increase (decrease) in cash and cash equivalents 122 97 (212)Effect of exchange rate translation on cash and cash equivalents 9 13 5Cash and cash equivalents of beginning of year 203 93 300
Total group cash and cash equivalents at end of year 13 334 203 93
59
SEGMENTAL INFORMATION – STATEMENT OF FINANCIAL POSITIONAS AT
Contract mining***30 June 2016 30 June 2015*
Rm Rm
BUSINESS SEGMENTATIONASSETSIntangible assets 37 39Property, plant and equipment 77 139Leasing assets 2 044 4 160Finance lease receivables 2 10Other investments and loans 1 59Inventories 87 164Trade and other receivables and derivatives 952 962
Operating assets 3 200 5 533Assets held for sale** 8 127 –Deferred tax assets 41 –Taxation in advance 6 2Cash and cash equivalents 148 63
Total assets 11 522 65
LIABILITIESTrade and other payables and derivatives 675 697Interest-bearing borrowings 2 631 2 990
Operating liabilities 3 306 3 687Liabilities associated with assets held for sale** 6 523 –Deferred tax liabilities 49 114Current tax liabilities 15 8
Total liabilities 9 893 3 809
GEOGRAPHIC SEGMENTATIONOperating assets 3 200 5 533
– South Africa 2 784 3 496 – Rest of world 416 2 037
Trade and other payable and derivatives 675 697
– South Africa 598 431 – Rest of world 77 266
Interest-bearing borrowings 2 631 2 990
– South Africa 2 395 2 293 – Rest of world 236 697
Net capital expenditure 529 521
– South Africa 485 180 – Rest of world 44 341
* Represents Contract Mining and Plant Rental segment as reported at 30 June 2015.** Refer to note 14 for segmental analysis of the assets held for sale and liabilities associated with assets held for sale.*** Only the continuing Eqstra business comprising Contract Mining business (to be renamed eXtract Group) is included in the segment report as the other divisions
are held for sale in light of the corporate transaction.
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SEGMENTAL INFORMATION – STATEMENT OF COMPREHENSIVE INCOME
No segmental statement of comprehensive income is disclosed as the remaining business comprises Contract Mining only. Refer to the continuing statement of comprehensive income for results.
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NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the consolidated and separate annual financial statements are set out below and are consistent in all material respects with those applied during the previous year.
1.1 BASIS OF PREPARATION
The consolidated and separate annual financial statements are stated in Rands and are prepared in accordance with and comply with International Financial Reporting Standards (IFRS), the Companies Act of South Africa, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council and the IFRS interpretations as issued by the IFRS Interpretations Committee and effective for the company and group’s financial year.
Consolidation
The consolidated annual financial statements incorporate the annual financial statements of the company and all its subsidiaries (including structured entities) controlled by the company and its subsidiaries. Control is achieved when the company has the power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect returns. All subsidiaries have been consolidated, except when the subsidiaries are held exclusively with a view to their disposal, which is highly probable, and are then accounted for as non-current assets held for sale. Where the group’s interest in subsidiary undertakings is less than 100%, the share attributable to outside shareholders is reflected as non-controlling interest. The accounts of subsidiary undertakings are drawn up at 30 June each year.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency in the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. gain from a bargain purchase) is credited to profit or loss in the period of acquisition. Any goodwill arising on changes in ownership interest that does not result in a gain or loss of control is accounted for as an equity transaction.
The interest of minority shareholders is stated as the non-controlling interest shareholder’s proportion of the fair values of the assets and liabilities recognised. Subsequent profits are credited to minority shareholders and any losses attributable to minority shareholders in excess of the minority interests are allocated against the interests of the minority, unless recovery from the minority is not certain.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition, or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the annual financial statements of subsidiaries to bring the accounting policies used in line with those used by the group.
All intercompany transactions, balances and unrealised surpluses and deficits have been eliminated on consolidation.
Segmental information
The principal segments of the group have been identified on a primary basis by business segment and on a secondary basis by significant geographical area in which the group operates. The basis is representative of the internal structure used for management reporting.
Segment revenue reflects both sales to external parties and intergroup transactions across segments. The segment result is presented as segment profit for the year.
Segment operating assets and liabilities are only those items that can be specifically identified within a particular segment.
Foreign currencies
The individual annual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency).
For the purpose of the consolidated annual financial statements, the results and financial position of each entity are expressed in Rand, which is the functional currency of the company and the presentation currency for the consolidated annual financial statements.
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Statements of comprehensive income having a different functional currency are translated into South African currency at the weighted average exchange rates for the year and the statements of financial position are translated at the exchange rates ruling on the reporting date. All resulting exchange differences are classified as a foreign currency translation reserve and reflected as part of shareholders’ equity. On disposal of foreign entities, such translation differences are recognised in the income statement as part of the gain or loss on sale.
Transactions in currencies other than Rand are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Gains or losses arising on translation are included in net profit or loss for the period, except where the item relates to equity loans in which case the gain or loss will be deferred in other comprehensive income, until such time as the equity loan is repaid.
In order to hedge its exposure to foreign exchange risks, the group enters into forward contracts and options. See below for details of the group’s accounting policies in respect of such derivative financial instruments.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operation and translated at the closing rate at the reporting date with exchange differences arising being recognised in equity.
1.2 GOODWILL
Goodwill arising on consolidation represents the excess of the cost of acquisition over the group’s interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or joint venture at the date of acquisition. Goodwill is recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if there is an indication of impairment. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Cash-generating units represent the business operations from which the goodwill was originally generated.
On disposal of a subsidiary, associate or joint venture, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Any goodwill arising on changes in the ownership interest that does not result in a loss of control is accounted for as an equity transaction.
1.3 OTHER INTANGIBLE ASSETS
Expenditure on acquired patents, trademarks, licences and computer software is capitalised and amortised using the straight-line basis over their useful lives, generally between two and eight years. These intangible assets are recognised if it is probable that economic benefits will flow to the entity from the intangible assets and the costs of the intangible assets can be reliably measured. Intangible assets are not revalued. The carrying amount of each intangible asset is reviewed annually and adjusted for impairment, where it is considered necessary.
1.4 IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS EXCLUDING GOODWILL
At each reporting date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss, or whether an impairment loss recognised in a previous period has reversed or decreased. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss or reversal if any.
Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. The assessments that the useful lives are indefinite are assessed at least annually.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxation discount rate that reflects the current market assessment of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
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Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised only if there has been a change in the estimates used to determine the asset’s carrying amount. A reversal of an impairment loss is recognised in income immediately.
1.5 PROPERTY, PLANT AND EQUIPMENT AND LEASING ASSETS
Land is reflected at cost and is not depreciated.
Cost also includes the estimated costs of dismantling and removing the assets and where appropriate the cost is split into significant components. Major improvements to leasehold properties are capitalised and written off over the shorter of its useful life or period of the leases.
All other assets are recorded at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on the straight-line basis to write off the cost of each component of an asset to its residual value over its estimated useful life as follows:
Buildings and leasehold improvements up to 20 yearsEquipment and furniture 3 to 10 yearsMotor vehicles 3 to 5 yearsLeasing assets 3 to 10 yearsEarthmoving assets Production hours
The depreciation methods, estimated remaining useful lives and residual values are reviewed at least annually. Where significant components of an asset have different useful lives to the asset itself, these components are depreciated over their estimated useful lives.
When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. An impairment loss is recognised as an expense immediately.
Gains or losses on disposal are determined by reference to their carrying amount and are taken into account in determining operating profit.
1.6 CAPITALISED BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Where interest is earned on the temporary investment of borrowed funds, this income is set-off against the finance costs eligible for capitalisation. All other borrowing costs are expensed in profit or loss in the period in which they are incurred.
1.7 INVENTORIES
Inventories are stated at the lower of cost or net realisable value, due recognition having been made for obsolescence and redundancy (refer note 2.6). Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Cost is determined as follows:
Vehicles Specific costs
Spares, accessories and finished goods Weighted average cost
Work in progress includes direct costs and a proportion of overhead costs but excludes interest expense.
1.8 FINANCIAL INSTRUMENTS
Financial instruments are initially measured at fair value when the group becomes a party to the contractual provisions of the contract. Subsequent to initial recognition, these instruments are measured as set out below.
Equity and debt security instruments
Equity and debt security instruments are initially recognised at cost on trade date.
At subsequent reporting dates, debt securities that the group has the intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost, excluding those held-to-maturity debt securities
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designated as fair value through profit or loss at initial recognition, less any impairment losses recognised to reflect irrecoverable amounts. Premiums or discounts arising on acquisition are amortised on the yield-to-maturity basis and are recognised in profit or loss.
Equity and debt security instruments other than held-to-maturity debt securities are classified as either fair value through profit or loss or available-for-sale, and are measured at subsequent reporting dates at fair value.
Where equity and debt security instruments are held for trading purposes, gains or losses arising from changes in fair value are recognised in profit or loss for the year.
Available-for-sale investments and gains or losses arising from changes in fair value are recognised in other comprehensive income, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised is recognised in profit or loss for the year.
Loans receivable
Loans are recognised at the date that the amount is advanced.
At subsequent reporting dates they are measured at amortised cost, less any impairment losses recognised to reflect irrecoverable amounts.
Trade and other receivables
Trade and other receivables originated by the group are initially stated at fair value costs and reduced by appropriate allowances for doubtful debts. These allowances are recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents are measured at carrying value which is deemed to be fair value.
Loans payable
Interest-bearing loans are initially recorded on the day that the loans are advanced at fair value.
At subsequent reporting dates, interest-bearing borrowings are measured at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on the accrual basis in the statement of comprehensive income using the effective interest rate method, and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Where interest-bearing loans have interest rate swaps changing the interest rate from fixed to variable or vice versa, they are treated as hedged items and carried at fair value. Gains and losses arising from changes in fair value are included in other comprehensive income.
Where the group has the intention to repurchase its own interest-bearing loans in a recognised market place, such loans are designated as held for trade and are carried at fair value. Gains and losses arising from changes in fair value are included in the statement of comprehensive income for the year.
Trade payables
Trade payables are stated at their fair value and subsequently stated at amortised cost.
Derivative instruments
Derivative financial instruments are initially recognised at fair value, and subsequently measured at fair value. The group uses derivative financial instruments primarily relating to foreign currency protection and to alter interest rate profiles.
The group designates certain derivatives as hedging instruments.
They are classified as:
• fair value hedge: a hedge of exposure to changes in fair value of recognised assets and liabilities;• cash flow hedge: hedges a particular risk associated with a recognised asset or liability or a highly probable
forecast transaction; and• hedges of a net investment in a foreign operation.
Foreign currency forward contracts (FECs) are used to hedge foreign currency fluctuations relating to certain firm commitments and forecast transactions.
Interest rate swap agreements can swap interest rates from either fixed to variable or from variable to fixed and are used to alter interest rate profiles.
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Any gains or losses on fair value hedges are included in the statement of comprehensive income for the year.
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and any ineffective portion is recognised immediately in the statement of comprehensive income.
If the cash flow hedge of a firm commitment or forecast transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in other comprehensive income are recognised in the same period in which the hedged item affects the statement of comprehensive income.
Derivatives embedded in other financial instruments or non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with fair value gains or losses reported in the statement of comprehensive income.
Fair value calculations
Investments are fair valued based on regulated exchange-quoted ruling bid prices at the close of business on the last trading day on or before the reporting date. Fair values for unquoted equity instruments are estimated using applicable fair value models. If a quoted bid price is not available for dated instruments, the fair value is determined using pricing models or discounted cash flow techniques. Any unquoted equity instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at its cost, including transaction costs, less any provisions for impairment.
All other financial assets and liabilities fair values are calculated by present valuing the best estimate of the future cash flows using the risk-free rate of interest plus an appropriate risk premium.
Derecognition
The group derecognises a financial asset when its contractual rights to the cash flow from the financial asset expire, or if it transfers the asset together with its contractual rights to receive the cash flows of the financial assets.
The group derecognises a financial liability when the obligation specified in the contract is discharged, cancelled or expires.
1.9 LEASES
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The group as lessor
Finance leases
Amounts due under finance leases are treated as instalment credit agreements.
Operating leases
Income is recognised in the statement of comprehensive income over the period of the lease term on the effective interest rate basis. Assets leased under operating leases are included under the appropriate category of asset in the statement of financial position. They are depreciated over their expected useful lives on a basis consistent with similar items of property, plant and equipment.
Assets leased under operating leases are included under the appropriate category of asset in the statement of financial position. They are depreciated over their expected useful lives on a basis consistent with similar items of property, plant and equipment.
The group as lessee
Finance leases
Leases where the group assumes substantially all the risks and rewards of ownership are classified as finance leases.
Assets held under finance leases are capitalised as assets of the group at the lower of fair value or the present value of the minimum lease payments at the inception of the lease. The capitalised amount is depreciated over the assets useful life. Lease payments are allocated between capital payments and finance expenses using the effective interest rate method.
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The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Finance costs, which represent the difference between the total lease commitments and the fair value of the assets acquired, are charged to the statement of comprehensive income over the term of the relevant lease.
Operating leases
Operating lease costs are recognised in the statement of comprehensive income over the lease term on the straight-line basis. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.
1.10 SHARE-BASED PAYMENTS
The group operates equity-settled share-based compensation plans for senior employees and executives.
Equity-settled share-based payments are measured at fair value at the date of grant using the Binomial Model. The fair value determined at the grant date of the equity-settled share-based payment is expensed on the straight-line basis over the vesting period with a corresponding entry to equity. The expense takes into account the best estimate of the number of shares that are expected to vest. Non-market conditions such as time-based vesting conditions and non-market performance conditions are included in the assumptions for the number of options that are expected to vest.
At each reporting date, the entity revises its estimates on the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity.
When the options are exercised, or share awards vest, the proceeds received, net of any directly attributable transaction costs, are credited to stated capital.
1.11 RETIREMENT BENEFIT OBLIGATIONS
The group operates a number of retirement schemes around the world. These schemes have been designed and are administered in accordance with the local conditions and practices in the countries concerned and are defined contribution schemes. The pension costs relating to these schemes are assessed in accordance with the advice of qualified actuaries and are expensed as incurred.
1.12 TAXATION
The charge for current tax is based on the results for the year as adjusted for items that are non-assessable or disallowable. It is calculated using tax rates that have been substantially enacted at the reporting date.
Deferred tax is recognised in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the annual financial statements and the corresponding tax basis used in the computation of taxable profit.
In principle, deferred tax liabilities are recognised for all temporary differences arising from depreciation on property, plant and equipment, revaluations of certain non-current assets and provisions for pensions and other retirement benefits. Deferred tax assets are raised only to the extent that their recoverability is probable. Deferred tax assets relating to the carry-forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused taxation losses can be utilised.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the group is able to and intends to settle its current tax assets and liabilities on a net basis.
1.13 REVENUE RECOGNITION
Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer.
Where there are guaranteed buy-back arrangements in terms of which significant risks and rewards of ownership have not transferred to the purchaser, the transaction is accounted for as a lease.
Revenue arising from the rendering of services is recognised on the accrual basis in accordance with the substance of the agreement.
Revenue from vehicle maintenance plans is recognised over the period of the agreement to the extent of the value of parts and services provided.
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Where the group acts as agent and is remunerated on a commission basis, the commission is included in revenue. Where the group acts as principal, the total value of business handled is included in revenue.
Interest income is accrued on the time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s carrying amount.
Dividend income from investments is recognised when the shareholders’ right to receive payment is established.
1.14 PROVISIONS
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
When a provision is measured using cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
1.15 NON-CURRENT ASSETS CLASSIFIED AS HELD-FOR-SALE AND DISCONTINUED OPERATIONS
Non-current assets and disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Immediately before classification as held-for-sale, the measurement of the assets (and all assets and liabilities in a disposal group) is brought up-to-date in accordance with applicable IFRS. Then, on initial classification as held-for-sale, non-current assets and disposal groups are recognised at the lower of carrying amount and the fair value less costs to sell.
Non-current assets classified as held-for-sale are not depreciated or amortised whilst classified as such and are tested for impairment at each reporting period.
A discontinued operation is a component of the group’s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resell.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held-for sale, if earlier. A disposal group that is to be abandoned may also qualify as a discontinued operation.
2. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the consolidated annual financial statements requires the group’s management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the annual financial statements, and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires the exercise of judgement based on various assumptions and other factors such as historical experience, current and expected economic conditions, and in some cases actuarial techniques. Actual results could differ from those estimates.
The following accounting policies have been identified as involving particularly complex or subjective decisions or assessments:
2.1 IMPAIRMENT OF ASSETS
As outlined in the accounting policies, an impairment loss is recognised when the recoverable amount of an asset is estimated to be less than its carrying amount. In assessing value in use, future cash flows are discounted to their present value using a pre-tax discount rate. Management applies its best estimate of the range of economic conditions that will exist over the remaining useful life of an asset. Whilst external evidence is favoured, management applies judgement in circumstances where external evidence is limited.
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2.2 RESIDUAL VALUE AND USEFUL LIVES
The group depreciates its assets over their estimated useful lives taking into account residual values which are reassessed on an annual basis.
The actual lives and residual values of these assets can vary depending on a variety of factors. Technological innovation, product lifecycles and maintenance programmes all impact the useful lives and residual values of assets. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
2.3 INCOME TAXES
The group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the provision for income taxes due to the complexity of legislation and the different tax jurisdictions involved. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated taxes based on estimates. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
The group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income.
Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the reporting date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the group operates could limit the ability of the group to obtain taxation deductions in future periods.
2.4 CONTINGENT LIABILITIES
Management applies judgement to the probabilities and advice it receives from its attorneys, advocates and other advisors in assessing if an obligation is probable, more likely than not, or remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.
2.5 REVENUE RECOGNITION
Revenue from vehicle maintenance plans is recognised only to the extent of the value of parts and services provided, with the balance recognised at the end of the plan. An assessment is performed on a bi-annual basis to determine the value of profits already earned.
2.6 INVENTORY PROVISIONS
The provision for inventory obsolescence is based on a physical count and inspection of stock items which is performed at least annually and takes into account the age, condition and usage rates of the inventory.
2.7 FAIR VALUES AND FINANCIAL INSTRUMENTS
Basis for determining values derivatives
The fair values of derivative financial assets and liabilities are calculated by determining the net present value of all future cash flows, discounted at prevailing market curves of the different currencies at reporting date. Only observable market data is used (no estimates) when constructing the curves and basis swap adjustments are added to provide for liquidity in the market. Black-Scholes principles are used for valuing options.
Other non-derivative assets and liabilities
The fair values of other non-derivative financial assets and liabilities are calculated by determining the net present value of all future cash flows, discounted at prevailing market curves of the different currencies at reporting date.
Other financial instruments
The carrying amounts of financial assets and liabilities with a maturity of less than six months are assumed to approximate their fair value.
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2.8 ONEROUS CONTRACTS
A provision for onerous contracts is recognised when the unavoidable costs of meeting the group’s obligations under a contract exceed the economic benefits expected to be received under the contract. No onerous contracts were recognised for the year.
3. IMPACT OF NEWLY ISSUED AND REVISED STANDARDS AND INTERPRETATIONS
3.1 NEWLY ISSUED AND REVISED STANDARDS
There were no standards or interpretations that were early adopted in the current year.
3.2 NEWLY ISSUED AND REVISED STANDARDS AND INTERPRETATIONS – NOT ADOPTED IN THE CURRENT YEAR
The following new or revised IFRS standards and interpretations have been issued with effective dates applicable to future annual financial statements of the group. Other than new disclosure requirements, these are not expected to have a significant impact on the group’s results.
IFRS 1: First-time Adoption of International Financial Reporting Standards
Amendments resulting from the 2012 – 2014 Annual Improvement cycle (Annual periods beginning on or after 1 January 2016).
IFRS 5: Non-current Assets Held for Sale and Discontinued Operations
Amendments resulting from the 2012 – 2014 Annual Improvement cycle (Annual periods beginning on or after 1 January 2016).
IFRS 7: Financial Instruments: Disclosures
Amendments resulting from September 2014 Annual Improvements to IFRSs (Annual periods beginning on or after 1 January 2016).
IFRS 9: Financial Instruments
This is a new standard that forms the first part of a three-part project replace IAS 39 Financial Instruments: Recognition and Measurements. (Annual periods beginning on or after 1 January 2018).
IFRS 10: Consolidated Financial Statements
Amendments on Sale or Contribution of Assets between an investor and its associate or joint venture (Deferred indefinitely). Amendments related to the application of the investment entities exceptions (Annual periods beginning on or after 1 January 2016).
IFRS 11: Joint Arrangements
Amendment requiring the acquirer of an interest in a joint operation which constitutes a business, to apply all of the principles on business combinations accounting in IFRS (Annual periods beginning on or after 1 January 2016).
IFRS 12: Disclosure of Interests in Other Entities
Amendments related to the application of the investment entities exceptions (Annual periods beginning on or after 1 January 2016).
IFRS 15: Revenue from contracts with customers
IFRS 15 specifies how and when an entity will recognise revenue and required disclosures (Annual periods beginning on or after 1 January 2018).
IFRS 16: Leases
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, and replaces the previous leases Standard, IAS 17 Leases, and related interpretations (Annual periods beginning on or after 1 January 2019).
IAS 1: Presentation of Financial Statements
Amendments arising under the Disclosure Initiative (Annual periods beginning on or after 1 January 2016).
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IAS 7: Cash Flow Statement
Amendments arising under the Disclosure Initiative (Annual periods beginning on or after 1 January 2017).
IAS 12: Income Taxes
Amendments regarding the recognition of deferred tax assets for unrealised losses (Annual periods beginning on or after 1 January 2017).
IAS 16: Property, Plant and Equipment and IAS 38: Intangible Assets
Amendments resulting from clarification of acceptable methods of depreciation and amortisation (Amendments to IAS 16 and IAS 38) (Annual periods beginning on or after 1 January 2016).
IAS 19: Employee Benefits
Amendments resulting from 2012 – 2014 Annual Improvement Cycle (Annual periods beginning on or after 1 January 2016).
IAS 27: Separate Financial Statements
Amendments relating to equity method in separate annual financial statements and amendments related to the application of the investment entities exceptions (Annual periods beginning on or after 1 January 2016).
IAS 28: Investments in Associates and Joint Ventures
Amendments on Sale or Contribution of Assets between an investor and its associate or joint venture (Deferred indefinitely). Amendments related to the application of the investment entities exceptions (Annual periods beginning on or after 1 January 2016).
IAS 34: Interim Financial Reporting
Amendments resulting from 2012 – 2014 Annual Improvement Cycle. (Annual periods beginning on or after 1 January 2016)
IAS 38: Intangible Assets
Amendments resulting from clarification of acceptable methods of depreciation and amortisation (Amendments to IAS 16 and IAS 38) (Annual periods beginning on or after 1 July 2016).
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GoodwillComputer
software Patents TotalRm Rm Rm Rm
4. INTANGIBLE ASSETS30 June 2016 – Cost – 58 – 58 – Accumulated amortisation – (21) – (21)
– 37 – 37
Net book value at beginning of year 15 205 – 220Additions – 39 – 39Amortisation – (17) – (17)Currency adjustments 2 – – 2Impairment – (11) – (11)Reclassification to assets held for sale (17) (179) – (196)
Net book value at end of year – 37 – 37
30 June 2015 – Cost 15 251 1 267 – Accumulated amortisation – (46) (1) (47)
15 205 – 220
Net book value at beginning of year 9 157 1 167Additions 6 65 – 71Amortisation – (17) (1) (18)
Net book value at end of year 15 205 – 220
The goodwill relates to the operations in the United Kingdom, included in the entities being sold as part of the corporate transaction, and was thus subsequently written down in terms of IFRS 5 – Non Current Assets Held for Sale and Discontinued Operations.
72
Land andbuildings
Equipmentand furniture
Motor vehicles Total
Rm Rm Rm Rm
5. INTANGIBLE ASSETS30 June 2016 – Cost 70 61 119 250 – Accumulated depreciation and
impairment (17) (40) (116) (173)
53 21 3 77
Net book value at beginning of year 350 88 30 468Additions 13 17 2 32Transfer from leasing assets – – 6 6Impairment on assets (60) (17) – (77)Proceeds on disposals (45) (2) (2) (49)Depreciation (4) (30) (9) (43)Profit on disposal 5 – 1 6Currency adjustments 5 1 1 7Reclassification to assets held for sale (211) (36) (26) (273)
Net book value at end of year 53 21 3 77
30 June 2015 – Cost 384 284 185 853 – Accumulated depreciation (34) (196) (155) (385)
350 88 30 468
Net book value at beginning of year 353 101 65 519Additions 13 18 2 33Reclassification – 11 (6) 5Acquisition of businesses – – 1 1Proceeds on disposals (15) (1) (3) (19)Depreciation (7) (44) (31) (82)Profit on disposal – – 1 1Currency adjustments 6 3 1 10
Net book value at end of year 350 88 30 468
Certain assets have been encumbered as security for interest-bearing borrowings (note 17).
73
30 June 2016 30 June 2015Rm Rm
6. LEASING ASSETS – Cost 3 534 17 162 – Accumulated depreciation and impairment (1 490) (7 212)
2 044 9 950
Net book value at beginning of year 9 950 9 991Additions 2 304 2 447(Disposal) acquisition of business (42) 11Proceeds on disposals (32) (12)Depreciation (1 846) (1 934)Impairment (1 351) (97)Transfer to inventories (791) (641)Transfer to property, plant and equipment (6) (5)Currency adjustments 239 190Reclassification to assets held for sale (6 382) –
Net book value at end of year 2 044 9 950
Certain leasing assets have been encumbered as security for interest-bearing borrowings (note 17). For details on impairment refer note 22.
30 June 2016 30 June 2015Rm Rm
7. DEFERRED TAXATIONBalance at beginning of year (685) (686)Accounted for in the statement of comprehensive income 214 3Accounted for in the statement of other comprehensive income (33) –Accounted for directly to equity (1) –Net acquisition of businesses – (1)Currency adjustments (1) (1)Reclassification to assets held for sale 498 –
Balance at end of year (8) (685)
Analysis of deferred taxation – Trade and other payables and derivatives 18 84 – Property, plant, equipment and intangibles 9 (43) – Leasing assets (447) (1 128) – Estimated taxation losses 441 405 – Other (29) (3)
Analysis of deferred tax assets and liabilitiesDeferred tax assets 41 65Deferred tax liabilities (49) (750)
(8) (685)
Taxation lossesUnutilised taxation losses available for offset against future profits 1 591 1 680Taxation losses not recognised as deferred tax assets due to unpredictability of future profit streams – (234)Unutilised taxation losses available for offset against future profits 1 591 1 446Deferred taxation assets recognised in respect of such losses 441 405
Deferred tax assets are raised only to the extent that their recoverability is probable. Deferred tax assets relating to the carry-forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused taxation losses can be utilised (refer to note 2.3). The remaining continuing deferred tax asset relates to Contract Mining. Refer to note 32 for discussions on the cash flow projections and future profitability.
74
Less than one year
One to five years Total
Rm Rm Rm
8. FINANCE LEASE RECEIVABLES30 June 2016Minimum lease receivables 9 34 43Finance income (2) (3) (5)
Present value of minimum lease receivables 7 31 38Discontinued operations (6) (30) (36)
Continuing operations 1 1 2
Effective interest rates (%) 13.16
30 June 2015Minimum lease receivables 18 19 37Finance income (2) (3) (5)
Present value of minimum lease receivables 16 16 32
Effective interest rates (%) 15.63
30 June 2016 30 June 2015Rm Rm
9. OTHER INVESTMENTS AND LOANSLong-term investmentsListed investments at market value – 1Unlisted investments at fair value 1 19
Total long-term investments and loans 1 20
Short-term investmentsOther loans – 58
Total short-term investments – 58
Movement analysisOpening balance 78 108Impairment of loan (59) –Fair value adjustments through profit and loss (5) –Currency adjustment 1 9Derecognition of available-for-sale investment – (23)Fair value adjustments through equity – (16)Proceeds on disposal of investment (2) –Reclassification to assets held for sale (12) –
1 78
The above are categorised as follows: – Loans and receivables* – 58 – Available-for-sale 1 20
1 78
Maturity analysisMaturing after one year but within five years – 58
Effective interest ratesLoans (%) 3.75 3.75
* The loan which was previously included as loans and receivables, was impaired at the end of the year. It was discounted at 3.75% (30 June 2015: 3.75%) per annum.
75
In the 2015 year, Lereko Mobility Proprietary Limited did not exercise its call option to purchase the remainder of the shares, resulting in the automatic share repurchase by Eqstra at 0.1 cents per share. These shares were cancelled as at 30 June 2015 and included in unissued share capital.
Refer note 30 for fair value disclosure.
30 June 2016 30 June 2015Rm Rm
10. OTHER INVESTMENTS AND LOANSASSETSShort-termForward exchange contracts – 1Interest rate and cross-currency derivatives – 27
– 28
Fair value through profit and loss – 28Amount included in assets held for sale 32 –LIABILITIESShort-termForward exchange contracts – 1Interest rate derivatives – 2
– 3
Fair value through profit and loss (refer to note 30) – 3Amount included in liabilities associated with assets held for sale 4 –
Refer to note 30 for fair value disclosure.
Fair value of derivative financial instruments
Long-term financial assets are stated at fair value. The fair value of derivatives is based upon market valuations.
Forward exchange contracts
The net market value of all forward exchange contracts at year-end was calculated by comparing the forward exchange contracted rates to the equivalent year-end market foreign exchange rates.
Interest rate swap
The fair value of derivatives were determined by reference to quoted market prices for similar instruments. Refer to note 30 for fair value disclosure.
30 June 2016 30 June 2015Rm Rm
11. INVENTORIESNet inventory 87 1 062
Gross inventory 88 1 119Less: Impairment provision (1) (57)
Comprising of:New vehicles – 562Used vehicles – 174Spares, accessories and finished goods 87 301Work in progress – 25
87 1 062
Inventories carried at net realisable value included above – 65Amounts recognised as an expense in the period (continuing operations) 56 50Amount included as assets held for sale 819 –
76
30 June 2016 30 June 2015Rm Rm
12. TRADE AND OTHER RECEIVABLESNet trade receivables 874 1 501
Trade receivables 927 1 556Less: Impairment provision (53) (55)
Prepayments and other receivables 78 241
952 1 742
Amount included as assets held for sale 851 –
The carrying amount of trade and other receivables approximates its fair value.
13. CASH AND CASH EQUIVALENTSBank balances 148 197Cash on hand – 6
148 203
Amount included as assets held for sale 186 –
Total group cash and cash equivalents 334 203
Effective interest rates (%) 6 4Restricted cash – Nigeria (included in total above) 31 23
14. ASSETS HELD FOR SALE
Corporate transaction
TotalIndustrial
equipment
Fleet management and logistics Other Excess assets
30 June 2016 Rm Rm Rm Rm Rm
BUSINESS SEGMENTATIONASSETSIntangible assets 196 15 181 – –Less: Allocation of loss on sale from the corporate transaction (196) – – (196) –Property, plant and equipment 273 192 68 13 –Leasing assets 6 382 2 555 2 760 258 809Other investments and loans 12 – 12 – –Finance lease receivables 36 – 4 32 –Inventories 819 742 31 46 –Trade and other receivables and derivatives 883 488 262 133 –
Operating assets 8 405 3 992 3 318 286 809
77
Corporate transaction
TotalIndustrial
equipment
Fleet management and logistics Other Excess assets
30 June 2016 Rm Rm Rm Rm Rm
Deferred tax assets 63 40 7 16 –Less: Allocation of loss on sale from the corporate transaction (63) – – (63) –Taxation in advance 23 – – 23 –Cash and cash equivalents 186 50 42 94 –Unallocated loss on sale from the corporate transaction (487) – – (487) –
Total assets 8 127 4 082 3 367 (131) 809
LIABILITIESTrade and other payables and derivatives 1 194 609 352 233 –Interest-bearing borrowings 7 092 2 461 1 868 2 525 238Loans due from Contract Mining entities (2 403) (159) (132) (2 112) –
Operating liabilities 5 883 2 911 2 088 646 238
Deferred tax liabilities 498 161 330 7 –Current tax liabilities 142 25 43 – 74
Total liabilities 6 523 3 097 2 461 653 312
Corporate transaction
On 30 June 2016, Eqstra announced the proposed sale of the Fleet Management and Logistics division and the Industrial Equipment division to enX Group Limited. Shareholders approved the sale at the general meeting held on 22 September 2016. Management believe the transaction to be highly probable as most conditions have been met.
As part of the corporate transaction, subsidiaries of Eqstra Holdings in the Fleet Management and Logistics and Industrial Equipment divisions will be transferred to enX on the effective date, being the date that all conditions are met and have been disclosed as assets and associated liabilities held for sale.
Included in Other is the previously reported corporate office segment and entities which were discontinued during the year.
The loss on sale from the corporate transaction amounting to R746 million is calculated using proceeds of R1 107 million, being the enX Consideration Shares to be received and the net asset values of the entities being sold as at 30 June 2016. The loss was allocated to intangible assets and deferred tax assets of these entities and the remainder, being R487 million, is included as an unallocated loss as the recoverable amount of all other assets in the disposal group exceed their carrying values.
Contract Mining excess assets
Excess assets comprises excess assets in the South African Contract Mining business (R163 million), the Plant Rental business (R135 million) and assets and associated liabilities in the Mozambique Benga operation. Operations in Mozambique have ceased with the conclusion of the Benga contract. Non-current leasing assets of R511 million have been included as assets held for sale and the associated interest-bearing liabilities of R238 million and taxation liabilities of R74 million also separately disclosed. Based on the impaired values of these assets and shareholder approval received on 24 August 2016, management believe that sale of these assets is highly probable within the next 12 months.
78
15. INVENTORIES
15.1 STATED CAPITAL
30 June 2016 30 June 2015Rm Rm
Authorised share capitalOrdinary shares with no par value 500 000 000 500 000 000Issued share capitalOrdinary share capitalBalance at beginning of year 391 104 718 396 997 622
Shares in issue 405 502 997 411 367 941Treasury shares (14 398 279) (14 370 319)Disposal (acquisition) of treasury shares by subsidiary 237 000 (27 960)Repurchase and cancellation of ordinary shares – (5 864 944)
Balance at end of year 391 341 718 391 104 718
Shares in issue 405 502 997 405 502 997Treasury shares (14 161 279) (14 398 279)Stated capitalBalance at beginning of year 1 839 1 839(Acquisition) disposal of treasury shares * *
1 839 1 839
* Below R1 million
Treasury shares
Nozala MCC Proprietary Limited (Nozala) owns 8 272 000 ordinary shares in Eqstra Holdings Limited. These ordinary shares are pledged to Eqstra as security for the repayment of the 918 preference shares Eqstra holds in Nozala. The value of the preference shares held by Eqstra in Nozala in May 2010 was more than the market value of Eqstra shares, resulting in Eqstra effectively controlling the shares for accounting purposes. This resulted in the Nozala investment subsequently being treated as treasury shares.
Eqstra Corporation Limited, a wholly-owned subsidiary, currently owns 5 889 279 (2015: 6 126 279) ordinary shares which are held as treasury shares.
Ordinary shares
During the 2015 financial year Eqstra repurchased and cancelled 5 864 944 shares in term of the Lereko Mobility Proprietary Limited call option not being exercised. These shares were repurchased at 0.1 cent per share.
15.2 EQUITY COMPENSATION BENEFITS
Share appreciation rights (SAR) schemes
The SAR schemes allow certain senior employees to earn a long-term incentive amount calculated with reference to the increase in the Eqstra share price between the offer date of the share appreciation rights and the date of the exercise of such rights. SARs are awarded annually in September as approved by the Remuneration Committee (Remcom).
The following share incentive plans were in operation during the financial year:
Date of issuePeriod to vesting
from date of issueIFRS 2
classification
Eqstra Holdings Limited 1 September 2012 3 years Equity settledEqstra Holdings Limited 1 September 2013 3 years Equity settledEqstra Holdings Limited 1 September 2014 3 years Equity settledEqstra Holdings Limited 1 September 2015 3 years Equity settledEqstra Holdings Limited 1 September 2016 3 years Equity settled
79
The value of the SAR has been calculated using the Binomial model based on the following assumptions:
Date of issue 2014 scheme 2014 scheme B 2015 scheme
Expected volatility (%) 38.39 37.56 34.63 40.87Expected dividend yield (%) 6.47 5.51 – –Expected forfeiture rate (%) 80.00 80.00 80.00 50.00Exercise price of share appreciation rights R7.14 R6.07 R3.25 R2.82Fair value of the SAR on grant date R2.02 R2.04 R1.15 R1.37
30 June 2016 30 June 2015
Share-based payment expense (reversal) recognised (Rm)2011 scheme – (2)2012 scheme – (1)2013 scheme – (1)2014 scheme (1) 42015 scheme 3 –
The expected volatility was determined using volatility of Eqstra since listing in May 2008.
The expected forfeiture rate was determined by estimating the probability of participating individuals still being in the employment of Eqstra and the probability of meeting the non-market vesting conditions relating to profitability targets over the vesting period at vesting date. This along with the actual resignations during the year resulted in a net expense of R2 million (2015: net Rnil).
The calculation of the share-based payment expense requires management to exercise a degree of judgement.
Deferred bonus plan (DBP) schemes
The DBP schemes allow certain senior employees to acquire shares utilising a portion of their after taxation incentive bonus earned.
At the vesting date the employee will be awarded one share for each share purchased and held in escrow for the duration of the period.
Date of issuePeriod to vesting
from date of issueIFRS 2
classification
Eqstra Holdings Limited 1 September 2012 3 years Equity settledEqstra Holdings Limited 1 September 2013 3 years Equity settledEqstra Holdings Limited 1 September 2014 3 years Equity settledEqstra Holdings Limited 1 September 2015 3 years Equity settledEqstra Holdings Limited 1 September 2016 3 years Equity settled
The value of the DBP has been calculated using the Binomial model based on the following assumptions:
2013 scheme 2014 scheme 2015 scheme
Expected volatility (%) 38.39 37.59 40.87Expected dividend yield (%) 6.47 3.77 –Fair value of the SAR on grant date R5.98 R5.65 R2.95
30 June 2016 30 June 2015
Share-based payment expense (reversal) recognised (Rm)2012 scheme (1) 12013 scheme 1 12014 scheme 1 12015 scheme * –
* Below R1 million
80
Conditional share plan (CSP) schemes
The CSP schemes allow certain senior employees to receive shares should certain conditions be fulfilled.
Date of issuePeriod to vesting
from date of issueIFRS 2
classification
Eqstra Holdings Limited 1 January 2015 3 years Equity settledEqstra Holdings Limited 1 September 2015 3 years Equity settled
The value of the CSP has been calculated using the Binomial model based on the following assumptions:
2014 scheme 2015 scheme
Expected volatility (%) 34.63 40.87Expected dividend yield (%) – –Fair value of the SAR on grant date R3.39 R2.95
30 June 2016 30 June 2015
Share-based payment expense (reversal) recognised (Rm)2014 scheme* * *2015 scheme 2 –
* Below R1 million
30 June 2016 30 June 2015
Shares available for allocation to incentive schemes and movement during the yearMaximum number of shares available for allocation* 40 550 299 41 315 177Share appreciation rights in issue 29 909 809 28 674 876
Share appreciation rights at beginning of the year 28 674 876 28 322 071Share appreciation rights granted during the current year 12 047 000 15 991 000Share appreciation rights exercised in current year – –Share appreciation rights forfeited during the year (10 812 067) (15 638 195)
Deferred bonus plan shares in issue 1 179 000 898 000
Deferred bonus plan shares at beginning of year 898 000 955 000Deferred bonus plan shares granted in current year 533 000 400 000Deferred bonus plan shares exercised in current year (237 000) (275 000)Deferred bonus plan shares forfeited during the year (15 000) (182 000)
Conditional share plan shares in issue 3 440 000 400 000
Conditional share plan shares at the beginning of the year 400 000 –Conditional share plan shares issued during the year 3 040 000 400 000
Shares available for allocation at the end of the year 6 021 490 11 342 301
* The maximum number of shares available for allocation to all share schemes combined is equal to 1% of the ordinary shares in issue. The detailed allocation of scheme shares allocated to directors, prescribed officers and managers are disclosed in the Remuneration report.
81
30 June 2016 30 June 2015Rm Rm
16. OTHER RESERVESForeign currency translation reserve (see analysis below) 371 247Hedging reserve (4) (6)Foreign currency translation reserve on equity loans 121 82Goodwill reserve (23) (7)Share-based equity 21 17Deferred taxation in equity (37) (3)
449 330
Foreign currency translation reserveBalance at the beginning of year 247 155Increase in foreign currency translation reserves 124 92Intangible assets 2 –Property, plant and equipment 7 10Leasing assets 239 190Other investments and loans 1 9Inventories 9 9Trade and other receivables 70 36Cash and cash equivalents 9 13Deferred taxation (1) (1)Interest-bearing borrowings (164) (147)Trade and other payables (48) (27)
Balance at the end of year 371 247
30 June 2016 30 June 2015Rm Rm
17. INTEREST-BEARING BORROWINGSLong-term in nature – Secured loans 1 337 1 217 – Unsecured loans 5 174 6 122
6 511 7 339
Short-term in nature – Unsecured short-term, call borrowings and bank overdrafts 809 180
809 180
Total borrowings 7 320 7 519Less: Short-term and current portion of long-term borrowings 5 600 1 918
1 720 5 601
Total borrowings 7 320 7 519Continuing operations (Long-term and short-term portion) (2 631) (7 519)Discontinued operations 4 689 –
Interest-bearing borrowings (note 14) 7 092 –Loans due from Contract Mining entities (note 14) (2 403) –
82
30 June 2016 30 June 2015Effective
rateAnalysis
of debtEffective
rateAnalysisof debt
Interest rate analysis % Rm % Rm
Fixed – Secured loans 5.36 238 5.36 327 – Bonds – – 12.92 50
Variable linked – Secured loans 2.75 – 9.29 1 098 2.9 – 6.08 890 – Unsecured loans 1.42 – 10.83 3 493 6 – 9.48 3 891 – Unsecured short-term, call borrowings
and bank overdrafts 7.50 – 9.30 779 6.6 – 9.3 140 – Foreign overdraft 30 31 23.5 40 – Bonds 8.66 – 9.99 1 681 8.11 – 11.13 2 181
7 320 7 519
Summary of interest-bearing borrowings by year of redemption or repayment in SA Rand.
2020 andonwards 2019 2018 2017 2016 Total
Rm Rm Rm Rm Rm Rm
30 June 2016SA Rand – – 47 539 5 245 5 831Other – 915 – 168 406 1 489
Total – 915 47 707 5 651 7 320
30 June 2015SA Rand 25 132 1 340 3 011 1 424 5 932Other – 25 903 165 494 1 587
Total 25 157 2 243 3 176 1 918 7 519
Details of encumbered assets as follows:
30 June 2016 30 June 2015
Debt secured
Net book valueof assets
encumbered Debt secured
Net book valueof assets
encumberedRm Rm Rm Rm
Property, plant and equipment 43 43 54 54Leasing assets 1 242 1 696 1 163 1 929
Total 1 285 1 739 1 217 1 983
30 June 2016 30 June 2015Rm Rm
Borrowing facilitiesIn terms of the Memorandum of Incorporation the borrowing powers of the company are unlimited.Total facilities established 6 362 6 713Less: Total borrowings, excluding bonds 5 639 5 288
Unutilised borrowing facilities 723 1 425
Following a substantial impairment to the carrying value of various assets the group breached its capital adequacy covenant at 31 December 2015. Lenders agreed to condone the breach subject to certain conditions and a refinancing program was immediately commenced. In light of this and the corporate transaction approved by shareholders on 22 September 2016, the relevant debt has been reclassified as short-term as at 30 June 2016.
83
30 June 2016 30 June 2015Rm Rm
18. TRADE AND OTHER PAYABLESTrade payables 327 984Accrued expenses 255 564Interest accrual 9 68Employee related accruals 84 145Deferred income – 18
675 1 779
Amount included in liabilities associated with assets held for sale 1 190 –
The carrying amount of trade and other payables approximates its fair value.
19. REVENUEAn analysis of the group’s revenue is as follows:Sale of goods 2 244 2 092Rendering of services, leasing income and other 7 286 7 371
9 530 9 463
Discontinued operations (6 566) (6 662)Continuing operations 2 964 2 801
20. NET OPERATING EXPENSESCost of sales 2 280 1 962Staff costs 2 005 1 887Other operating income (55) (74)Other operating costs 2 843 2 618
7 073 6 393Discontinued operations (4 672) (4 117)
Continuing operations 2 401 2 276
The above costs include:Auditor’s remunerationAudit fees 17 14Other services 1 1
18 15Discontinued operations (15) (13)
Continuing operations 3 2
Equity-settled share-based payment expense (net reversal) (Included in staff costs) 5 2Discontinued operations (1) *
Continuing operations 4 2* Below R1 million
Directors’ remunerationExecutive directors’ remuneration 10 24Non-executive directors’ remuneration 6 4
16 28Discontinued operations (10) (24)
Continuing operations 6 4
84
30 June 2016 30 June 2015Rm Rm
Rental and operating lease chargesProperties 33 36Office equipment 7 7
40 43Discontinued operations (35) (42)
Continuing operations 5 1
The group provides benefits through independent funds under the control of a board of trustees and all contributions to those funds are charged to the statement of comprehensive income.
The large majority of South African employees, other than those employees required by legislation to be members of various industry funds, are members of the Eqstra Group Pension Fund and the Eqstra Group Provident Fund which are governed by the Pensions Fund Act, 1956. In the UK, the group contributes 4% of the UK members’ salary to a suitable UK scheme.
30 June 2016 30 June 2015Rm Rm
Expenses not included in net operating expensesNet foreign exchange gains 1 14
Realised (losses) gains (4) 35Unrealised gains (losses) 5 (21)
1 14Discontinued operations – ( 14)
Continuing operations 1 –
85
30 June 2016 30 June 2015Rm Rm
21. DEPRECIATION, AMORTISATION AND PROFIT ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENTIntangible assets 17 18Property, plant and equipment 43 82Leasing assets 1 846 1 934
Depreciation and amortisation 1 906 2 034Discontinued operations (1 494) (1 612)Continuing operations 412 422Profit on disposal of property, plant and equipment 6 (1)Discontinued operations (6) –
Continuing operations – (1)
22. IMPAIRMENT OF ASSETSImpairment of leasing assets(1) 1 351 97Impairment of tangible assets(2) 11 –Impairment of property, plant and equipment(3) 77 –Impairment of investments and loans(4) 59 –
Total impairments 1 498 97Discontinued operations (945) (18)
Continuing operation (total impairment) 553 79
(1) The R1 351 million relates to specific leasing assets which have been written down to their estimated fair-value less costs-to-sell, being their estimated current market values. During the year, the group performed a review of the market conditions and underutilised leasing assets in the Contract Mining and Plant Rental division. The review led to an impairment of R736 million (30 June 2015: R97 million) being recorded, of which R536 million (30 June 2015: R79 million) has been recognised in continuing operations. The leasing assets, equipment and property of the Benga operations were impaired to their estimated fair-value less costs-to-sell.
(2) The impairment of intangible assets relates to the write off of previously capitalised costs. This has been included in discontinued operations as it relates to the Fleet Management and Logistics.
(3) The impairment of property, plant and equipment relates to the Contract Mining operation. R60 million has been included in discontinued operations as it relates to the write off of assets in the Mozambique Benga operation to fair-value less costs-to-sell. An additional R17 million was raised in continuing operations based on a property valuation performed.
(4) The impairment of investments and loans is the write off of the amount previously included in long-term loan receivables and has been included as discontinued operations.
30 June 2016 30 June 2015Rm Rm
23. NET FINANCE COSTSFinance expense 651 672Finance income (45) (19)
Net finance costs 606 653Discontinued operations (387) (453)
Continuing operations 219 200
No finance costs were capitalised during the year.Included in finance income is the following: – Finance income on loans, investments and trade receivables (4) (14) – Finance income on capitalised finance leases (4) (2) – Finance income on cash and cash equivalents and interest swaps (37) (3)
(45) (19)Discontinued operations 16 11
Continuing operations (29) (8)
86
30 June 2016 30 June 2015Rm Rm
24. INCOME TAX EXPENSESOUTH AFRICAN TAXATIONNormal taxation – Current year 154 32 – Prior year (over) under provisions (21) 3 – Capital gains taxation 1 –
Deferred taxation – Current year (238) (9) – Prior year (over) under provisions 27 5
(77) 31
FOREIGN TAXATIONNormal taxation – Current year 65 15 – Prior year under provisions 1 – – Withholding tax 2 –
Deferred taxation – Current year (4) 2 – Change in rate (1) –
Prior year under/(over) provisions 2 (1)
65 16
Total taxation (12) 47
Discontinued operations 145 92
Discontinued operations normal taxation 200 137Discontinued operations deferred taxation (55) (45)
Continuing operations (157) (45)
% %
Reconciliation of taxation rates:Standard taxation rate 28.0 28.00– Tax incentives (12.7) (13.84)– Permanent difference: Fair value adjustment (8.9) –– Permanent differences: Transaction costs (0.5) –– Permanent differences: Other (0.1) 0.11– Permanent differences: Deferred taxation allocation (note 14) (2.8) –– Foreign taxation differential (0.1) (0.78)– Prior year (over)/under provision (0.3) 2.12– Derecognition of deferred tax asset (2.1) –
Effective taxation rate 0.5 15.61
87
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89
Corporate transaction
On 30 June 2016, Eqstra announced the proposed sale of the Fleet Management and Logistics division and the Industrial Equipment division to enX Group Limited. Shareholders approved the sale at the general meeting held on 22 September 2016.
As part of the corporate transaction, subsidiaries of Eqstra Holdings in the Fleet Management and Logistics and Industrial Equipment divisions will be transferred to enX on the effective date, being the date that all conditions are met and have been disclosed as discontinued operations.
The pre-tax IFRS 5 fair value adjustment of R719 million comprises the loss on sale from the corporate transaction amounting to R683 million before taxation of R63 million (calculated using proceeds of R1 107 million, being the enX Consideration Shares, and the net asset values of the entities being sold as at 30 June 2016) as well as R36 million relating to entities which were discontinued during the year.
Included in Other is the previously reported corporate office segment and entities which were discontinued during the year. The corporate office segment includes R40 million of transaction related costs.
In line with the group strategy to close or sell non-core businesses, the group closed the Construction Equipment business, following the termination of the Terex distribution agreement as well as the Air Supreme and Agricultural businesses.
The Commodities business has been disposed of with effect from 1 May 2016.
Contract Mining and Plant Rental discontinued operations
Eqstra Mozambique
The operations which have ceased in Mozambique with the conclusion of the Benga contract, have been included as discontinued operations. An impairment of R731 million was recognised for leasing assets, loans, property and equipment collectively.
Construction Botswana
In line with the group strategy to close or sell non-core businesses, the Botswana construction business was discontinued.
Inventories have been written down to their net realisable value.
Plant Hire
In May 2016, the directors announced a plan to dispose of the Plant Hire business. The disposal is consistent with the group’s stated strategy of exiting non-core loss making businesses. Leasing assets were impaired by R200 million.
30 June 2016 30 June 2015Rm Rm
CASH FLOWS FROM DISCONTINUED OPERATIONSNet cash flows from operating activities 2 471 2 821Net cash flows from investing activities (1 758) (2 085)Net cash flows from financing activities (603) (685)
Net cash inflow 110 51
90
30 June 2016 30 June 2015Rm Rm
26. EARNINGS PER SHAREBasic earnings per share are calculated by dividing the profit after taxation attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year.Attributable to owners of the parent: (2 257) 243
– Loss for the year from continuing operations (463) (131) – (Loss)/profit for the year from discontinued operations (1 794) 374
Non-controlling interest 4 11Headline (loss)/earnings reconciliation for operations – (Loss)/profit attributable to owners of the parent (2 257) 243 – Profit on disposal of property, plant and equipment (6) (1) – Impairment of leasing assets 1 351 97 – Impairment of other assets 147 – – Fair value adjustment 719 – – Taxation effect (71) (27)
Headline (loss)/earnings (117) 312
Headline loss reconciliation – continuing operations – Loss attributable to owners of the parent (463) (131) – Profit on disposal of property, plant and equipment (6) (1) – Impairment of assets 553 79 – Taxation effect (151) (22)
Total Headline loss – continuing operations (67) (75)
Headline (loss)/earnings reconciliation – discontinued operations – (Loss)/profit attributable to owners of the parent (1 794) 374 – Impairment of other assets 130 – – Fair value adjustment 719 – – Impairment of leasing assets 815 18 – Taxation effect 80 (5)
Total Headline (loss)/earnings – discontinued operations (50) 387
2016 2015Million Million
Weighted average number of ordinary shares – Shares at beginning of year 391.1 397.0 – Disposal of treasury shares 0.2 – – Repurchase of ordinary shares – (0.4)
Weighted average number of ordinary shares in issue during the year 391.3 396.6 – Dilutionary effect – –
Diluted weighted average number of ordinary shares 391.3 396.6
91
30 June 2016 30 June 2015Rm Rm
Cents Cents
Basic and diluted (loss)/earnings and basic and diluted headline earnings per share from operationsTotalBasic and diluted (loss)/earnings per share (576.8) 61.3Basic and diluted headline earnings per share (29.9) 78.7
Continuing operationsBasic and diluted loss per share (118.3) (33.5)Basic and diluted headline loss per share (17.1) (18.9)
Discontinued operationsBasic and diluted (loss)/earnings per share (458.5) 94.3Basic and diluted headline (loss)/earnings per share (12.8) 97.6
30 June 2016 30 June 2015Rm Rm
27. NOTES TO THE STATEMENT OF CASH FLOWS
27A CASH GENERATED FROM OPERATIONS(Loss)/profit before net finance costs (1 659) 954
– Continuing operations (401) 25 – Discontinued operations (1 258) 929
Adjustments for non-cash movements – Depreciation of property, plant and equipment 43 82 – Depreciation of leasing assets 1 846 1 934 – Amortisation of intangible assets 17 18 – Profit on disposal of property, plant and equipment (6) (1) – Net impairment of leasing assets 1 351 97 – Movement in trade receivables provision 113 6 – Movement in inventory provision 27 – – Fair value adjustment 719 – – Other non-cash items (2) (1) – Fair value adjustments 5 20 – Impairment of other assets 147 – – Share-based payment expense 5 2
Cash generated by operations before changes in working capital 2 606 3 111
Working capital movements – Decrease in inventories 893 710 – Increase in trade and other receivables (104) – – Increase in trade and other payables 38 81
Cash generated by operations 3 433 3 902
27B INCOME TAXATION PAIDNet balance payable at beginning of year 27 10Taxation charge 202 50Net balance payable at end of year (128) (27)
Income taxation paid 101 33
92
30 June 2016 30 June 2015Rm Rm
27C (DISPOSAL)/ACQUISITION OF BUSINESSESLeasing assets *(42) 11Property, plant and equipment – 1Deferred taxation liability – (1)Inventory – 4Trade and other receivables – 8Interest-bearing borrowings – (3)Trade and other payables – (7)Current tax liability – (1)
Net (selling)/purchase price (42) 12* Represents the sale of the assets in the Commodities business.
28. COMMITMENTS AND CONTINGENT LIABILITIESCapital expenditure commitments to be incurred*Contracted 50 224Authorised by directors but not contracted 379 1 552
429 1 776
The expenditure is substantially for the acquisition and replacementof leasing assets. Expenditure will be financed from proceeds on disposals and existing banking facilities.* Capital commitments as at 30 June 2016 are disclosed for continuing operations only.
Contingent liabilities – –
Guarantees 10 24
29. OPERATING LEASE RECEIVABLES AND PAYABLES
The minimum future lease payments receivable under non-cancellable operating leases are as follows:
More thanfive years
One tofive years
Less thanone year Total
Rm Rm Rm Rm
30 June 2016 – Forklifts 19 1 312 725 2 056 – Vehicles 291 2 124 1 152 3 567
310 3 436 1 877 5 623
30 June 2015 – Forklifts 19 1 430 767 2 216 – Vehicles 566 3 176 1 611 5 353
585 4 606 2 378 7 569
The minimum future lease payments payable under non-cancellable operating leases are as follows:
One tofive years
Less thanone year Total
Rm Rm Rm
30 June 2016 – Property 11 6 17
30 June 2015 – Property 14 8 22
93
30. FINANCIAL INSTRUMENTS
The note has been prepared for the Eqstra group as a whole and not just for the remaining continuing operations.
Financial risk factors
The group’s objectives, policies and processes for measuring and managing these risks are detailed below.
The group seeks to minimise the effects of these risks by matching assets and liabilities as far as possible or by using derivative financial instruments to hedge these risk exposures. The adherence to the use of derivative instruments and exposure limits is reviewed on a continuous basis and results are reported to the Asset-Liability Committee (ALCO).
The group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The group enters into financial instruments to manage and reduce the possible adverse impact on earnings of changes in interest rates and foreign exchange rates.
Market risk
This is the risk that changes in the general market conditions, such as foreign exchange rates, interest rates and commodity prices may adversely impact on the group’s earnings, assets, liabilities and capital.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
The group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and equity prices.
Currency risk
This is the risk of losses arising from the effects of adverse movements in exchange rates on net foreign currency asset or liability positions.
The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. In order to manage these risks, the group may enter into transactions which make use of derivatives. Derivative instruments are used by the group for hedging purposes. Such instruments include forward exchange contracts and under specific ALCO authorisation, currency options.
The policy of the group is to maintain a fully covered foreign exchange risk position in respect of foreign currency commitments with a few exceptions authorised by the ALCO. The day-to-day management of foreign exchange risk is performed on a decentralised basis by the various business units within the group’s hedging policies and guidelines. This process is overseen by the group treasurer. Trade-related import exposures are managed through the use of natural hedges arising from foreign assets as well as forward exchange contracts.
At the year end, the settlement dates on open forward contracts ranged from spot up to 12 months. The average exchange rates shown include the cost of forward points cover. The amounts represent the net rand equivalent of commitments to purchase and sell foreign currencies, and have all been recorded at fair value.
The group has entered into certain forward exchange contracts that relate to specific statement of financial position items at 30 June and specific foreign commitments not yet due. The details of these contracts are as follows:
Foreignamount(million)
Averageexchange
rate
Contractvalue
Rm
Fair value
Rm
30 June 2016FOREIGN CURRENCYImportsUS Dollar * 15.319 1 1Euro 7 17.333 113 108Pound Sterling * 22.006 4 4Japanese Yen 1 423 7.059 202 204Swedish Krona 15 0.522 29 27
349 344
* Less than R1 million
94
US Dollar Euro
PoundSterling
JapaneseYen
SwedishKrone Rand value
Maturing within one year (million) * 7 * 1 423 15 349
Foreignamount(million)
Averageexchange
rate
Contractvalue
Rm
Fair value
Rm
30 June 2015FOREIGN CURRENCYImportsUS Dollar 1 12.441 17 17Euro 3 13.623 43 43Pound Sterling 1 19.058 20 20Japanese Yen 1 482 9.899 150 149Swedish Krona 17 0.675 25 25
255 254
US Dollar Euro
PoundSterling
JapaneseYen
SwedishKrone Rand value
Maturing within one year (million) 1 3 1 1 482 17 255
The group had uncovered foreign currency exposure of Rnil (2015: Rnil).
The impact of a 1% devaluation of the Rand on the uncovered foreign exposure will have a Rnil (2015: Rnil) impact on after tax profit and vice versa for a 1% appreciation of the Rand.
The sensitivity of profits to changes in exchange rates is a result of foreign exchange gains/losses on translation of foreign denominated trade receivables and financial assets and liabilities at fair value through profit or loss that are offset by equivalent gains/losses in currency derivatives.
The impact of a 1% devaluation of the Rand on foreign entities through the foreign currency translation reserve would be a R6 million (2015: R12 million) impact on equity.
Foreign exchange rates
The exchange rates used by the group to translate foreign entities’ income statements and statements of financial position are as follows:
30 June 2016Average
30 June 2016Closing
30 June 2015Average
30 June 2015Closing
Currency (1FC=ZAR)Pound Sterling 21.160 19.613 18.010 19.095Botswana Pula 1.325 1.350 1.212 1.230Namibian Dollar 1.000 1.000 1.000 1.000Kenyan Shilling 0.140 0.146 0.125 0.123Tanzanian Shilling 0.007 0.007 0.006 0.001Nigerian Naira 0.071 0.053 0.063 0.061US Dollar 14.383 14.613 11.452 12.140
Interest rate risk
This is the risk that fluctuations in interest rates may adversely impact on the group’s earnings, assets, liabilities and capital.
The group is exposed to interest rate risk as it borrows and places funds at both fixed and floating rates. The risk is managed by matching fixed and floating rate assets and liabilities wherever possible and achieve a re-pricing profile in line with ALCO directives through the use of interest rate derivatives. The group analyses the impact on profit and loss of defined interest rate shifts taking into consideration refinancing, renewal of existing positions, alternative financing and hedging.
95
The group’s treasury, having access to local money markets, provides the subsidiaries with the benefits of bulk financing and depositing. The interest rate profile of total borrowings is reflected in note 17.
The group has entered into interest rate derivative contracts that entitle it to either receive or pay interest at floating rates on notional principal amounts and oblige it to receive or pay interest at fixed rates on the same amounts.
The group’s remaining periods and notional principal amounts of the outstanding interest rate derivative contracts for which the group has exposure are:
30 June 2016 30 June 2015Rm Rm
Pay floating receive fixedOne to five years 106 106Fair value of interest rate swaps (net liability) 4 3
The impact of a 1% decrease in the interest rate swap curve will have a positive R1 million (2015: positive R1 million) effect on profit and equity in respect of the interest rate swap.
The impact of a 1% increase in interest rates will have a negative R6 million (2015: negative R4 million) effect on profit or loss. The majority of this impact relates to contracts with customers where the contract pricing is only reviewed on an annual basis.
Concentration risk
This is the risk of a single customer exceeding 5% of total group revenue. There are four (2015: four) customers that contribute 5% or more of group revenue, amounting to R2 654 million (2015: R2 842 million). These all form part of the Contract Mining and Plant Rental segment.
Credit risk
Credit risk, or the risk of counterparties defaulting, is controlled by the application of credit approvals, limits and monitoring procedures. Where appropriate, the group obtains appropriate collateral to mitigate risk. Counterparty credit limits are in place and are reviewed and approved by the respective subsidiary boards.
The carrying amount of financial assets represents the maximum credit exposure. None of the financial instruments below were held as collateral for any security provided.
In addition, the group is exposed to credit risk in relation to financial guarantees given to banks provided by the group. The group’s maximum exposure in this respect is the maximum amount the group could pay if the guarantee is called upon (refer to note 28). As at 30 June 2016, an amount of R7 944 million (30 June 2015: R6 122 million) has been recognised for the whole group as financial liabilities.
Cash and cash equivalents
It is group policy to deposit short-term cash with reputable financial institutions with high credit ratings assigned by international credit-rating agencies.
Trade receivables that are neither past overdue nor impaired
Trade accounts receivable consist mainly of a large, widespread customer base. Group companies monitor the financial position of their customers on an ongoing basis. Creditworthiness of trade debtors is assessed when credit is first extended and is reviewed regularly thereafter. The granting of credit is controlled by the application of account limits. Where considered appropriate, use is made of credit guarantee insurance. The analysis of trade receivables for the whole group is detailed below.
30 June 2016 30 June 2015Rm Rm
Trade receivables that are neither past de nor impaired 979 1 033
Based on past experience, the group believes that no significant impairment is necessary in respect of trade receivables not past due as the amount relates to customers that have a good track record with the group, and there has been no objective evidence to the contrary.
Past due trade receivables not impaired
Included in trade receivables are debtors which are past the original expected collection date (past due) at the reporting date and no significant provision has been made as there has not been a change in credit quality and the amounts are still considered recoverable.
96
A summarised age analysis is set out below:
30 June 2016 30 June 2015Rm Rm
Past dueLess than 1 month 266 226Between 1 – 3 months 287 297
533 523
The overdue debtor ageing profile above is typical of the industry in which certain of our businesses operate.
No significant collateral was held by the Eqstra group as security and other enhancement over the financial assets during the year.
30 June 2016 30 June 2015Rm Rm
Trade debtors by industry:Contract Mining and Plant Rental 940 919Fleet Management and Logistics 126 198Industrial Equipment 466 439
1 532 1 556
Provision for doubtful debts
Before the financial instruments can be impaired, they are evaluated for the possibility of recovery as well as the length of time at which the debt has been long outstanding. Provision is made for bad debts on trade accounts receivable. Management does not consider that there is any material credit risk exposure not already covered by credit guarantee or a bad debt provision. There were no allowances for impairments on long-term receivables or investments in equity instruments at cost during the year under review.
30 June 2016 30 June 2015Rm Rm
Analysis of provision for doubtful debtsSet out below is a summary of the movement in the provision for doubtful debts for the year:Balance at beginning of the year 55 49Amounts written off during the year (50) (28)Increase in allowance recognised in profit or loss 163 34
Balance at end of the year 168 55
Concentration of credit risk includes any single debtor that owes the group 5% or more of total trade receivables. Trade receivables amounting to R524 million (2015: R491 million) represent the significant concentration of credit risk. These all form part of the Contract Mining and Plant Rental segment.
Other receivables
The credit quality of all derivative financial assets is sound. None are overdue or impaired and the group does not hold any collateral on derivatives. The group’s maximum exposure to counterparty credit risk on derivative assets at 30 June 2016 amounted to R32 million (2015: R27 million).
Collateral
The group may require collateral in respect of the credit risk on transactions with a third party.
The amount of credit risk is the positive fair value of the contract. Collateral may be in the form of cash or in the form of a lien over a debtors assets, entitling the group to make a claim for current and future liabilities.
The group is not exposed to a situation where a third party may require collateral with respect to the transaction with that third party.
97
Guarantees
The group did not obtain financial or non-financial assets during the year by taking possession of collateral it holds as security or calling on guarantees.
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.
The ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the group’s short-, medium-and long-term funding and liquidity management requirements.
The group manages liquidity risk by monitoring forecast cash flows in compliance with loan covenants and ensuring that adequate unutilised borrowing facilities are maintained. Unutilised borrowing facilities are reflected in note 17. The group aims to have the duration of its debt to exceed the duration of its assets.
Standard payment terms for the majority of trade payables is the end of the month following the month in which the goods are received or services are performed.
To avoid incurring interest on late payments, financial risk management policies and procedures are entrenched to ensure the timeous matching of orders placed with goods received notes or service acceptances and invoices.
Maturity profile of contractual cash flows (including interest) of financial instruments are as follows:
Carryingamount
Contractualcash flows
Less thanone year
One tofive years
Rm Rm Rm Rm
30 June 2016Maturity profile of financial instrumentsFinancial assetsFinance lease receivable 38 43 9 34Other investments and loans 13 13 – 1Trade receivables 1 532 1 700 1 700 –Cash and cash equivalents 334 334 334 –Derivative financial assets 32 32 32 –
1 949 2 122 2 075 35
Percentage profile 100% 98% 2%
Financial liabilitiesInterest-bearing borrowings 7 320 7 490 5 781 1 709Trade and other payables 1 859 1 859 1 859 –Derivative financial liabilities 4 4 4 –
9 183 9 353 7 644 1 709
Percentage profile 100% 82% 18%
In assessing the maturity profiles of financial instruments of the group, the available borrowing facilities per note 17 should be noted. In addition, the group generates the majority of its cash flow from its leasing assets per note 6, which is not classified as a financial instrument, and therefore excluded above.
98
Carryingamount
Contractualcash flows
Less thanone year
One tofive years
Rm Rm Rm Rm
30 June 2015Maturity profile of financial instrumentsFinancial assetsFinance lease receivable 32 37 18 19Other investments and loans 78 78 58 20Trade receivables 1 501 1 556 1 556 –Cash and cash equivalents 203 203 203 –Derivative financial assets 28 28 28 –
1 842 1 902 1 863 39
Percentage profile 100% 98% 2%
Financial liabilitiesInterest-bearing borrowings 7 519 9 134 2 753 6 381Trade and other payables 1 761 1 761 1 761 –Current derivative financial liabilities 3 3 3 –
9 283 10 898 4 517 6 381
Percentage profile 100% 41% 59%
30 June 2016 30 June 2015Carrying
amount Fair valueCarrying
amount Fair valueRm Rm Rm Rm
Fair value of financial instrumentsFinancial assetsNon-derivative financial assetsOther investments and loans – Loans and receivables – – 58 58 – Available-for-sale 13 13 20 20
Trade receivables 1 532 1 532 1 501 1 501Finance lease receivable 38 38 32 32Cash and cash equivalents 334 334 203 203Derivative financial assetsDerivative instruments 32 32 28 28
Financial liabilitiesNon-derivative financial liabilitiesInterest-bearing borrowings – Borrowings at amortised cost 7 320 7 320 7 519 7 519
Trade and other payables – Other trade and other payables 1 859 1 859 1 761 1 761
Derivative financial liabilitiesDerivative instruments 4 4 3 3
The directors consider that the carrying amounts of cash and cash equivalents, trade and other receivables and trade and other payables approximates their fair value due to the short-term maturities of these assets and liabilities.
The fair values of financial assets represent the market value of quoted investments and other traded instruments. For non -listed investments and other non-traded financial assets fair value is calculated using discounted cash flows with market assumptions, unless carrying value is considered to approximate fair value.
99
The fair values of financial liabilities is determined by reference to quoted market prices for similar issues, where applicable, otherwise the carrying value approximates to the fair value.
Following the impairment of various assets, the group breached its capital adequacy covenant at 31 December 2015. Lenders agreed to condone the breach subject to certain conditions and a refinancing program was immediately commenced. In light of this and the corporate transaction approved by shareholders on 22 September 2016, the relevant debt has been reclassified as short-term at 30 June 2016.
There were no reclassifications of financial assets or financial liabilities that occurred during the year. There were no financial assets or liabilities that qualified for derecognition during the year.
Capital risk management
The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal mix of liquidity and low cost of capital and to be able to finance future growth. This is consistent with the prior year.
Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital includes share capital and borrowings.
30 June 2016 30 June 2015Rm Rm
Total interest-bearing borrowings 7 320 7 519Less: Cash and cash equivalents 334 203Net debt 6 986 7 316Total equity 1 629 3 770
Total capital 8 615 11 086
Gearing ratio (Debt to total capital) (%) 81.09 65.99Statement of changes in equityIncluded in the statement of changes in equity are the following:adjustments relating to financial instruments:Hedge accounting – cash flow hedgesAmount recognised in equity 1 1
Fair value hierarchy disclosures
Valuation methodology
The table below shows the group’s financial asset and liability that are recognised and subsequently measured at fair value, analysed by valuation technique. The classification is based on the lowest level input that is significant to the fair value measured in its entirety.
Level 1 Level 2 Fair valueRm Rm Rm
30 June 2016Financial assetsAvailable-for-sale financial assets – Investments – 13 –
Financial assets designated as fair value through profit and loss – Derivative financial assets – 32 32
Total financial assets – 45 32
Financial liabilities designated as fair value through profit and loss – Derivative financial liabilities – 4 –
Total financial liabilities – 4 –
100
Level 1 Level 2 Fair valueRm Rm Rm
30 June 2015Financial assetsAvailable-for-sale financial assets – Investments – 20 20
Financial assets designated as fair value through profit and loss – Derivative financial assets – 28 28 – Loans and receivables – 58 58
Total financial assets – 106 106
Financial liabilities designated as fair value through profit and loss – Derivative financial liabilities – 3 3
Total financial liabilities – 3 3
Valuation narration disclosures
Level 1 – valuations with reference to quoted prices in an active market:
Financial instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available and the price represents actual and regularly occurring market transactions on an arm’s length basis.
An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. This category includes highly liquid active listed equities.
Level 2 – valuations based on observable and unobservable inputs include:
Financial instruments valued using inputs other than quoted prices as described above for level 1 but which are observable for the asset or liability, either directly or indirectly, such as:
• quoted price for similar assets or liabilities in an active market;• quoted price for identical or similar assets or liabilities in inactive markets;• valuation model using observable inputs; and• valuation model using inputs derived from/corroborated by observable market data.
The following summary sets out the principal instruments whose valuation may involve judgemental inputs:
Debt instruments held as assets
These instruments are valued based on valuation techniques using inputs derived from observable market data, and, where relevant, assumptions in respect of unobservable inputs.
Equity investments held as assets
The fair value of these investments is determined using appropriate valuation methodologies, which are dependent on the cash flow analysis.
Derivatives
Derivative contracts can be exchange traded or traded over-the-counter (OTC). OTC derivative contracts include forward and swap contracts related to interest rates, bonds, foreign currencies, credit spreads and equity prices. Fair values of derivatives are obtained from dealer price quotations, discounted cash flow and option pricing models.
Lereko Mobility call option
In the 2015 year, Lereko Mobility Proprietary Limited did not exercise its call option to purchase the remainder of the shares, resulting in the automatic share repurchase by Eqstra at 0.1 cents per share. These shares were cancelled as at 30 June 2015 and included in unissued share capital.
101
31. RELATED PARTY TRANSACTIONS
Subsidiaries and the Eqstra Pension and Provident Funds and key management are considered to be related parties.
During the year, the company and subsidiaries of Eqstra Holdings Limited, in the ordinary course of business, entered into sale and purchase and services transactions with related parties. These transactions occurred under terms that are no less favourable than those arranged with third parties. For direct and indirect beneficial shareholding of directors, refer Shareholder profiles.
Interest of directors in contracts
The directors have confirmed that they held no material interest in any transaction of any significance with the company or any of Eqstra Holdings Limited subsidiaries. Accordingly, no conflict of interest with regard to directors’ interest in contracts exists.
Balances between related parties
There were no significant outstanding balances with related parties.
Transactions between related parties
30 June 2016 30 June 2015Rm Rm
The following intercompany revenue is included in each divisional revenue:Industrial Equipment 17 75Fleet Management and Logistics 69 83
Total intergroup revenue 86 158
102
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103
Key management personnel
Key management personnel are directors and those executives having authority and responsibility for planning, directing and controlling the activities of the company.
The company has many different operations, retail outlets and service centres where the company staff may be transacting. Often these transactions are minor and are difficult to monitor. Key management have to report any transactions with the company in excess of R100 000. The total value of goods and services purchased from key management on an arms-length basis amounted to R nil (2015: R nil).
Group key management personnel remuneration comprises:
30 June 2016 30 June 2015Rm Rm
Short-term employee benefits 85 85Long-term employee benefits 7 7Retirement benefits – 12Share-based payment (reversal) expense 5 2
97 106
Number of key management personnel 54 55
32. SIGNIFICANT JUDGEMENTS AND ESTIMATES
Following the turmoil in the mining and resources sector, and in addition to the specific impairments raised related to the relevant assets held for sale, the group performed a review of the recoverable amount of the South African Contract Mining cash-generating unit (CGU), a significant CGU of the group. The net operating assets of the CGU at 30 June 2016 is R2 362 million (30 June 2015: R2 653 million). The value-in-use for the CGU is calculated at R2 755 million (30 June 2015: R3 407 million).
The recoverable amount of this CGU was determined based on a value-in-use calculation which uses cash flow projections based on financial budgets approved by the directors covering a five-year period, and a discount rate of 13.22% (2015: 11.94%) per annum.
Cash flow projections during the budget period were based on the same expected gross margins per contract as is currently being earned. The cash flow projections were performed on individual projected contract profiles. Based on current tender activity, one additional contract was included in the five-year projections, and it was assumed that all the existing contracts will be renewed after their current contract termination rate. The cash flows beyond that five-year period have been extrapolated using a steady 5% per annum growth rate which is the projected long-term average growth rate of the division.
Key assumptions used in value in use calculation:
Discount rate: The weighted average cost of capital (WACC) of 13.22% was used (2015: 11.94%).
Terminal growth rate: 5% (2015: 5%).
Capital expenditure: Capital expenditure is increased over the budget period in order to achieve a 1:1 revenue to asset ratio. The terminal period’s capital expenditure then assumes that this ratio is maintained. Furthermore, future cash flows have been estimated for assets in their current condition and do not include costs for improving or enhancing the asset’s performance.
Sensitivities
The following sensitivity analyses have been prepared demonstrating the value which the recoverable amount exceeds the carrying amount of the CGU:
104
Sensitivity analysis based on lower or higher margins from volatile commodity prices
The group has currently assumed that client operations will stabilise on the back of improved commodity prices, expected to recover in the next two to four years. The impact of this assumption, on earnings before Interest, taxation, depreciation and amortisation (EBITDA) taking into account sensitivities on WACC are as follows:
EBITDA and capital expenditure(20.00)% (10.00)% 0.00% 10.00% 20.00%
WACC 12.50% (885) (100) 686 1 471 2 25613.00% (998) (261) 477 1 214 1 95113.22% (1 043) (325) 393 1 111 1 82913.50% (1 097) (402) 293 988 1 68314.00% (1 185) (528) 130 787 1 444
Sensitivity analysis based on fewer contracts and related capital expenditure adjustments, as follows:
• 10.0% EBITDA decrease and 10% less capital expenditure• 20.0% EBITDA decrease and 20% less capital expenditure• 30.0% EBITDA decrease and 30% less capital expenditure
Should the additional contract not be awarded, management will actively monitor the situation in order to take actions to reduce the risk of losses and limit capital expenditure accordingly.
EBITDA(30.00)% (20.00)% (10.00)% 0.00%
WACC 12.50% 16 239 462 68613.00% (145) 62 270 47713.22% (209) (8) 192 39313.50% (286) (93) 100 29314.00% (411) (231) (51) 130
In addition to the South African CGU, the recoverability of the Mozambique assets were assessed based on a fair valuation of the assets and impaired down to USD 35 million. An impairment of R734 million was recognised in total for leasing assets, loans and property plant and equipment.
Conclusion
The directors believe that any reasonably possible change in key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.
33. POST-BALANCE SHEET EVENTS
Subsequent to year-end, the group’s year end was changed to 31 August 2017.
Shareholders voted in favour of the transaction to sell the Fleet Management and Logistics and the Industrial Equipment divisions to enX at the general meeting held on 22 September 2016. The conditions precedent in the enX transaction have been substantially achieved. Shareholders also voted in favour of the name change to eXtract Group Limited at the same meeting. Refer to the Eqstra circular issued on 24 August 2016 for further details. The transaction will result in the issuance of 101 400 000 ordinary shares (20%) to enX by Eqstra.
34. GOING CONCERN
The annual financial statements presented for the Eqstra group have been prepared on the assumption that the Eqstra group as a whole will continue to operate as a going concern. This assumption is predicated on the enX transaction being implemented in substantially the form approved by shareholders at a general meeting on 22 September 2016.
The enX transaction will result in a cash injection into the group of R1 400 million in the form of ordinary share capital of R100 million, preference share capital of R600 million and subordinated debt of R700 million. New banking facilities have also been negotiated with a consortium of lenders subject to the transaction being implemented and management believe that these facilities will provide adequate financial resources to enable the group to meet its obligations over the next 12 months and beyond.
105
COMPANY STATEMENT OF FINANCIAL POSITIONAS AT
30 June 2016 30 June 2015Notes Rm Rm
ASSETSNon-current assetsInvestments and loans 2 526 995 1 986 718Current assetInvestments and loans 2 – 21 921Other receivables 3 233 202Cash and cash equivalents 10 41Investments and loans held for sale 4 1 107 023 –
Total assets 1 634 261 2 008 882
EQUITY AND LIABILITIESCapital and reservesStated capital 5 2 417 956 2 417 956Other reserves 71 335 71 335Accumulated loss (945 838) (480 679)
Total shareholders’ equity 1 543 453 2 008 612
Non-current liabilitiesDeferred Tax 6 32 706 –Current liabilitiesOther payables 59 270Liabilities associated with assets held for sale 4 58 043 –
Total equity and liabilities 1 634 261 2 008 882
106
COMPANY STATEMENTS OF COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOMEFOR THE YEARS ENDED
30 June 2016 30 June 2015Notes Rm Rm
Dividends received 39 477 53 957Other operating income – 936Other operating costs (19) (106)
Operating profit 39 458 54 787Finance income 90 6 443Foreign exchange gain on equity loans 39 980 –Impairment of investments and loans to subsidiaries 2 (508 955) (203 977)Impairment of other investments (414) –Remeasurement of investments held for sale 4 (2 557) –
Loss before taxation (432 398) (142 747)Income tax expense 7 (32 761) (234)
Loss for the year (465 159) (142 981)
Other comprehensive incomeItems that may be reclassified subsequently to profit or loss
Fair value and translation gains on financial instruments and equity loans – 21 666
Comprehensive loss for the year (465 159) (121 315)
107
COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEARS ENDED
Stated capital Other reserves
Accumulatedcomprehensive
loss TotalR’000 R’000 R’000 R’000
Balance at 1 July 2014 2 417 962 100 528 (349 707) 2 168 783Devaluation of Lereko call option – (15 893) – (15 893)Derecognition of Lereko call option (6) (22 957) – (22 963)Realisation of currency translation reserve – (12 009) 12 009 –Comprehensive income (loss) for the year – 21 666 (142 981) (121 315)
Balance at 30 June 2015 2 417 956 71 335 (480 679) 2 008 612
Comprehensive loss for the year – – (465 159) (465 159)
Balance at 30 June 2016 2 417 956 71 335 (945 838) 1 543 453
108
COMPANY STATEMENT OF CASH FLOWS
30 June 2016 30 June 2015Note Rm Rm
Cash flows from operating activitiesCash (utilised in) generated from operations 8 (261) 448Finance income 90 6 443
Net cash flows from operating activities (171) 6 891
Cash flows from investing activitiesDecrease in investments and loans (39 337) (60 850)Dividends received 39 477 53 957
Net cash flow from investing activities 140 (6 893)
Net cash flows from financing activities – –
Net movement in cash and cash equivalents (31) (2)Cash and cash equivalents at beginning of year 41 43
Cash and cash equivalents at end of year 10 41
109
NOTES TO THE COMPANY ANNUAL FINANCIAL STATEMENTS
30 June 2016 30 June 2015Rm Rm
1. ACCOUNTING POLICIESPlease refer to notes 1, 2 and 3 of the consolidated annual financial statements.
2. INVESTMENTS AND LOANSInvestmentsInvestments in subsidiaries 865 291 1 789 186Provisions for losses in subsidiaries (637 772) (488 890)
227 519 1 300 296Other unlisted and listed investments at directors’ valuation 22 312 24 508
249 831 1 324 804
Included in the aboveAvailable-for-sale financial asset 22 312 24 508
LoansGroup loans 736 479 1 107 900
Impairment of group loans (459 315) (424 065)
277 164 683 835
Total investments and loans 526 995 2 008 639
Included in the aboveLong-term 526 995 1 986 718Short-term – 21 921
Total investments and loans 526 995 2 008 639
Maturing one to five years (Mozambique Limitada refer Annexure A) 227 269 –Maturing after five years 509 210 1 107 900The impairments of investments and loans due to subsidiaries consist of impairments that have been provided for as a result of losses incurred in certain subsidiaries.
3. OTHER RECEIVABLESInterest receivable 233 202
4. INVESTMENTS AND LOANS HELD FOR SALEInvestments in subsidiaries 939 679 –
Group loans 494 724 –
Impairment of group loans (327 380) –
167 344 –
Total investments and loans 1 107 023 –
Liabilities associated with assets held for sale (58 043) –
Remeasurement of investments held for sale through comprehensive income 508 955 –
Liabilities associated with assets held for sale comprises of a loan due to Eqstra Corporation Limited which forms part of the subsidiary companies being disposed of as part of the corporate transaction.
The disposal group has been measured at fair value less cost to sell based on the share exchange per the formal binding offer and transaction agreement. A fair value loss of R2,557 million was realised in this regard for the year ending 30 June 2016.
110
30 June 2016 30 June 2015Rm Rm
5. STATED CAPITALAuthorised share capital500 000 000 (2015: 500 000 000) ordinary shares with no par value
Stated capital405 502 997 (2015: 405 502 997) ordinary shares with no par value 2 417 956 2 417 956Refer to note 15 of the consolidated annual financial statements for details on share classes, movements in stated capital, number of shares in issue, and equity compensation benefits.
6. DEFERRED TAXATIONAnalysis of deferred taxForeign currency translation reserve 32 706 –
7. INCOME TAX EXPENSE SOUTH AFRICAN TAXATIONCurrent taxation (55) (234)Deferred taxation (32 706) –
(32 761) (234)
Reconciliation of taxation rates % %Standard taxation rate 28.0 28.00 – Dividend received 2.6 10.58 – Permanent difference: impairment, remeasurement and foreign exchange (30.5) (38.42) – Deferred tax raised on cumulative foreign exchange gain 7.6 –
Effective taxation rate 7.6 0.16
8. NOTES TO THE STATEMENT OF CASH FLOWSCash (utilised in) generated from operationsLoss before taxation (432 398) (142 747)Impairment of investment in and loans to subsidiaries 508 955 –Impairment of other investments 414 –Remeasurement of investments and loans held-for-sale 2 557 203 977Foreign exchange gain on equity loans (39 980) –Dividends received (39 477) (53 957)Finance income (90) (6 443)
Cash flow before working capital movements (19) 830Working capital movements: – Increase in other receivables (31) (202) – Decrease in other payables (211) (180)
Cash (utilised in) generated from operations (261) 448
111
9. FINANCIAL INSTRUMENTS
Financial risk factors
Please refer to note 30 of the group annual financial statements for a description of the financial risks of the company.
Carryingamount
Contractualcash flow
Less thanone year
One tofive years
R’000 R’000 R’000 R’000
30 June 2016Maturity profile of financial instrumentsFinancial assetsLoans 277 164 277 164 – 277 164Loans held for sale 167 344 167 344 167 344 –Available for sale financial asset 22 312 22 312 – 22 312Other receivables 233 233 233 –Cash and cash equivalents 10 10 10 –
467 063 467 063 167 587 299 476
Percentage profile 100% 36% 64%
Financial liabilitiesTrade and other payables 59 59 59 –Liabilities associated with assets held for sale 58 043 58 043 – 58 043
58 102 58 102 59 58 043
Percentage profile 100% 0% 100%
30 June 2015Maturity profile of financial instrumentsFinancial assetsLoans 683 835 1 107 900 – 1 107 900Available-for-sale financial asset 24 508 24 508 24 508 –Other receivables 202 202 202 –Cash and cash equivalents 41 41 41 –
708 586 1 132 651 24 751 1 107 900
Percentage profile 100% 2% 98%
Financial liabilitiesTrade and other payables 270 270 270 –
270 270 270 –
Percentage profile 100% 100% –
112
30 June 2016 30 June 2015Carrying
valueFair
valueCarrying
valueFair
valueR’000 R’000 R’000 R’000
Fair value of financial instrumentsFinancial assetsNon-derivative financial assetsOther investments and loans – Classified as held-to-maturity 227 519 227 519 683 835 683 835 – Classified as held-to-maturity
(held for sale) 939 679 939 679 – – – Available-for-sale (Level 1: determined
with reference to quoted market prices) 22 312 22 312 24 508 24 508 – Cash and cash equivalents 10 10 41 41
Financial liabilitiesNon-derivative financial liabilities – Trade and other payables 59 59 270 270 – Liabilities associated with assets
held for sale 58 043 58 043 – –
The directors consider that the carrying amounts of cash and cash equivalents and trade and other payables approximates their fair value due to the short-term maturities of these assets and liabilities. The carrying values of other financial assets and liabilities approximate fair value.
Currency risk
This is the risk of losses arising from the effects of adverse movements in exchange rates on net foreign currency asset, liability positions especially group loans.
A 1% devaluation of the Rand on the group loans will have an impact of R 0.4 million (2015: R0.2 million) on before tax profit and vice versa for a 1% appreciation of the Rand.
113
UNAUDITED INTERIM RESULTS OF eXtract GROUP LIMITED (FORMERLY EQSTRA HOLDINGS LIMITED)FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2016
INTRODUCTION
The period under review has been eventful and challenging for eXtract Group Limited (“eXtract” or “Group”), with the Group transitioning into its new form and subsequently changing the strategic direction as led by management and the new board of directors.
The disposal of Fleet Management and Logistics and Industrial Equipment divisions to enX Group Limited (“enX”) was completed and effective from 8 November 2016 and the remaining Group was supported with various mezzanine funding instruments (“enX transaction”).
SALE OF END OF LIFE AND EXCESS ASSETS
On 11 July 2016 shareholders approved the sale of specified excess assets (refer to SENS announcement dated 11 July 2016 and related circular dated 10 June 2016).
Of the R809 million of contract mining related assets which were classified as assets held for sale at 30 June 2016, R176 million were sold during the period and subsequent to 31 December 2016, R196 million of Mozambique Benga assets were sold for which payment has been received.
SAFETY
The Group improved its lost time injury frequency rate to 0.08 (2015: 0.10).
STRATEGIC REVIEW
Over the past six months the operating environment for contract mining has been difficult, with the group continuing to report operational losses at key operations.
During Q4 2016, the negative impact was further felt by the Boteti contract being terminated (refer to the SENS announcement dated 5 December 2016) together with the PPM contract proving to be sub-optimal and Tharisa Mining notifying the Group of its intention to pursue an owner operator model.
Remaining contracts operate under a satisfactory model and will be carried through until the contracts expire.
These elements naturally led to the board of directors and management performing a strategic review of the Group’s business model and contractual arrangements in order to align the Group’s capital allocations with the current mining environment. eXtract will look to allocate capital to areas where the board of directors believe eXtract can deliver appropriate returns and create shareholder value. Pursuant to this strategic review process detailed below, a number of key outcomes have been identified and eXtract is currently engaging with various stakeholders in this regard. Note that a joint category one transaction announcement released concurrently on SENS with these results contains further information.
Key outcomes of the strategic review include:
• the termination of non-profitable contracts and transitioning the counterparties to such contracts to an owner/operator model where the contracts and underlying assets are sold by eXtract to such counterparties as a going concern;
• the disposal of further excess assets;• significantly reducing the eXtract Group’s overhead costs, including a reduction in headcount;• changes to the management of eXtract, as below;• significantly restructuring eXtract’s debt levels; and• exploring a funding model for potential future resources investments.
The approval of this strategy has resulted in the Group impairing a material amount of the value of leasing assets as the plan is to realise the majority of its assets through sale as opposed to continuing use.
As part of the strategic review, enX has agreed to convert its mezzanine debt and preference share instruments in full to equity (excluding the R22 million amount as referred to in the joint category one transaction announcement released concurrently with these results) and it is the intention of management to apply all proceeds from asset sales to reduce banking debt over the next 12 to 18 months.
114
SOLVENCY AND LIQUIDITY
The board of directors is satisfied that the conversion of the enX mezzanine debt and preference share instruments to equity places the Group in a position that it is solvent at the reporting date and for the foreseeable future even though the liabilities are greater than the assets at 31 December 2016. The conversion, already approved by the enX board of directors, is subject to shareholder and various other stakeholder approvals which will be requested imminently. (Refer to the joint category one announcement released on SENS on 18 April 2017.)
To facilitate the strategic plan, management has concluded a standstill arrangement to allow for the accelerated transition to an asset and debt light model.
The board of directors is further satisfied that the strategies to address the liquidity and refinancing risks, including the de-gearing strategy, are on track and are being effectively addressed.
Management has been proactive in addressing the immediate liquidity concerns and the achievement of the strategic plan is critical to the Group meeting its repayment obligations.
DIVIDEND
The board of directors has not declared a dividend given the Group’s performance and change in strategy.
LOOKING AHEAD
eXtract will continue to focus on these commitments in the short- to medium-term:
• reduction of external debt;• accelerate the execution of the strategic plan;• selling excess and end of life assets; and• improving the efficiencies of existing contracts.
GOING CONCERN
The interim results presented for the eXtract Group have been prepared on the assumption that the eXtract Group as a whole will continue to operate as a going concern. This assumption is predicated on the enX conversion of debt being approved by shareholders, the cash flows presented to the external funders as part of their 18 month standstill and the execution of the strategic review initiatives. (For more details on the enX conversion of debt, refer to the joint category one transaction announcement released concurrently on SENS with these results.)
DIRECTOR CHANGES
The following directors were appointed on 1 November 2016:• ZB Swanepoel as independent non-executive chairman;• J Colling as CEO;• DAG Chadinha as CFO;• JL Serfontein and MS Teke as non-executive directors; and• CS Halsey, SA Nkosi and OM Matloa as independent non-executive directors.
The previous board members resigned at the AGM on 24 November 2016.
115
Further changes were executed with effect from 29 March 2017, where:• MS Teke has resigned as a director of eXtract. This follows a potential for conflicts of interest as a result of eXtract’s change
in business strategy;• Mr J Colling has stepped down as CEO and will remain available to the Group on a consultancy basis until 31 May 2017
to assist the board of directors with the transition to the revised strategy.• Mr ZB Swanepoel, the current chairman of the board of directors, was appointed as executive chairman, to oversee the
strategic review and the implementation of the resultant changes;• Mr CS Halsey, has been appointed as Chief Investment Officer and will also serve as Interim CEO to oversee operations
until a new CEO is appointed.• Mr SA Nkosi has been appointed as lead independent director.
By order of the board of directors
ZB Swanepoel CS HalseyExecutive Chairman Interim CEO
18 April 2017
116
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT
Unaudited31 December
2016Rm
Unaudited31 December
2015Rm
Audited30 June
2016Rm
ASSETSNon-current assets 762 8 734 2 201Intangible assets – 229 37Property, plant and equipment 85 382 77Leasing assets 677 8 022 2 044Deferred tax assets – 83 41Finance lease receivables – 4 1Other investments and loans – 14 1Current assets 1 625 4 720 9 321Finance lease receivables – 4 1Other investments and loans – 89 –Inventories 78 1 108 87Trade and other receivables and derivatives 515 1 887 952Taxation in advance – 18 6Cash and cash equivalents 162 433 148Assets held for sale(2) 870 1 181 8 127
Total assets 2 387 13 454 11 522
EQUITY AND LIABILITIESCapital and reservesStated capital 1 891 1 839 1 839Other reserves 374 574 449(Accumulated loss) retained income (3 256) 445 (688)
(Deficit) equity attributable to owners of the parent (991) 2 858 1 600Non-controlling interests – 27 29
Total (deficit) equity (991) 2 885 1 629Non-current liabilities 2 294 5 819 2 588
Interest-bearing borrowings(3) 2 256 5 212 2 539Deferred tax liabilities 38 607 49
Current liabilities 1 084 4 750 7 305
Current portion of interest-bearing borrowings(3) 465 2 333 92Trade and other payables, provisions and derivatives 420 1 949 675Current tax liabilities – 43 15Liabilities directly associated with assets held for sale(2) 199 425 6 523
Total equity and liabilities 2 387 13 454 11 522
117
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unauditedfor the
six monthsended
31 December2016
Unauditedfor the
six monthsended
31 December2015*
Auditedyear-end30 June
2016*Rm Rm Rm
Continuing operationsRevenue 1 152 1 240 2 582
Profit from operations before depreciation and amortisation 200 276 480Depreciation and amortisation (171) (217) (409)
Operating profit 29 59 71Net impairment of assets(6) (1 141) (536) (553)
Loss before net finance costs (1 112) (477) (482)Net finance costs(8) (134) (108) (204)Finance costs (144) (111) (240)Finance income 10 3 36
Loss before taxation (1 246) (585) (686)Income tax (expense)/income (47) 167 175
Loss for the period from continuing operations (1 293) (418) (511)
Discontinued operations(9)
Loss for the period from discontinued operations (240) (704) (1 742)
Loss for the period (1 533) (1 122) (2 253)
Attributable to:Owners of the parent (1 535) (1 124) (2 257) – Loss for the period from continuing operations (1 293) (418) (511) – Loss for the period from discontinued operations (242) (706) (1 746)
Non-controlling interests 2 2 4
Loss for the period (1 533) (1 122) (2 253)
Cents Cents Cents
Loss per share from continuing operations(11)
– Basic and diluted loss per share (319.4) (106.9) (130.6)Loss per share from discontinued operations(11)
– Basic and diluted loss per share (59.8) (180.5) (446.2)
* Amounts re-presented to show comparative results from continuing operations.
118
SUMMARISED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Unauditedfor the
six monthsended
31 December2016
Unauditedfor the
six monthsended
31 December2015
Auditedyear-end30 June
2016Rm Rm Rm
Loss for the period (1 533) (1 122) (2 253)Total other comprehensive (loss) income for the period, net of taxation (55) 241 132Exchange differences on translation of foreign subsidiaries (55) 194 124Net fair value (losses) gains on cash flow hedges and other fair value reserves – 47 8
Total comprehensive loss for the period, net of taxation (1 588) (881) (2 121)
Attributable to:Owners of the parent (1 590) (883) (2 125)Non-controlling interests 2 2 4
(1 588) (881) (2 121)
119
SUMMARISED CONSOLIDATED DISCONTINUED OPERATIONS INCOME STATEMENT
Unauditedfor the
six monthsended
31 December2016
Unauditedfor the
six monthsended
31 December2015*
Auditedyear-end30 June
2016*Rm Rm Rm
Revenue 2 459 3 390 6 948
Profit from operations before depreciation, amortisation and recoupments 613 1 083 1 977Depreciation and amortisation (21) (793) (1 497)Profit on disposal of property, plant and equipment – 4 6
Operating profit 592 294 486Net foreign exchange (losses) gains (24) 13 1Net impairment of assets(6) (248) (658) (945)IFRS 5 adjustment(9) (439) – (719)
Loss before net finance costs (119) (351) (1 177)Net finance costs(8) (130) (208) (402)Finance costs (231) (324) (653)Finance income 101 116 251
Loss before taxation (249) (559) (1 579)Income tax income (expense) 75 (145) (163)
Loss for the period (174) (704) (1 742)
Loss on sale of subsidiaries(9) (3) – –Deconsolidation of subsidiary(7) (63) – –
Total loss for the period from discontinued operations (240) (704) (1 742)
* Amounts re-presented to show comparative results from discontinued operations.
120
SUM
MA
RIS
ED C
ON
SOLI
DAT
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TAT
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F C
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Reta
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Non
-con
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Rm
Rm
Rm
Rm
Rm
Bal
ance
at 1
July
201
51
839
330
1 56
932
3 77
0To
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ompr
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for t
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241
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2(8
81)
Loss
for t
he p
erio
d–
–(1
124
)2
(1 1
22)
Oth
er c
ompr
ehen
sive
inco
me
for t
he p
erio
d, n
et o
f tax
atio
n–
241
––
241
Net
shar
e-ba
sed
paym
ent m
ovem
ent
–3
––
3D
ivid
ends
pai
d–
––
(7)
(7)
Bal
ance
at 3
1 D
ecem
ber
2015
1 83
957
444
527
2 88
5To
tal c
ompr
ehen
sive
inco
me
for t
he p
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d–
(109
)(1
133
)2
(1 2
40)
Loss
for t
he p
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d–
–(1
133
)2
(1 1
31)
Oth
er c
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inco
me
for t
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d, n
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f tax
atio
n–
(109
)–
–(1
09)
Net
shar
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sed
paym
ent m
ovem
ent
–2
––
2Ve
sting
of s
hare
ince
ntiv
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hem
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––
(1)
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rese
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n ad
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–(1
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–(1
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tion
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ctly
in e
quity
–(1
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–(1
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Bal
ance
at 3
0 Ju
ne 2
016
1 83
944
9(6
88)
291
629
Tota
l com
preh
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com
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–(5
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535
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the
peri
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–(1
535
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(1 5
33)
Oth
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sive
inco
me
for
the
peri
od, n
et o
f tax
atio
n–
(55)
––
(55)
Vest
ing
of s
hare
ince
ntiv
e sc
hem
e–
(4)
––
(4)
New
issu
e of
sta
ted
capi
tal
37–
––
37C
onve
rsio
n of
trea
sury
sha
res
15–
––
15D
ivid
end
paid
––
–(2
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ivid
end
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––
(1 0
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–(1
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)R
ever
sal o
f sha
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ased
pay
men
t res
erve
–(1
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––
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ithi
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tego
ries
of r
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–22
(22)
––
Dis
posa
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(27)
–(2
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efer
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taxa
tion
dir
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y in
equ
ity
–5
(5)
––
Bal
ance
at 3
1 D
ecem
ber
2016
1 89
137
4(3
256
)–
(991
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* O
n 16
Nov
embe
r 201
6 10
1 40
0 00
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ares
wer
e issu
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each
.
121
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Unauditedfor the
six monthsended
31 December2016
Unauditedfor the
six monthsended
31 December2015
Auditedyear-end30 June
2016Rm Rm Rm
Cash flows from operating activitiesCash generated from operations before working capital movements 688 1 510 2 606Working capital movements 697 263 827
Cash generated from operations 1 385 1 773 3 433Finance income 111 7 45Finance costs (341) (323) (651)Taxation paid (29) (24) (101)
Net cash flows from operating activities 1 126 1 433 2 726
Cash flows from investing activities(Acquisition) disposal of businesses (75) – 42Net capital expenditure (820) (1 154) (2 295)Movement in finance lease receivables 36 33 (6)Proceeds on disposal of other investments and loans – – 2
Net cash flows from investing activities (859) (1 121) (2 257)
Cash flows from financing activitiesRepurchase of non-controlling interest – (16) (16)Issue of shares 37 – –Dividends paid (2) (7) (7)Net decrease in interest-bearing borrowings (447) (91) (324)
Net cash flows from financing activities (412) (114) (347)
Net (decrease) increase in cash and cash equivalents (145) 198 122Effect of exchange rate translation on cash and cash equivalents (5) 32 9Derecognition of cash and cash equivalents (22) – –Cash and cash equivalents at beginning of period 334 203 203
Cash and cash equivalents at end of period 162 433 334
122
SUMMARISED CONSOLIDATED STATEMENT OF DISCONTINUED CASH FLOWS
Unauditedfor the
six monthsended
31 December2016
Unauditedfor the
six monthsended
31 December2015
Auditedyear-end30 June
2016Rm Rm Rm
Net cash flows from operating activities 1 165 1 114 2 471Net cash flows from investing activities (680) (847) (1 758)Net cash flows from financing activities (580) (51) (603)
Net cash outflow (95) 216 110
123
SEGMENTAL INFORMATION
No segmental statements are disclosed as the group comprises Contract Mining only.
NOTES
(1) Basis of preparation
The unaudited summarised consolidated financial statements for the six months ended 31 December 2016 have been prepared in accordance with the framework concepts, measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and contains information required by IAS 34: Interim Financial Reporting, the JSE Limited Listings Requirements and the South African Companies Act.
The accounting policies and their application are consistent, in all material respects, with those detailed in Extract’s (previously Eqstra Holdings Limited) 2016 annual financial report, except for the adoption on 1 July 2016 of those new, revised and amended standards and interpretations detailed therein. These financials have not been reviewed or reported on by the company’s auditors.
The adoption of the new and amended statements of generally accepted accounting practice, interpretations of statements of generally accepted accounting practice, and improvements project amendments did not have a material impact on the Group.
Unaudited31 December
2016
Unaudited31 December
2015
Audited30 June
2016Rm Rm Rm
(2) Assets classified as held for saleLeasing assets 870 1 181 809Corporate transaction disposal group – – 7 318
870 1 181 8 127
Liabilities directly associated with assets held for saleInterest-bearing borrowings 151 259 238Current taxation liabilities 48 147 74Corporate transaction disposal group – 19 6 211
199 425 6 523
Excess assets comprises leasing assets in all operations (excluding Benga) of R433 million (June 2016: R298 million) and assets in the Mozambique Benga operation of R437 million (30 June 2016: R511 million) which have been included as assets held for sale and the associated interest-bearing liabilities of R151 million (30 June 2016: R238 million) and taxation liabilities of R48 million (30 June 2016: R74 million). There were sales of R176 million during the reporting period to 31 December 2016.
Management believe that the sale of these assets is highly probable within the next 12 months.
124
Corporate transaction disposal statement of financial position
Disposal statement of financial position
8 November 2016Audited
30 June 2016Rm Rm
ASSETSIntangible assets 3 –Property, plant and equipment 257 273Leasing assets 5 056 5 573Other investments and loans 30 12Finance lease receivables 2 36Inventories 853 819Trade and other receivables and derivatives 646 883
Operating assets 6 847 7 596Taxation in advance 58 23Cash and cash equivalents 75 186Unallocated loss on sale from the corporate transaction (487) (487)
Total assets 6 493 7 318
LIABILITIESTrade and other payables and derivatives 1 153 1 194Interest-bearing borrowings 6 575 6 854Loans due from Contract Mining entities (2 853) (2 403)
Operating liabilities 4 875 5 645Deferred tax liabilities 411 498Current tax liabilities 114 68
Total liabilities 5 400 6 211
The sale of the Fleet Management and Logistics division and the Industrial Equipment division to enX Group Limited took place on 8 November 2016. The disposal balance sheet is disclosed above.
As part of the corporate transaction, subsidiaries of eXtract Holdings in the Fleet Management and Logistics and Industrial Equipment divisions were transferred to enX on the effective date. The assets and associated liabilities were disclosed as held for sale at 30 June 2016.
Unaudited31 December
2016
Unaudited31 December
2015
Audited30 June
2016Rm Rm Rm
(3) Interest-bearing borrowingsFacility breakdownExternal senior bank debt 465 7 545 236enX mezzanine debt 1 656 – –Preference shares 600 – –Intercompany loans – – 2 395
2 721 7 545 2 631
The enX transaction resulted in a cash injection in the form of ordinary share capital of R101 million, preference share capital of R600 million and subordinated mezzanine debt of R1 656 million.
125
Unaudited31 December
2016
Unaudited31 December
2015
Audited30 June
2016Rm Rm Rm
(4) Capital commitments 229 1 738 429
– Contracted 59 239 50 – Authorised by directors but not contracted 170 1 499 379
Guarantees 19 24 10
The expenditure is substantially for the acquisition and replacement of leasing assets.
Expenditure will be financed from cash generated from operations and existing banking facilities.
(5) Fair value hierarchy disclosures
Valuation methodology
Level 1 – valuations with reference to quoted prices in an active market:
Financial instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available and the price represents actual and regularly occurring market transactions on an arm’s length basis.
Level 2 – valuations based on observable and unobservable inputs include:
• financial instruments valued using inputs other than quoted prices as described above for level 1 but which are observable for the asset or liability, either directly or indirectly, such as quoted price for similar assets or liabilities in an active market; quoted price for identical or similar assets or liabilities in inactive markets; valuation model using observable inputs; and
• valuation model using inputs derived from/corroborated by observable market data.
There are no financial asset and liabilities that are recognised and subsequently measured at fair value, analysed by valuation technique.
Unaudited31 December
2016
Unaudited31 December
2015*
Audited30 June
2016*Rm Rm Rm
(6) Impairment of assetsImpairment of leasing assets(1) 1 329 1 194 1 351Impairment of intangible assets(2) 42 – 11Impairment of restricted cash(3) 18 – –Impairment of property, plant and equipment(4) – – 77Impairment of investments and loans(5) – – 59
Total impairments 1 389 1 194 1 498
Discontinued operations (248) (658) (945)Continuing operations 1 141 536 553
* Amounts re-presented to show comparative results from discontinued operations.
(1) The R1 329 million relates to specific leasing assets which have been written down to their estimated fair-value less costs-to-sell, being their current market values due to the change in strategy.
(2) The impairment of intangible assets relates to the write-off of previously capitalised costs relating to various systems which are no longer viable as a result of the strategic plan.
(3) The restricted cash in foreign countries has been impaired due to the uncertainty of repatriation to South Africa.(4) The impairment of property, plant and equipment at 30 June 2016 related to the write-down of assets in the Mozambique Benga operation to
fair-value less costs-to-sell (R60 million) and the impairment of South African property of R17 million.(5) The impairment of investments and loans is the write-off of the amount previously included in long-term loan receivables and has been included
as discontinued operations.
126
Unaudited31 December
2016
Unaudited31 December
2015*
Audited30 June
2016*Rm Rm Rm
(7) Deconsolidation of subsidiaryDiscontinued operationsGain on deconsolidation of subsidiary 156 – –Provision for liabilities (net of expected proceeds) (67) – –Impairment of inter-company loans (152) – –
Total (63) – –
The Karowe contract in Botswana was unlawfully terminated and money withheld which resulted in the Botswana entity being placed in liquidation. The Group is therefore no longer in control of the subsidiary and it has been deconsolidated. A deconsolidation gain was offset by the relevant impairment on inter company loans and provision for liabilities for which guarantees were provided.
Unaudited31 December
2016
Unaudited31 December
2015
Audited30 June
2016Rm Rm Rm
(8) Net finance costs including fair value gainsNet finance costs from continued operations (134) (108) (204)Net finance costs from discontinued operations (130) (208) (402)
Total finance costs (264) (316) (606)
(9) Discontinued operations
CORPORATE TRANSACTION
On 30 June 2016, eXtract announced the proposed sale of the Fleet Management and Logistics division and the Industrial Equipment division to enX Group Limited. Shareholders approved the sale at the general meeting held on 22 September 2016.
As part of the corporate transaction, subsidiaries of eXtract Group in the Fleet Management and Logistics and the Industrial Equipment divisions were transferred to enX on 8 November 2016, being the effective date on which all conditions were met. The loss on sale of subsidiaries of R3 million was recognised using the fair value adjusted purchase price of R1 086 million (being the fair value of the enX consideration shares received, adjusted for the fair value of the eXtract shares issued to enX) and the net asset values of the entities being sold as at 8 November 2016.
Depreciation ceased in line with IFRS 5 for the corporate transaction disposal group resulting in exceptional profitability. This is included in the further IFRS 5 impairment of R439 million (June 2016: R719 million) during the period.
CONTRACT MINING AND PLANT RENTAL DISCONTINUED OPERATIONS
Eqstra Mozambique
The Benga operations in Mozambique are included as discontinued operations. Subsequent to 31 December 2016, R196 million of assets have been sold.
Botswana Karowe
This operation has been disclosed as discontinued for both periods prior to deconsolidation.
Plant Rental
The Plant Rental operations were successfully wound down during the period with the majority of machines sold into the market.
127
31 December2016
31 December2015
30 June2016
Cents Cents Cents
(10) Net (deficit) asset value per share attributable to owner of the parent (198.8) 704.8 394.6
(11) Headline earnings per shareContinuing operations – Basic and diluted headline earnings per share (116.5) (8.2) (28.8)
Discontinued operations – Basic and diluted headline earnings per share 109.1 6.0 (1.0)
Reconciliation of continuing headline earnings per shareBasic and diluted earnings per share (319.4) (106.9) (130.6)Net impairments of assets 281.8 137.0 141.3Taxation effect (78.9) (38.37) (39.6)
Continuing headline earnings per share (116.5) (8.2) (28.8)
Reconciliation of discontinued earnings per shareBasic and diluted earnings per share (59.8) (180.5) (446.2)Profit on sale of property, plant and equipment and leasing assets – (1.0) (1.5)Net impairments of assets 61.3 168.2 241.5IFRS 5 fair value adjustment 108.4 – 183.7Loss on sale of subsidiaries 0.7 – –Deconsolidation of subsidiary 15.6 – –Taxation effect (17.2) 19.3 21.5
Discontinued headline earnings per share 109.0 6.0 (1.0)
Million Million Million
(12) Weighted average number of shares in issue for the periodNumber of ordinary shares – in issue 506.9 405.5 405.5 – in issue (net of treasury shares) 498.6 391.3 391.3
404.9 391.2 391.3
Weighted average number of ordinary shares in issue during the period – opening shares (net of treasury shares) 391.3 391.1 391.1 – additional shares issued 12.8 – – – disposal of treasury shares 0.8 0.1 0.2
Diluted weighted average number of ordinary shares 404.9 391.2 391.3
(13) Significant judgements and estimates
Following the turmoil in the mining and resources sector and in addition to the specific impairments raised, the Group performed a review of the recoverable amount of the remaining South African Contract Mining cash-generating unit (CGU), a significant CGU of the Group. The remaining assets value is deemed to be recoverable based on current operations and the current strategic model. The valuation of the equipment impaired was based on market values on a normalised sales basis and reflects management’s best estimate of the recoverable amount.
128
(14) Going concern
The interim results presented for the eXtract Group have been prepared on the assumption that the eXtract Group as a whole will continue to operate as a going concern. The board of directors have considered all relevant factors at the reporting date in reaching this conclusion. This assumption is predicated on the enX conversion of debt being approved by shareholders, the cash flows presented to the external funders as part of their 18-month standstill and the execution of the strategic review initiatives. (For more details on the enX conversion of debt, refer to the joint category one transaction announcement released concurrently with these results.)
(15) Post-balance sheet events
Subsequent to period-end, the Group:
• Sold excess assets in Benga amounting to R196 million.• Signed an agreement to convert the enX debt to equity subject to shareholder and other approvals.• Signed a standstill agreement with external funders.• Terminated the PPM contract.
129
Annexure 4
SHARE PRICE HISTORY
enX
A table of the aggregate volumes and values traded and the highest and lowest prices traded in enX shares for each month over the 12 months prior to the date of issue of the circular and for each day over the 30 days preceding the last practicable date prior to the date of the circular is set out below.
Date High (cents) Low (cents) Close (cents) Volume Value (Rand)
Monthly2016May 2 089 1 611 1 978 138 856 2 585 594June 2 500 1 911 2 311 132 163 2 941 551July 2 256 1 889 2 033 177 959 3 631 123August 2 133 1 778 2 056 1 024 817 20 165 125September 2 056 1 944 2 000 157 735 3 128 616October 2 111 1 833 1 995 270 855 5 328 504November 1 993 1 680 1 850 4 489 267 83 918 352December 1 839 1 700 1 740 5 298 637 97 933 3582017January 1 830 1 671 1 785 1 782 968 31 393 493February 2 014 1 725 1 820 3 874 811 70 630 050March 1 855 1 702 1 740 3 785 051 67 426 157April 1 771 1 580 1 649 1 236 032 21 114 465Daily2 May 1 600 1 563 1 600 22 860 365 7543 May 1 600 1 550 1 590 32 263 502 6204 May 1 565 1 500 1 565 25 391 391 9025 May 1 550 1 515 1 550 9 535 145 0878 May 1 550 1 500 1 549 7 699 116 9149 May 1 633 1 538 1 550 26 378 409 50710 May 1 633 1 500 1 560 9 688 150 32611 May 1 560 1 520 1 560 34 124 531 27812 May 1 600 1 520 1 600 7 652 116 94015 May 1 600 1 520 1 575 13 182 208 67616 May 1 539 1 500 1 533 1 733 640 26 579 34317 May 1 545 1 525 1 530 1 235 510 18 902 94718 May 1 535 1 450 1 500 157 250 2 395 97419 May 1 600 1 467 1 520 791 558 11 869 83422 May 1 550 1 500 1 550 945 561 14 595 27423 May 1 575 1 535 1 550 54 232 840 61324 May 1 600 1 550 1 565 23 574 365 84725 May 1 600 1 530 1 600 11 346 174 64426 May 1 589 1 550 1 589 10 353 160 51229 May 1 625 1 542 1 600 273 530 4 364 56330 May 1 625 1 575 1 601 26 547 424 83331 May 1 660 1 590 1 602 78 556 1 266 0821 June 1 630 1 600 1 622 3 135 504 50 230 3852 June 1 640 1 575 1 640 102 177 1 648 0755 June 1 671 1 600 1 671 204 228 3 366 8266 June 1 675 1 649 1 670 392 634 6 478 558
130
Date High (cents) Low (cents) Close (cents) Volume Value (Rand)
7 June 1 650 1 600 1 650 393 842 6 496 0718 June 1 684 1 610 1 650 328 404 5 461 9059 June 1 650 1 600 1 645 441 331 7 116 51512 June 1 644 1 601 1 634 1 008 16 36313 June 1 670 1 630 1 650 286 286 4 720 03214 June 1 683 1 650 1 680 456 534 7 143 30115 June 1 680 1 650 1 680 2 634 44 03019 June 1 680 1 600 1 650 290 483 4 797 68020 June 1 650 1 620 1 620 226 934 3 698 71621 June 1 610 1 510 1 510 569 513 8 916 18622 June 1 575 1 500 1 575 247 893 3 757 39523 June 1 580 1 525 1 575 452 054 7 119 36526 June 1 585 1 550 1 585 182 310 2 849 53627 June 1 634 1 560 1 634 395 723 6 409 81428 June 1 661 1 566 1 661 62 266 1 019 51529 June 1 700 1 592 1 675 14 419 243 58730 June 1 695 1 600 1 669 133 442 2 213 025
131
eXtract
A table of the aggregate volumes and values traded and the highest and lowest prices traded in eXtract shares for each month over the 12 months prior to the date of issue of the circular and for each day over the 30 days preceding the last practicable date prior to the date of the circular is set out below.
Date High (cents) Low (cents) Close (cents) Volume Value (Rand)
Monthly2016May 228 191 205 7 781 076 16 182 423June 295 202 260 32 571 692 84 807 126July 300 240 278 82 334 927 222 164 747August 286 265 270 28 888 859 78 519 286September 292 230 275 13 331 643 36 028 467October 299 245 262 10 526 510 29 611 822November 269 36 36 85 896 243 38 757 768December 41 31 35 11 893 274 4 366 3742017January 36 28 30 25 493 025 7 907 848February 32 20 20 17 602 763 5 002 680March 26 20 21 9 369 052 2 138 184April 25 10 11 10 054 708 1 435 331Daily2 May 14 10 14 5 554 419 620 2003 May 14 11 14 842 080 116 4234 May 14 14 14 – –5 May 13 10 13 152 319 17 4628 May 14 12 13 300 132 39 1409 May 13 11 13 42 972 5 17110 May 14 13 13 80 400 10 45611 May 12 9 9 1 519 500 175 65012 May 14 10 14 5 554 419 620 20015 May 14 11 14 842 080 116 42316 May 12 9 9 1 519 500 175 65017 May 11 9 10 840 950 87 66818 May 10 9 9 4 841 658 437 43019 May 9 8 8 1 050 229 91 65622 May 9 8 9 1 486 000 132 77423 May 10 9 9 198 062 18 26924 May 10 9 9 409 746 36 91725 May 9 8 9 210 079 18 85726 May 9 8 9 272 767 23 96629 May 10 9 9 105 199 9 78930 May 9 8 9 498 600 44 83031 May 10 9 10 92 900 9 0901 June 9 9 9 18 112 1 6302 June 9 9 9 117 282 10 5555 June 9 9 9 231 559 20 8406 June 10 9 9 435 575 39 2907 June 9 8 8 97 338 8 1108 June 9 8 8 2 213 872 177 7499 June 9 7 9 270 127 21 54612 June 9 7 9 344 596 26 45213 June 9 8 9 11 292 96315 June 9 8 8 1 094 451 88 000
132
Date High (cents) Low (cents) Close (cents) Volume Value (Rand)
19 June 8 7 8 1 899 863 15131220 June 8 7 7 1 088 584 76 26121 June 8 7 7 924 448 64 90322 June 8 7 7 4 808 130 337 54923 June 9 9 9 231 559 20 84026 June 7 6 6 3 936 533 237 64527 June 7 5 5 33 814 780 1 706 61228 June 6 5 5 7 322 457 366 21229 June 6 5 5 8 518 762 460 90030 June 6 6 6 217 651 13 059
133
Annexure 5
THE INDEPENDENT EXPERT’S REPORT IN RESPECT OF THE RESTRUCTURE
“The DirectorseXtract Group Limited61 Maple StreetPomonaKensington, 1619
4 July 2017
Dear Sirs
INDEPENDENT EXPERT REPORT REGARDING THE RESTRUCTURE OF DEBT OWED BY eXtract GROUP LIMITED (“eXtract”) AND THE ISSUE OF SHARES TO enX GROUP LIMITED (“enX”)
Introduction
eXtract ordinary shareholders are referred to the joint restructure announcements released on SENS on 18 April 2017 and 21 June 2017 and are advised that the board of eXtract (”the Board”) proposes, subject to eXtract ordinary shareholder approval, the adoption of the resolutions relating to the proposed restructure and recapitalisation of eXtract and its subsidiary, MCC Contracts Proprietary Limited (“MCC”) (collectively referred to as “eXtract”).
The proposed restructure and recapitalisation comprises of the following (collectively referred to as “the Restructure”):
• the delegation by MCC to enX of its debt owing to Eqstra Corporation under the first mezzanine loan to the value of R876 112 358 less the excluded amount of R250 million;
• the voluntary redemption by MCC of the MCC preference shares held by enX for R600 million;• the set-off of various inter-company loans between eXtract and MCC through the issue of 1 002 234 000 new MCC shares
equal in value to R501 117 000;• the subscription by enX for 3 755 171 958 new MCC shares (“the MCC designated shares”) to the value of
R1 877 585 979 and the set-off of MCC’s aggregate indebtedness to enX against the subscription price payable by enX for the new MCC shares, resulting in a balance of R250 million owing by MCC to Eqstra Corporation; and
• the exchange by enX of all of the MCC shares held by it for 3 755 171 958 new eXtract shares at 50 cents per eXtract share.
Scope
Pursuant to the requirements of the Companies Act and section 10.4(f ) of the JSE Listings Requirements, an independent expert report is required to be obtained by the Board in respect of the Restructure.
In light of the above, KPMG Services (Proprietary) Limited (“KPMG”) has been appointed by the Board as the independent expert to advise on whether the terms and conditions of the Restructure are fair and reasonable to the shareholders of eXtract. The Board has been advised accordingly.
Our work and findings shall not in any way constitute recommendations regarding the completion of the Restructure.
Responsibility
The compliance with the JSE Listings Requirements and the Companies Act is the responsibility of the Board. Our responsibility is to report on the terms and conditions of the Restructure.
Definition of the terms “fair” and “reasonable”
A transaction will generally be considered fair to a company’s shareholders if the benefits received by the shareholders, as a result of the transaction, are equal to or greater than the value surrendered by the shareholders.
The assessment of fairness is primarily based on quantitative issues. In this case, the Restructure may be considered fair if the fair value of an eXtract share is less than or equal to 50 cents.
134
The assessment of reasonableness is generally based on qualitative considerations surrounding the Restructure. Hence, even though the benefits received by eXtract shareholders may be less than the value surrendered by eXtract shareholders, the entire Restructure may still be reasonable in certain circumstances after considering other significant qualitative factors.
Information utilised and procedures performed
In arriving at our opinion we have undertaken the following procedures in evaluating the fairness of the Restructure:
• considered the rationale for the Restructure, based on discussions with the management of eXtract, its advisors and consideration of internal documents such as the memorandum to the Board;
• obtained an understanding of the structure, terms and conditions of Restructure;• held discussions with the management of eXtract to establish its strategy and considered such other matters as we consider
necessary, including assessing the prevailing economic, legal and market conditions in the industry;• considered the historical performance of eXtract with reference to its audited financial statements for the financial years
ended 30 June 2012 to 2016 and the unaudited management accounts for the period ended 30 April 2017;• evaluated the risks and expected returns associated with eXtract;• reviewed eXtract’s monthly forecast financial model (“the eXtract Financial Model”) for the period 31 March 2017 to
2019 and the basis of the assumptions therein including the prospects of the business. This review included an assessment of the recent historical performance to date as well as the reasonableness of the outlook assumed based on discussions with management;
• reviewed the process followed in the preparation of the eXtract Financial Model and reliance placed thereon by eXtract’s directors;
• reviewed the reasonableness of material assumptions in the eXtract Financial Model;• assessed the assumptions made against our analysis of future macro-economic factors, as well as the overall industry outlook;• reviewed certain publicly available information relating to eXtract, including company announcements, analysts’ reports
and media articles;• compared the 12 month historical share price movement of eXtract shares to shares of comparable companies in order to
assess the relative trading activities, liquidity and volatility of eXtract shares; and• considered any further material adjustments to value based on matters arising in the period from 30 April 2017 to the date
of this opinion.
Key qualitative considerations
In arriving at our opinion, we have also considered the following key qualitative considerations in evaluating the reasonableness of the Restructure:
• the rationale for the Restructure as set out in public announcements made by eXtract and enX;• our understanding of the process followed in negotiating the Restructure; and• the limited options available to management of eXtract given the recent financial performance of eXtract and management’s
view that eXtract could no longer trade out of its highly indebted position.
Valuation
KPMG performed a valuation of eXtract to determine whether the transaction offer consideration represents fair value to the ordinary shareholders of eXtract. The discounted cash flow methodology was the primary valuation methodology employed, supplemented by the net asset value methodology.
The valuation was performed taking cognisance of key external value drivers including, where relevant, key economic parameters such as the current interest rates, the forecast exchange rate, the forecast inflation rate and commodity price expectations. Key internal value drivers to the valuation included the discount rate, operating margins, growth rates, proceeds from the sale of excess assets, current customer contracts and the expectation of customer contract renewals.
Additionally, sensitivity analyses were performed considering key assumptions applied in the eXtract Financial Model which included, inter alia, discount rates, capital expenditure forecasts, working capital policies and key economic parameters used in order to test the operation of the model.
KPMG determined a valuation of nil per ordinary eXtract share. A range of values has not been set out as a nil value resulted from all sensitivity analyses performed.
The valuation above is provided solely in respect of this fair and reasonable opinion and should not be used for any other purposes.
135
Opinion
KPMG has considered the terms and conditions of the Restructure, subject to the conditions set out herein. Based on the proposed share value of 50 cents, KPMG is of the opinion that the terms and conditions of the Restructure are fair and reasonable to the eXtract shareholders.
Our opinion is necessarily based upon the information available to us up to 21 June 2017, including in respect of the financial, regulatory, securities market and other conditions and circumstances existing and disclosed to us at the date thereof. We have furthermore assumed that all conditions precedent, including any material regulatory, other approvals and consents required in connection with the Restructure have been or will be timeously fulfilled and/or obtained.
Accordingly, it should be understood that subsequent developments may affect this opinion, which we are under no obligation to update, revise or re-affirm.
Limiting conditions
This opinion is provided to the Board in connection with and for the purposes of the Restructure. This opinion is prepared solely for the Board and therefore should not be regarded as suitable for use by any other party or give rise to third party rights. This opinion does not purport to cater for each individual shareholder’s perspective, but rather that of the general body of eXtract shareholders. Should an eXtract shareholder be in doubt as to what action to take, he or she should consult an independent adviser.
An individual eXtract shareholder’s decision as to whether to vote in favour of any transaction may be influenced by his particular circumstances. The assessment as to whether or not the Board decides to recommend the Restructure is a decision that can only be taken by the Board.
We have relied upon and assumed the accuracy of the information used by us in deriving our opinion. Where practical, we have corroborated the reasonability of the information provided to us for the purpose of our opinion, whether in writing or obtained in discussion with management of eXtract, by reference to publicly available or independently obtained information. While our work has involved an analysis of, inter alia, the annual financial statements, and other information provided to us, our engagement does not constitute, nor does it include, an audit conducted in accordance with generally accepted auditing standards.
Where relevant, the forecasts of eXtract relate to future events and are based on assumptions that may or may not remain valid for the whole of the forecast period. Consequently, such information cannot be relied upon to the same extent as that derived from audited financial statements for completed accounting periods. We express no opinion as to how closely the actual future results of eXtract will correspond to those projected. Where practicable, we compared the forecast financial information to past trends and third party estimates as well as discussing the assumptions inherent therein with the management of eXtract to the circumstances, we believe that the forecasts have been prepared with due care and consideration.
We have also assumed that the Restructure will have the legal, accounting and taxation consequences described in discussions with, and materials furnished to us by, representatives and advisors of eXtract and we express no opinion on such consequences. We have assumed that all agreements that will be entered into in respect of the Restructure will be legally enforceable.
Independence
We confirm that we have no direct or indirect interest in eXtract shares or the transaction and we confirm that we have no existing or continuing relationship with the issuer and/or any other parties involved in the transaction.
Furthermore, we confirm that our professional fees, of between R475 000 and R515 000 (excluding VAT and disbursements), are not contingent upon the success of the Restructure.
Consent
We consent to the inclusion of this letter and the reference to our opinion in the Circular to be issued to the shareholders of eXtract in the form and context in which it appears.
Yours faithfully
Heather CarswellDirector – Deal Advisory
KPMG Services Proprietary LimitedWanooka place1 Albany RdParktown2193
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Annexure 6
THE INDEPENDENT EXPERT’S REPORT IN RESPECT OF THE EXCESS ASSET DISPOSAL
“The DirectorseXtract Group Limited61 Maple StreetPomonaKempton Park, 1619
4 July 2017
Dear Sirs
REPORT OF THE INDEPENDENT PROFESSIONAL EXPERT TO EXTRACT GROUP LIMITED REGARDING THE DISPOSAL OF EXCESS ASSETS
Introduction
BDO Corporate Finance Proprietary Limited (“BDO Corporate Finance”) has been appointed by the board of directors of eXtract Group Limited (“eXtract” or the “Company”) to provide an independent fairness opinion to the shareholders of eXtract with regard to the disposal of its excess assets in one or more transactions (the “Excess Assets”) over a period of 24 months to third parties (the “Excess Asset Disposal”).
The eXtract board has resolved to approve the Excess Asset Disposal subject to the following terms and conditions:
• the Excess Assets will be disposed of for cash or assets (including equity) on the most favourable commercial terms eXtract can achieve but the aggregate consideration for the disposal of the Excess Assets (the “Aggregate Consideration”) shall not be less than R1.197 billion, being an amount equal to 70% of the asset for sale value of such Excess Assets;
• the Excess Assets will be disposed of within a period of 24 months, calculated from the date upon which eXtract shareholder adopt the resolution approving the excess asset disposal;
• the Excess Assets will be sold on an arm’s length basis to independent third parties and will not be sold to related parties, as defined in section 10.1 of the Listings Requirements; and
• the Excess Assets may be disposed of either by way of a sale of assets (either on auction or to independent third parties by way of agreement) or through the disposal of a going concern.
As part of the Excess Asset Disposal and as announced on SENS on 11 May 2017, MCC Contracts Proprietary Limited (“MCC”) has concluded a binding term sheet with Tharisa Minerals Proprietary Limited (“Tharisa”) in terms of which Tharisa will acquire MCC’s existing equipment, strategic components, site infrastructure and spare parts at the Tharisa Mine together with additional excess assets not situated at the Tharisa mine (the “Tharisa Assets”) as a going concern for an aggregate consideration of R303 468 428 (the “Tharisa Agreement”), subject to certain terms and conditions. The purchase consideration net of costs and deductions is R279 305 396. The Aggregate Consideration of R1.197 billion for the Excess Assets is inclusive of the proceeds of the disposal of the Tharisa Assets.
Fairness opinion required
The appointment of an independent expert is not required in terms of the JSE Limited (“JSE”) Listings Requirements, however, the Directors have voluntarily requested that written confirmation be obtained from an independent professional expert confirming whether the terms and conditions of the Excess Asset Disposal are fair insofar as the shareholders of eXtract are concerned (the “Fairness Opinion”).
BDO Corporate Finance has been appointed as the independent professional expert by the directors in respect of the Excess Asset Disposal.
Responsibility
Compliance with the Listings Requirements is the responsibility of the directors. Our responsibility is to report on the fairness of the terms of the Excess Asset Disposal.
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Explanation as to how the term “fair” applies in the context of the excess asset disposal
Schedule 5.7 of the Listings Requirements states that the “fairness” of a transaction is based on quantitative issues. A transaction will generally be considered fair to a company’s shareholders if the benefits received by shareholders, as a result of a corporate action, are equal to or greater than the value ceded by a company.
The Excess Asset Disposal would be considered fair to the shareholders of eXtract if the Aggregate Consideration receivable exceeds the realisable market value of the Excess Assets.
Details and sources of information
In arriving at our opinion we have relied upon the following principal sources of information:
• the Tharisa Agreement;• the Excess Assets detailed fixed asset registers (the “Fixed Asset Registers”);• independent asset valuers’ report on the fair market value of the Excess Assets, whom we have satisfied ourselves is an
independent external registered professional valuer in terms of the Property Valuers Profession Act, No. 47 of 2000 (the “Independent Asset Valuations”);
• historical financial information of eXtract for the years ended 30 June 2014, 30 June 2015 and 30 June 2016;• recent publicly available financial information on eXtract;• precedent transactions of a similar nature;• discussions with the eXtract directors and management regarding the rationale for the Excess Asset Disposal;• discussions with eXtract directors and management on prevailing market, economic, legal and other conditions which may
affect underlying value; and• publicly available information relating to eXtract and mining services sector.
The information above was secured from:
• directors and management of eXtract and their advisors; and• third party sources, including information related to publicly available economic, market and other data which we
considered applicable to, or potentially influencing eXtract.
Procedures and consideration
In arriving at our opinions we have undertaken the following procedures and taken into account the following factors in evaluating the fairness of the Excess Asset Disposal:
• reviewed the terms and conditions of the Tharisa Agreement;• reviewed the audited and unaudited financial information related to eXtract, as detailed above;• reviewed the relevant experience and credentials of the asset valuers, being:
– land and buildings – Tenurey BSM Property Advisory – Performed by Siamisang Ramalebana and Werner Sarvari (property valuer registration number 7074/2 SACPVP); and
– vehicle and machinery – Asset Valuation Specialists Proprietary Limited – Performed by Rowan Bennett, a plant and machinery valuer.
• reviewed the Independent Asset Valuations and considered the valuation methodologies and assumptions applied. Based on our review of the Independent Asset Valuations we are satisfied that the valuation approaches adopted are consistent with standard valuation practice and the valuation assumptions are consistent with market parameters. Consequently, we are satisfied with the valuations and are placing reliance on the valuations;
• review the Fixed Asset Registers and selected a sample of assets to agree to the Independent Asset Valuations;• evaluated the relative risks associated with eXtract and the mining sector asset class;• reviewed certain publicly available information relating to eXtract, comparable publicly traded companies, and the mining
services industry that we deemed to be relevant, including company announcements and media articles;• where relevant, representations made by management and/or directors were corroborated to source documents or
independent analytical procedures were performed by us, to examine and understand the mining services industry, and to analyse external factors that could influence the business; and
• held discussions with the directors and management of eXtract and their advisers as to their strategy and the rationale for the Excess Asset Disposal and considered such other matters as we considered necessary, including assessing the prevailing economic and market conditions and trends.
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Assumptions
We arrived at our opinions based on the following assumptions:
• That all agreements that are to be entered into in terms of the Excess Asset Disposal will be legally enforceable.
Appropriateness and reasonableness of underlying information and assumptions
We satisfied ourselves as to the appropriateness and reasonableness of the information and assumptions employed in arriving at our opinion by determining the extent to which representations from management were confirmed by documentary evidence as well as our understanding of eXtract and the economic environment in which the Company operates.
Limiting conditions
This opinion is provided to the directors and shareholders of eXtract in connection with and for the purposes of the Excess Asset Disposal. The opinion does not purport to cater for each individual shareholder’s perspective, but rather that of the general body of eXtract shareholders.
Individual shareholders’ decisions regarding the Excess Asset Disposal may be influenced by such shareholders’ particular circumstances and accordingly individual shareholders should consult an independent advisor if in any doubt as to the merits or otherwise of the Excess Asset Disposal.
We have relied upon and assumed the accuracy of the information provided to us in deriving our opinion. Where practical, we have corroborated the reasonableness of the information provided to us for the purpose of our opinion, whether in writing or obtained in discussion with management, by reference to publicly available or independently obtained information. While our work has involved an analysis of, inter alia, the annual financial statements, and other information provided to us, our engagement does not constitute an audit conducted in accordance with generally accepted auditing standards.
We have also assumed that the Excess Asset Disposal will have the legal consequences described in discussions with, and materials furnished to us by representatives and advisors of eXtract and we express no opinion on such consequences.
Our opinion is based on current economic, regulatory and market as well as other conditions. Subsequent developments may affect the opinion, and we are under no obligation to update, review or re-affirm our opinion based on such developments.
Independence
We confirm that we have no direct or indirect interest in eXtract or the Excess Asset Disposal. We also confirm that we have the necessary qualifications and competence to provide the fairness opinions on the Excess Asset Disposal.
Furthermore, we confirm that our professional fees, payable in cash, are not contingent upon the success of the Excess Asset Disposal.
Valuation approach
In considering the terms and conditions of the Excess Asset Disposal, we performed an independent valuation of the Excess Assets by applying the market approach. The value of the Excess Assets was based on the most recent Independent Asset Valuations as well as the underlying Fixed Asset Registers as at 31 March 2017 (the “Last Practicable Date”).
This NAV was adjusted for events and market conditions subsequent to 31 December 2016 up to 31 March 2017 resulting in a revised book value as at 31 March 2017, as follows:
Net Book Value (“NBV”)
as at 31 December 2016
NBV as at
31 March 2017Description (R’million) (R’million)
Property, plant and equipment 85 84Leasing assets 677 670Inventory 78 77Assets held for sale 870 529
Total 1 710 1 360
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The current market value of the vehicle and machinery assets were based on the market value cost approach methodology and the following market values were determined for the assets at the following sites:
Description Market value Forced sale value
Aganang R24.89 million R15.50 millionIsibonelo R23.55 million R13.90 millionMidrand R114.70 million R73.17 millionMogalakwena R70.81 million R42.20 millionNsele R13.55 million R8.50 millionPPM R225.10 million R130.10 millionRiverside R46.50 million R29.95 millionTharisa Minerals R283.10 million R169.20 million
Total R802.20 million R482.52 million
The current market value of the land and buildings were based on the capitalisation and sale comparable methodology and were valued according to the following parameters:
Description
Portion 1 of Erf 15 Commercia Ext 15,
Erf 2685 Commercia Ext 5,
Erf 2686 Commercia Ext 8
Portion 188 of Farm Allandale
10 IR
Methodology applied Capitalisation method Sale comparable methodAchieved disposal value R52 million n/aValuation result R38.1 million R9.275 millionCapitalisation rate 11% n/aCapitalisation rate per square metre of total lettable area R3,501 n/aSelling rate per square meter n/a R350Gross lettable area 10,882 m2 n/aErf size n/a 26,500 m2
On 9 June 2017, an announcement was made advising shareholders that MCC has reached an agreement to dispose of 60 Rodio Place to Sandton Plant Hire East Proprietary Limited (“Sandton Plant”) for an aggregate consideration of R52 million (the “Sandton Plant Transaction”), which is R13.9 million in excess of the independent market valuation obtained for the underlying immovable properties.
Opinions
BDO Corporate Finance has considered the terms and conditions of the Excess Asset Disposal and, based on and subject to the conditions set out herein, is of the opinion that the terms and conditions of the Excess Asset Disposal are fair to the eXtract shareholders.
Our opinion is necessarily based upon the information available to us up to 3 July 2017, including in respect of the financial information as well as other conditions and circumstances existing and disclosed to us. We have assumed that all conditions precedent, including any material regulatory and other approvals or consents required in connection with the Excess Asset Disposal has been fulfilled or obtained.
Accordingly, it should be understood that subsequent developments may affect this opinion, which we are under no obligation to update, revise or re-affirm.
Yours faithfully
N LazanakisDirector
BDO Corporate Finance Proprietary Limited22 Wellington RoadParktown2193”
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Annexure 7
TABLE OF ENTITLEMENT
The following table sets out the number of eXtract shares of no par value which a shareholder of the company will receive pursuant to the consolidation based on the consolidation ratio of 1 eXtract share of no par value for every 100 eXtract shares of no par value held.
Fractions arising from the consolidation will be rounded down to the nearest whole number.
Number of existing sharesNumber of shares to which a shareholder
is entitledFraction of share for which a
shareholder will be paid in cash
1 0 0.005002 0 0.010003 0 0.015004 0 0.020005 0 0.025006 0 0.030007 0 0.035008 0 0.040009 0 0.0450010 0 0.0500011 0 0.0550012 0 0.0600013 0 0.0650014 0 0.0700015 0 0.0750016 0 0.0800017 0 0.0850018 0 0.0900019 0 0.0950020 0 0.1000021 0 0.1050022 0 0.1100023 0 0.1150024 0 0.1200025 0 0.1250026 0 0.1300027 0 0.1350028 0 0.1400029 0 0.1450030 0 0.1500031 0 0.1550032 0 0.1600033 0 0.1650034 0 0.1700035 0 0.1750036 0 0.1800037 0 0.1850038 0 0.1900039 0 0.1950040 0 0.2000041 0 0.2050042 0 0.21000
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Number of existing sharesNumber of shares to which a shareholder
is entitledFraction of share for which a
shareholder will be paid in cash
43 0 0.2150044 0 0.2200045 0 0.2250046 0 0.2300047 0 0.2350048 0 0.2400049 0 0.2450050 0 0.2500051 0 0.2550052 0 0.2600053 0 0.2650054 0 0.2700055 0 0.2750056 0 0.2800057 0 0.2850058 0 0.2900059 0 0.2950060 0 0.3000061 0 0.3050062 0 0.3100063 0 0.3150064 0 0.3200065 0 0.3250066 0 0.3300067 0 0.3350068 0 0.3400069 0 0.3450070 0 0.3500071 0 0.3550072 0 0.3600073 0 0.3650074 0 0.3700075 0 0.3750076 0 0.3800077 0 0.3850078 0 0.3900079 0 0.3950080 0 0.4000081 0 0.4050082 0 0.4100083 0 0.4150084 0 0.4200085 0 0.4250086 0 0.4300087 0 0.4350088 0 0.4400089 0 0.4450090 0 0.4500091 0 0.4550092 0 0.4600093 0 0.4650094 0 0.47000
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Number of existing sharesNumber of shares to which a shareholder
is entitledFraction of share for which a
shareholder will be paid in cash
95 0 0.4750096 0 0.4800097 0 0.4850098 0 0.4900099 0 0.49500100 0 0.50000
1 000 5 010 000 50 0
1 000 000 5 000 010 000 000 50 000 0100 000 000 500 000 0
1 000 000 000 5 000 000 0
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Annexure 8
DEALINGS IN EXTRACT SHARES BY SHAREHOLDERS WHO GAVE UNDERTAKINGS
Shareholder DatePurchase/sale
Number of shares bought/sold
Aggregate price (R)
Jannie Serfontein 8 November 2016 Purchase
Sale
306 555
306 555
Delivered in terms of a deferred bonus plan
107 294.25
Bernard Swanepoel 28 November 2016 Purchase 8 000 000 2 400 000
Clinton Halsey 28 November 2016 Purchase 2 000 000 600 000
Cadiz Asset Management 21 November 2016 Unbundling 4 297 79921 November 2016 Sale 30 000 12 90030 November 2016 Purchase 256 224 92 240.642 December 2016 Purchase 126 581 50 505.825 December 2016 Purchase 2 010 682 756 016.4326 December 2016 Purchase 375 465 135 1673.407 December 2016 Purchase 14 201 4 790.3510 January 2017 Purchase 1 367 910 437 731.205 April 2017 Sale 1 071 628 214 325.60
Protea Asset Management LLC 19 October 2016 Purchase 100 000 289 000.0021 October 2016 Purchase 28 747 80 491.6028 October 2016 Purchase 250 000 662 500.007 November 2016 Purchase 200 000 510 000.00
Peregrine Equities 16 November 2017 Purchase 22 703 840 4 540 768Sale 450 000 225 000
18 November 2016 Sale 2 520 828 1 159 992.9621 November 2016 Sale 2 996 343 1 402 191.6622 November 2016 Purchase 300 000 114 00024 November 2016 Sale 7 917 122 3 055 217
Purchase 150 000 60 49528 November 2016 Sale 10 000 000 3 000 00029 November 2016 Purchase 435 000 198 127.502 December 2016 Sale 512 211 199 762.2912 December 2016 Purchase 500 000 200 00010 January 2017 Purchase 1 100 000 354 53011 January 2017 Purchase 34 000 10 88012 January 2017 Purchase 37 722 11 693.8218 January 2017 Purchase 100 000 32 00020 January 2017 Sale 3 605 262 1 123 683.8027 January 2017 Sale 147 563 44 268. 9030 January 2017 Sale 2 437 731.10
Purchase 10 044 2 912.7631 January 2017 Sale 80 000 1 124.701 February 2017 Sale 80 000 24 0006 February 2017 Sale 1 000 3007 February 2017 Purchase 38 790 10 861.208 February 2017 Purchase 62 000 15 5009 February 2017 Purchase 3 200 000 928 00013 February 2017 Sale 74 000 22 200
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Shareholder DatePurchase/sale
Number of shares bought/sold
Aggregate price (R)
14 February 2017 Sale 525 000 157 500Purchase 401 000 120 300
15 February 2017 Sale 400 000 120 000Purchase 120 000 37 200
16 February 2017 Purchase 254 737 79 274.1524 February 2017 Purchase 92 965 24 170.9028 February 2017 Purchase 100 000 25 5001 March 2017 Purchase 319 000 82 748.602 March 2017 Purchase 23 000 5 779.908 March 2017 Purchase 50 000 11 50017 March 2017 Purchase 100 000 23 00020 March 2017 Purchase 22 5.5024 March 2017 Purchase 150 000 33 00030 March 2017 Purchase 400 000 88 00031 March 2017 Sale 2 970 000 653 4003 April 2017 Sale 3 000 6004 April 2017 Purchase 10 000 2 1005 April 2017 Purchase 250 000 48 75011 April 2017 Purchase 29 311 5 862.2012 April 2017 Purchase 500 000 110 000
Flagship Asset Management 5 December 2016 Purchase 1 789 248 652 001.978 December 2016 Purchase 1 000 000 370 000.009 December 2016 Purchase 1 000 000 360 000.0012 December 2016 Purchase 63 423 22 198.0513 December 2016 Purchase 130 826 45 789.1014 December 2016 Purchase 409 420 143 297.0012 January 2017 Purchase 396 321 122 859.5113 January 2017 Purchase 1 500 000 480 000.0018 January 2017 Purchase 1 000 000 310 000.0025 January 2017 Purchase 304 879 91 463.70
PSG Asset Management 16 November 2016 Purchase 958 145 480 870.27 17 November 2016 Purchase 762 089 342 024 18 November 2016 Purchase 4 235 722 1 933 137 21 November 2016 Purchase 38 470 577 37 536 400 22 November 2016 Purchase 3 100 000 1 207 582 23 November 2016 Purchase 625 000 238 021 24 November 2016 Purchase 6 686 116 2 596 593 25 November 2016 Purchase 239 633 93 824 28 November 2016 Purchase 1 463 365 587 528 29 November 2016 Purchase 372 200 149 435.47 30 November 2016 Purchase 2 481 835 896 786 1 December 2016 Purchase 426 339 162 639 2 December 2016 Purchase 19 422 7 434 3 December 2016 Purchase 429 985 155 371.62 12 December 2016 Purchase 620 536 224 221.38 13 December 2016 Purchase 552 176 199 520.60 14 December 2016 Purchase 85 000 30 724.67 15 December 2016 Purchase 16 944 6 135.27 19 December 2016 Purchase 141 692 51 208.13 20 December 2016 Purchase 124 944 45 156.87 21 December 2016 Purchase 2 028 834 733 096
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Annexure 9
MATERIAL CONTRACTS OF EXTRACT
1. THE EQSTRA TRANSACTION
The salient terms of the agreement entered into between enX and Eqstra Holdings Limited (“Eqstra”) dated 29 June 2016 (as amended) are set out below.
1.1 The IE and FML division acquisitions
enX acquired all of the issued shares of newly incorporated subsidiary of Eqstra Investments Proprietary Limited (“Eqstra NewCo”) that owns all of the companies comprising Eqstra’s IE division and all of the companies comprising Eqstra’s FML division and Eqstra, post the transaction renamed as eXtract Group Limited (eXtract group), for an aggregate consideration of R7.8 billion, settled by enX by:
1.1.1 allotting and issuing to eXtract 52 715 390 new enX shares at R21.00 per enX share and post the placement;
1.1.2 assuming approximately R5.2 billion of eXtract group’s debt obligations, of which R4.8 billion was within the IE and FML divisions, and that included enX through its subsidiary Eqstra Corporation, assuming approximately R900 million of senior debt owing by MCC to Eqstra under and in terms of the first mezzanine loan;
1.1.3 undertaking a private placement to achieve an equity capital raise of R1.5 billion of which R1.4 billion was applied towards the recapitalisation of eXtract by way of enX:
1.1.3.1 subscribing for 101 400 000 new Eqstra ordinary shares at R1.00 per share;
1.1.3.2 subscribing for 400 new MCC preference shares for an aggregate subscription price of R600 million; and
1.1.3.3 advancing an amount of R700 million to MCC under the second mezzanine loan.
1.2 The Eqstra ordinary share subscription
enX subscribed for 101 400 000 Eqstra ordinary shares at R1.00 per Eqstra ordinary share at an aggregate subscription price of R101 400 000, constituting approximately 20% of the enlarged issued ordinary shares of eXtract. Eqstra used all of the aforesaid subscription proceeds to subscribe for additional ordinary shares in MCC. These subscription monies were then applied in full by MCC to reduce its debt obligations to its existing lenders.
1.3 The MCC preference shares
1.3.1 enX subscribed for 400 MCC preference shares at R1 500 000 each, for an aggregate subscription price of R600 million (constituting 100% of the issued preference shares of MCC). These subscription monies were applied in full by Eqstra to reduce its debt obligations to its existing lenders.
1.3.2 The MCC preference shares comprise unlisted cumulative, redeemable, preference shares that have the following salient rights and privileges:
1.3.2.1 the holders of the MCC preference shares are be entitled to a coupon equivalent to an after tax rate of 13% n.a.c.q.;
1.3.2.2 the MCC preference shares are subordinate to and rank behind all bank debt but rank pari passu as to payment with the enX loan and rank ahead of the Eqstra ordinary shares;
1.3.2.3 no dividends may be declared or paid on any Eqstra ordinary share for so long as any dividend on the MCC preference shares is in arrears and for so long as the MCC preference shares have not been redeemed in full;
1.3.2.4 the MCC preference shares may be redeemed at the option of enX after the third anniversary plus one day of the date of their issue;
1.3.2.5 MCC is entitled on any date to voluntarily redeem the MCC preference shares;
1.3.2.6 the MCC preference shares are compulsorily redeemable on the fifth anniversary of the date of their issue, to the extent that they have not already been redeemed by them; and
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1.3.2.7 the MCC preference shares do not enjoy any voting rights unless and in such event, only for so long as one or more of the following circumstances prevails, inter alia, (i) the MCC preference shares are not redeemed in accordance with their terms; or (ii) a special resolution of MCC proposed in terms of section 112 as read with section 115 of the Companies Act in relation to the disposal of all or the greater part of MCC’s assets or undertaking; or a resolution of MCC is proposed which affects the rights attached to the MCC preference shares or the interest of the MCC preference shareholder, in which event the MCC preference shares shall in aggregate carry that number of votes which would entitle the MCC preference shareholder to exercise, in aggregate, 95% of the total votes exercisable at a general meetings of MCC.
1.4 enX call option
eXtract granted enX a call option to subscribe in one or more tranches for Eqstra ordinary shares (at R1.50 per Eqstra ordinary share) to the value of R600 million. The enX call option may be exercised by enX at any time after all of the MCC preference shares have been redeemed or, if the MCC preference shares have not been redeemed by the 5th anniversary after their issue date, by no later than 30 days after the expiry of the 5th anniversary. The enX call option will lapse on the 30th day following the 5th year from the date of issue of the MCC preference shares, to the extent it has not previously been exercised. This option will fall away as a consequence of the restructure.
1.5 The enX loan
enX lent MCC R700 million under the second mezzanine loan, and the proceeds of this loan were applied by MCC to reduce its debt obligations to its existing lenders. The loan is subject to the following principal terms:
1.5.1 the loan is subordinate to and ranks behind the claims of the banks against MCC;
1.5.2 the loan benefits from a revisionary security package, ranking second to the security for the bank debt;
1.5.3 the loan accrues interest at the rate of 3 month JIBAR + 450 bps; and
1.5.4 the loan and interest are repayable from the proceeds of free cash flow of MCC.
In addition to the aforegoing, MCC used R1.8 billion of new bank borrowings to pro tanto repay Eqstra Corporation the amount owing by MCC to Eqstra Corporation, leaving a net balance owing by MCC to Eqstra Corporation of approximately R900 million (the outstanding balance in terms of the first mezzanine loan is currently R876 112 358). The aforesaid debt, totalling approximately R900 million, is the subject matter of the first mezzanine loan agreement, which terms and conditions are the same mutatis mutandis as those which attach to the second mezzanine loan. The claims of Eqstra Corporation under the aforesaid loan will rank pari passu with the claims of enX in terms of the second mezzanine loan.
1.6 Ancillary provisions
1.6.1 The agreement includes warranties, indemnities and undertakings which are usual and normal for a transaction of this nature.
1.6.2 Upon completion of the Eqstra transaction, eXtract assigned, ceded, transferred and made over to enX all of its right, title and interest in and to all its trademarks and intellectual property relating to the IE division and the FML division.
2. RESTRUCTURE OF DEBT FACILITIES
2.1 Pre-Restructure Indebtedness
2.1.1 MCC indebtedness
As at the last practical date MCC is indebted to the lenders, Eqstra Corporation, enX and eXtract as follows:
2.1.1.1 eXtract
eXtract has intercompany loans to MCC (the “eXtract Intercompany Loan”) in an amount equal to approximately R514 million.
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2.1.1.2 Eqstra Corporation
On or about 21 October 2016 Eqstra Corporation (as lender) and MCC (as borrower) entered into a loan instrument which recorded the terms of an existing loan advanced by Eqstra Corporation to MCC, (being the first mezzanine loan). As at the last practical date, this debt totalled R876 112 358.
2.1.2 enX
2.1.2.1 In terms of the Eqstra transaction agreement (and the preference share subscription agreement contained therein) dated on or about 29 June 2016, enX agreed to subscribe for 400 MCC preference shares at R1 500 000 each, for an aggregate subscription price of R600 million (constituting 100% of the issued preference shares). The preference share subscription price was applied by MCC to partially discharge its obligations under the various facilities granted by the lenders, pursuant to the Common Terms Agreement. As at the last practical date, enX holds 400 MCC preference shares, as aforesaid.
2.1.2.2 On or about 21 October 2016 enX entered into a loan instrument with MCC in terms of which enX advanced a loan in the principal amount of R700 million to MCC (being the second mezzanine loan) in order for MCC to partially discharge its obligations under the various facilities granted by the lenders, pursuant to the Common Terms Agreement. As at the last practical date, this debt amounts to R651 473 621.
2.1.3 Lenders
In terms of the Common Terms Agreement, the lenders granted credit facilities to MCC in the amount of approximately R1.8 billion in respect of which the following amounts remain outstanding as at the last practical date:
2.1.3.1 R465 million owing to all lenders under an amortising term loan facility, to be repaid over a period of six years with a 33 month capital repayment moratorium (“Senior Facility A”);
2.1.3.2 an aggregate amount of R200 million under separate 365 day notice period general banking facilities (“MCC GSTBF”); and
2.1.3.3 an undrawn aggregate amount of approximately R50 million under separate 180 day notice period indirect banking facilities (“MCC Indirect Facilities”),
(collectively the “Senior Loans”).
2.1.4 The proceeds of the Senior Loans were applied inter alia to partially discharge the first mezzanine loan and for general working and corporate purposes.
2.2 Eqstra Corporation Indebtedness
2.2.1 Eqstra Common Terms Agreement
In terms of an Eqstra Common Terms Agreement dated 21 October 2016, the lenders granted Eqstra Corporation credit facilities in amount of approximately R2.7 billion in respect of which the following amounts remain outstanding as at the last practical date:
2.2.1.1 an amount of approximately R2 320 500, in respect of all lenders, under an amortising term loan facility, to be repaid over a period of six years with a 33 month capital repayment moratorium (“Eqstra Senior Facility A”);
2.2.1.2 an amount of approximately R600 000 000 under an amortising term loan facility, to be repaid on the earlier of three years from the first utilisation date or two years from the second utilisation date (“Eqstra Senior Facility B”);
2.2.1.3 an aggregate amount of approximately R400 000 000 under a 365-day notice period general banking facilities (“Eqstra GSTBF”); and
2.2.1.4 an aggregate amount of approximately R850 480 000 under an 180 day notice period indirect banking facilities (“Eqstra Indirect Facilities”),
(collectively the “Eqstra Loans”).
2.2.2 The proceeds of the Eqstra Loans were applied, inter alia, to discharge existing debt of Eqstra Corporation, fees, the principal due under the notes issued in terms of Eqstra Corporation’s note programme and for general working and corporate purposes.
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2.3 Other Arrangements Pre-Restructure
2.3.1 Financial support
Pursuant to the liquidation of Eqstra Botswana and with effect from 10 April 2017, MCC, eXtract and Standard Chartered Bank Botswana Limited (“SCB Botswana”) entered into an agreement in terms of which MCC purchased the proceeds of a liquidation dividend in respect of SCB Botswana’s secured claim for a purchase price of approximately R153 400 000.
2.3.1.1 The purchase price was partially discharged by MCC making a payment to SCB Botswana of R113 million. The balance of the purchase price is to be paid on the first anniversary of the implementation date (being 10 April 2017). MCC has a right to prepay the outstanding amount at any time.
2.3.1.2 The outstanding balance is guaranteed by FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”). To facilitate the issue of such guarantee, enX deposited cash collateral in an amount of R44 036 000, being equal to the outstanding purchase price plus interest, into a bank account with RMB. This deposit serves as cash collateral for the obligations of RMB under the guarantee. enX has secured its contingent claims against MCC by way of a security interest in all amounts paid to MCC in the liquidation of Eqstra Botswana.
2.3.2 Letter Agreement
2.3.2.1 In terms of a letter agreement entered into on or about 4 April 2017 between enX, MCC, Eqstra Corporation and the Majority Lenders (as such term is defined in the Common Terms Agreement), as amended, (the “Letter Agreement”), the Facility Agent (acting on the instructions of the Majority Lenders) consented to:
2.3.2.1.1 the restructuring of the repayment profile of MCC’s Senior Loans such that such Senior Loans will be repaid in full by no later than 30 September 2018;
2.3.2.1.2 the suspension of any repayment of the first mezzanine loan or second mezzanine loan and any redemption of the MCC preference shares until 30 September 2018, being the date on which the Senior Loans shall be discharged in full in terms of the Letter Agreement, provided that if the steps set out in the restructure agreement are implemented (i) the first mezzanine loan (less the excluded amount) and the second mezzanine loan shall be discharged and (ii) the MCC preference shares shall be redeemed, in each case in accordance with the provisions of the steps;
2.3.2.1.3 the increase in the interest rate of the MCC GSTBF;
2.3.2.1.4 the disposal of certain assets and inventory of MCC and eXtract, which disposal proceeds shall be applied in accordance with the provisions of the Letter Agreement;
2.3.2.1.5 the release of the financial covenants set out in the Common Terms Agreement and the substitution therefor with a loan to value ratio in accordance with agreed thresholds;
2.3.2.1.6 the redemption of the MCC preference shares;
2.3.2.1.7 the lenders taking additional security in the form of (i) pledge and cessions over the intercompany loans advanced by each of eXtract and MCC to Eqstra Mozambique; and (ii) a first ranking mortgage bond over the immovable property owned by MCC and situated in Midrand;
2.3.2.1.8 eXtract establishing and making capital contributions into the Investment Fund.
2.3.2.1.9 Upon repayment of all amounts owing to the lenders, the proceeds of the excess asset disposal and amounts repatriated from Mozambique or Botswana will be applied as follows:2.3.2.1.9.1 first, towards discharging the excluded amount owing by MCC to
Eqstra Corporation, up to an amount of R100 million;2.3.2.1.9.2 second, an amount of up to R80 million will be paid to eXtract;
and2.3.2.1.9.3 third, the remainder of the excluded amount will be paid to Eqstra
Corporation.
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2.4 Post-Restructure Indebtedness
2.4.1 Pursuant to the implementation of the restructure as contemplated in the restructure agreement:
2.4.1.1 MCC’s obligation to repay the enX claim and the second mezzanine loan is fully discharged as a result of the set-off under Step 4 of the restructure agreement;
2.4.1.2 the MCC preference shares are redeemed and the obligation to redeem the MCC preference shares is discharged in accordance with Step 2 of the restructure agreement; and
2.4.1.3 the following entities will be indebted as described below:
2.4.1.3.1 MCC and eXtract shall be indebted to the lenders under the Common Terms Agreement in an amount of R665 million;
2.4.1.3.2 Eqstra Corporation shall be indebted to the lenders under the Eqstra Common Terms Agreement in an amount of R3.828 billion;
2.4.1.3.3 MCC shall be indebted to Eqstra Corporation in an amount of R250 million; and
2.4.1.3.4 enX shall be indebted to Eqstra Corporation as a result of the delegation of MCC’s obligations under the first mezzanine loan to enX in an amount of R626 112 376.
2.5 Senior Loans
Security was taken from MCC, as follows:
2.5.1 Pre Restructure security
A pledge and cession over the MCC preference shares held by enX which security is released upon the redemption of the MCC preference shares on the closing date (as defined in the restructure agreement).
2.5.2 General Security (Pre and Post Restructure)
2.5.2.1 a first ranking debt guarantee issued by the debt guarantor in favour of the lenders and a second ranking debt guarantee in favour of enX and Eqstra Corporation;
2.5.2.2 a security cession of all rights, title and interest in and to inter alia the trade debtors, bank accounts and insurance proceeds of eXtract and MCC (as obligors), including a collection account opened and maintained pursuant to the terms of the Letter Agreement;
2.5.2.3 a pledge and cession of loan accounts to all subsidiary companies, associates and investments of eXtract;
2.5.2.4 a general notarial bond over all moveable assets of MCC and eXtract;
2.5.2.5 a special notarial bond over certain moveable assets;
2.5.2.6 a limited guarantee provided by eXtract in favour of the lenders;
2.5.2.7 a pledge and cession over the intercompany loans advanced by each of eXtract and MCC to Eqstra Mozambique; and
2.5.2.8 a first ranking mortgage bond over the property by MCC and situated in Midrand.
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eXtract Group Limited(previously Eqstra Holdings Limited)
(Incorporated in the Republic of South Africa)(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZAE000223202(“eXtract” or “the company”)
NOTICE OF GENERAL MEETING OF SHAREHOLDERS
Notice is hereby given that the general meeting of shareholders of the company (“shareholders”) will be held at 10:00 on Thursday, 10 August 2017 at the offices of eXtract, 61 Maple Street, Pomona, Kempton Park, 1619 (the “general meeting”) for the purposes of considering and, if deemed fit, adopting with or without modification, the resolutions set out below.
IMPORTANT DATES TO NOTE:
2017
Record date to receive circular (together with the notice convening the general meeting) Friday, 30 JuneCircular (together with the notice convening the general meeting) posted Tuesday, 11 JulyAnnouncement relating to the issue of the circular (together with the notice convening the general meeting) released on SENS Tuesday, 11 JulyAnnouncement relating to the issue of the circular (together with the notice convening the general meeting) published in the press Wednesday, 12 JulyLast day to trade in order to be eligible to vote at the general meeting Tuesday, 25 JulyVoting record date Friday, 28 JulyLast day to lodge forms of proxy with the transfer secretaries for the general meeting (by 10:00) Monday, 7 AugustGeneral meeting held at 10:00 Thursday, 10 AugustResults of the general meeting released on SENS Thursday, 10 August
In terms of section 62(3)(e) of the Companies Act:
• a shareholder who is entitled to attend and vote at the general meeting is entitled to appoint a proxy, or two or more proxies, to attend and participate in and vote at the general meeting in the place of the shareholder; and
• a proxy need not be a shareholder of the company.
Kindly note that meeting participants (including proxies) are required to provide reasonably satisfactory identification before being entitled to attend or participate in a meeting. All shareholders recorded in the register of the company on the voting record date will be required to provide identification satisfactory to the chairman of the general meeting. Forms of identification include valid identity documents or smart cards, drivers’ licenses and passports.
Definitions and incorporation of provisions of the circular
Where appropriate and applicable, unless the converse appears from the context, terms defined in the circular to which this notice of general meeting is attached (“the circular”) bear the same meanings in this notice of general meeting. This notice of general meeting shall be read together with the contents of the circular.
Inter-conditionality of certain resolutions
All of the resolutions included herein are inter-conditional, save for ordinary resolutions number 3, 4 and 5.
ORDINARY RESOLUTION NUMBER 1 – Approval of related party transaction and as a category 1 transaction – MCC designated shares
“IT IS RESOLVED THAT the issue by MCC to enX of the MCC designated shares, upon the terms and conditions set out in the restructure agreement, be and hereby approved (i) in terms of paragraph 10.4 (d) of the Listing Requirements and (ii) as a category 1 transaction in terms of section 9 (as read with paragraph 3.35) of the Listing Requirements.”
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Percentage of voting rights required for the adoption of ordinary resolution number 1:
In terms of the Listings Requirements, ordinary resolution number 1 must be approved by more than 50% (fifty percent) of the voting rights exercised on the resolution by the eXtract shareholders, other than enX and its associates (being a related party in terms of paragraph 10(1)(b) of the Listings Requirements), present in person or represented by proxy at the general meeting.
ORDINARY RESOLUTION NUMBER 2 – Approval of related party transaction and as a category 1 transaction – eXtract consideration shares
“IT IS RESOLVED THAT the issue by the company to enX of the eXtract consideration shares, upon the terms and conditions set out in the restructure agreement, be and hereby approved (i) in terms of paragraph 10.4(d) of the Listing Requirements and (ii) as a category 1 transaction in terms of section 9 of the Listing Requirements.”
Percentage of voting rights required for the adoption of ordinary resolution number 2:
Ordinary resolution number 2 must be approved by more than 50% (fifty percent) of the voting rights exercised on the resolution by the eXtract shareholders, other than enX and its associates (being a related party in terms of paragraph 10(1)(b) of the Listings Requirements), present in person or represented by proxy at the general meeting.
ORDINARY RESOLUTION NUMBER 3 – Approval of the disposal by MCC to Tharisa of the Tharisa assets as a category 1 transaction
“IT IS RESOLVED THAT the disposal by MCC of the Tharisa assets to Tharisa, upon the terms and conditions set out in the Tharisa agreement, resulting in the Tharisa transaction being classified as a category 1 transaction, be and is hereby approved in terms of section 9 of the Listing Requirements by the eXtract shareholders.”
Percentage of voting rights required for the adoption of ordinary resolution number 3:
Ordinary resolution number 3 must be approved by more than 50% (fifty percent) of the voting rights exercised on the resolution by the eXtract shareholders present in person or represented by proxy at the general meeting.
ORDINARY RESOLUTION NUMBER 4 – Approval of the disposal by MCC to Sandton Plant of the MCC properties as a category 1 transaction
“IT IS RESOLVED THAT the disposal by MCC of the MCC properties to Sandton Plant, upon the terms and conditions set out in the Sandton Plant agreement, resulting in the Sandton Plant transaction being classified as a category 1 transaction, be and is hereby approved in terms of section 9 of the Listing Requirements by the eXtract shareholders.”
Percentage of voting rights required for the adoption of ordinary resolution number 4:
Ordinary resolution number 4 must be approved by more than 50% (fifty percent) of the voting rights exercised on the resolution by the eXtract shareholders present in person or represented by proxy at the general meeting.
ORDINARY RESOLUTION NUMBER 5 – Approval of the disposal by eXtract and/or MCC of the excess assets as a Category 1 transaction
“IT IS RESOLVED THAT the disposal by the eXtract group of the excess assets, upon the terms and conditions set out in the circular, resulting in the excess assets disposal being classified as a category 1 transaction, be and is hereby approved in terms of section 9 of the JSE Listing Requirements by the eXtract shareholders.”
Percentage of voting rights required for the adoption of ordinary resolution number 5:
Ordinary resolution number 5 must be approved by more than 50% (fifty percent) of the voting rights exercised on the resolution by the eXtract shareholders present in person or represented by proxy at the general meeting.
Pursuant to the excess asset disposal, eXtract intends to dispose of its entire contract mining business over a 24-month period. eXtract intends establishing a new funding model for future diverse investments, via the creation of the Investment Fund.
Shareholders are advised that to the extent that eXtract’s assets consist wholly or mainly of cash due to the excess asset disposal, eXtract will be classified as a cash company by the JSE. Further information in this regard will be announced on SENS in due course.
In accordance with paragraph 3.26 of the Listings Requirements:
– should a cash company, within six months after classification as a cash company fail to enter into an agreement and make an announcement relating to the acquisition of viable assets that satisfy the conditions of listing set out in section 4 of the Listings Requirements, its listing will be suspended; and
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– if a cash company fails, within three months of suspension, to obtain approval from the JSE for a circular relating to the acquisition of viable assets that satisfy the conditions of listing set out in section 4 of the Listings Requirements, its listing will be terminated.
ORDINARY RESOLUTION NUMBER 6 – Placing control of the authorised but unissued eXtract shares in the hands of the eXtract board solely for the issue of the eXtract consideration shares
“IT IS RESOLVED THAT the eXtract shares (following the increase in special resolution number 1 and special resolution number 2) in the authorised but unissued share capital of the company, be and are hereby placed under the control of the eXtract board with specific authority to issue such eXtract consideration shares to enX in terms of the restructure agreement, subject to the provisions of the Companies Act, the MOI and the Listings Requirements.”
Percentage of voting rights required for the adoption of ordinary resolution number 6:
Ordinary resolution number 6 must be approved by more than 50% (fifty percent) of the voting rights exercised on the resolution by the eXtract shareholders present in person or represented or by proxy at the general meeting.
ORDINARY RESOLUTION NUMBER 7 – Waiver of mandatory offer
“IT IS RESOLVED THAT in terms of regulation 86(4) of the Takeover Regulations, the requirement that enX make a mandatory offer at 50 cents per eXtract share in terms of section 123 of the Companies Act to the remaining eXtract shareholders by reason of it acquiring more than 35% (thirty five percent) of the voting rights attaching to the eXtract shares in the company, as a consequence of the acquisition by enX of the eXtract consideration shares, be and is hereby waived.”
Percentage of voting rights required for the adoption of ordinary resolution number 7:
Ordinary resolution number 7 will require the approval of independent holders of more than 50% (fifty percent) of the general voting rights of all the issued securities of the company which are, present in person or represented by proxy at the general meeting, being eXtract shareholders other than enX and its associates.
ORDINARY RESOLUTION NUMBER 8 – General authority to issue shares for cash
“IT IS RESOLVED THAT subject to the restrictions set out below, the directors be and are hereby authorised pursuant, inter alia, to the provisions of the Companies Act and the Listings Requirements, until this authority lapses at the next annual general meeting of the company, unless it is then renewed at the next annual general meeting of the company, provided that it shall not extend beyond 15 (fifteen) months, to allot and issue ordinary shares for cash on the following basis:
1. The allotment and issue of shares must be made to persons qualifying as public shareholders and not related parties as defined in the Listings Requirements;
2. The shares which are subject to the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such shares or rights that are then convertible into a class already in issue;
3. The total aggregate number of shares which may be issued for cash in terms of this authority may not exceed 3 196 556 shares, being 15% of the company’s shares in issue pursuant to the restructure and consolidation. Any shares issued in terms of this authority prior to this authority lapsing shall be deducted from the 3 196 556 shares the company is authorised to issue in terms of this authority for the purpose of determining the remaining number of shares that may be issued in terms of this authority;
4. In the event of a sub-division or consolidation of shares prior to this authority lapsing, the existing authority shall be adjusted accordingly to represent the same allocation ratio;
5. The maximum discount at which ordinary shares may be issued is 10% (ten percent) of the weighted average traded price on the JSE of those shares over the 30 (thirty) days prior to the date that the price of the issue price is agreed between the company and the party/ies subscribing for shares; and
6. After the company has issued shares for cash which represent, on a cumulative basis within a financial year, 5% (five percent) or more of the number of shares in issue prior to that issue, the company shall publish an announcement containing full details of the issue (including the number of shares issued, the average discount to the weighted average traded price of the shares over the 30 (thirty) days prior to the date the price of the issue is agreed in writing between the company and the party/ies subscribing for shares and an explanation, including supporting documentation (if any), of the intended use of funds).”
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Percentage of voting rights required for the adoption of ordinary resolution number 8:
Ordinary resolution number 8 must be approved by at least 75% (seventy five percent) of the voting rights exercised on the resolution by the eXtract shareholders present in person or represented or by proxy at the general meeting.
SPECIAL RESOLUTION NUMBER 1 – Increase in the number of authorised but unissued eXtract shares
“IT IS RESOLVED THAT, the existing authorised share capital of the company, being 1 500 000 000 eXtract shares of no par value, be and is hereby increased by the creation of a further 8 500 000 000 eXtract shares of no par value such that, pursuant to such increase, the authorised share capital of the company shall comprise 10 000 000 000 eXtract shares of no par value.”
Percentage of voting rights required for the adoption of special resolution number 1:
Special resolution number 1 must be approved by at least 75% (seventy five percent) majority of the votes exercised on the resolution by eXtract shareholders present in person or represented by proxy at the general meeting.
The reason for special resolution number 1 is that the company does not have sufficient authorised but unissued eXtract shares to enable it to issue the eXtract consideration shares to enX in terms of the restructure agreement and therefore the company has proposed an increase in the number of authorised eXtract shares for that purpose.
The effect of special resolution number 1 is to increase the authorised share capital of the company from 1 500 000 000 eXtract shares of no par value to 10 000 000 000 eXtract shares of no par value.
SPECIAL RESOLUTION NUMBER 2 –Amendment of the MOI
“IT IS RESOLVED THAT subject to the passing of special resolution number 1, the MOI be and is hereby amended, with effect from the date of filing of the necessary amendment thereto with CIPC, by the deletion of the figures and words “1 500 000 000 (one billion five hundred million)” in clause 6.1 of the MOI and the replacement thereof with the following figures and words “10 000 000 000 (ten billion)”.
Percentage of voting rights required for the adoption of special resolution number 2:
Special resolution number 2 must be approved by at least 75% (seventy five percent) majority of the votes exercised on the resolution by eXtract shareholders present in person or represented by proxy at the general meeting.
The reason for special resolution number 2 is to amend the MOI as required in terms of section 16 of the Companies Act to give effect, mechanically, to the increase in the authorised share capital of the company as set out in special resolution 1.
The effect of special resolution number 2 is that the MOI will be amended to reflect the company’s increased authorised share capital.
SPECIAL RESOLUTION NUMBER 3 – Authorisation for the issue of 30% or more of eXtract shares for the purposes of implementing the restructure
“IT IS RESOLVED THAT in terms of section 41(3) of the Companies Act, the issue by the company of the eXtract consideration shares to enX, upon the terms and conditions set out in the restructure agreement, be and hereby is authorised and approved by the eXtract shareholders.
Percentage of voting rights required for the adoption of special resolution number 3:
Special resolution number 3 must be approved by at least 75% (seventy five percent) majority of the votes exercised on the resolution by eXtract shareholders present in person or represented by proxy at the general meeting.
The reason for special resolution number 3 is that the Companies Act requires shareholders, by way of a special resolution, to authorise any issue by a company of shares where such shares will be equal to or exceed 30% (thirty percent) of the voting rights of all the company’s shares immediately prior to the proposed issue.
The effect of special resolution number 3 is to authorise the company, in terms of section 41(3) of the Companies Act, to issue the eXtract consideration shares in circumstances where the voting rights attaching to the eXtract consideration shares will be in excess of 30% (thirty percent) of the voting rights of all eXtract shares immediately prior to the issue thereto.
SPECIAL RESOLUTION NUMBER 4 – Consolidation of shares
“IT IS RESOLVED THAT that the authorised share capital of the company, if special resolutions 1 and 2 are passed, be and are hereby consolidated and reduced on a 200 to 1 basis, such that, pursuant to the consolidation, the authorised share capital of the company will be 50 000 000 eXtract shares of no par value, and the MOI be and is hereby amended, with effect from the date of filing of the necessary amendment thereto with the CIPC, by the deletion of the figures and words “10 000 000 000
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(ten billion)” in clause 6.1 of the MOI and the replacement thereof with the following figures and words “50 000 000 (fifty million)” and simultaneously therewith, the issued ordinary shares of the company be and are hereby consolidated and reduced on a 200 to 1 basis, in the manner set out in the circular.”
Percentage of voting rights required for the adoption of special resolution number 4:
Special resolution number 4 must be approved by at least 75% (seventy five percent) majority of the votes exercised on the resolution by eXtract shareholders present in person or represented by proxy at the general meeting.
The Reason for special resolution number 4 is to amend the MOI as required in terms of section 16 of the Companies Act to give effect, mechanically, to the decrease in the authorised share capital of the company.
The effect of special resolution number 4 is that the company’s authorised and issued shares will be consolidated on a 200 to 1 basis, such that immediately following the share consolidation, the authorised shares of the company will comprise 50 000 000 eXtract shares and the issued shares of the company will comprise 21 310 374 eXtract shares.
SPECIAL RESOLUTION NUMBER 5 – Share repurchases
“IT IS RESOLVED THAT the company or any of its subsidiaries be and are hereby authorised by way of a general authority pursuant, inter alia, to sections 46 and 48 of the Companies Act, until this authority lapses at the next annual general meeting of the company, unless it is then renewed at the next annual general meeting of the company and provided that this authority shall not extend beyond 15 months from date of passing this special resolution, for the company or any subsidiary of the company to acquire shares of the company, subject to the Listings Requirements on the following basis:
1. Repurchases of shares must be effected through the order book operated by the JSE trading system, and done without any prior understanding or arrangement between the company and the counterparty;
2. At any point in time, the company may only appoint one agent to effect repurchases on its behalf;
3. The company (or any subsidiary) must be authorised thereto by its memorandum of incorporation;
4. The number of shares which may be acquired pursuant to this authority in any financial year (which commenced on 1 September 2016) may not in the aggregate exceed 20% (twenty percent) (or 10% where such acquisitions are effected by a subsidiary) of the company’s issued shares pursuant to the implementation of the restructure and consolidation;
5. Repurchases of shares may not be made at a price more than 10% (ten percent) above the weighted average of the market value on the JSE of the shares in question for the 5 (five) business days immediately preceding the repurchase;
6. Repurchases may not take place during a prohibited period (as defined in paragraph 3.67 of the JSE Listings Requirements) unless a repurchase programme (where the dates and quantities of shares to be repurchased during the prohibited period are fixed) is in place and has been submitted to the JSE in writing prior to the commencement of the prohibited period;
7. After the company has acquired shares which constitute, on a cumulative basis, 3% (three percent) of the number of shares in issue (at the time that authority from shareholders for the repurchase is granted), the company shall publish an announcement containing full details of such repurchases;
8. The board of directors of the company must resolve that the repurchase is authorised, the company and its subsidiaries have passed the solvency and liquidity test, as set out in section 4 of the Companies Act, and since that test was performed, there have been no material changes to the financial position of the company.”
Voting requirement
Special resolution number 5 must be approved by at least 75% (seventy five percent) majority of the votes exercised on the resolution by eXtract shareholders present in person or represented by proxy at the general meeting.
In accordance with the JSE Listings Requirements, the directors record that:
Although there is no immediate intention to effect a repurchase of the company’s shares, the directors would utilise the general authority to repurchase shares as and when suitable opportunities present themselves, which opportunities may require expeditious and immediate action. The directors undertake that, after considering the maximum number of securities which may be repurchased and the price at which the repurchases may take place pursuant to the buy-back general authority, for a period of 12 months after the date of notice of this general meeting:
• The company and the group will be able to pay their debts in the ordinary course of business;• The consolidated assets of the company and of the group fairly valued in accordance with International Financial
Reporting Standards, will exceed the consolidated liabilities of the company and of the group fairly valued in accordance with International Financial Reporting Standards; and
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• The working capital, authorised shares and reserves of the company and of the group will be adequate for ordinary business purposes.
The reason for special resolution number 5 is to afford directors of the company or a subsidiary of the company general authority to effect a repurchase of the company’s shares on the JSE.
The effect of special resolution number 5 will be that the directors will have the authority, subject to the Listings Requirements, to effect repurchases of the company’s shares on the JSE.
QUORUM
A quorum for the purposes of considering the resolutions proposed at the general meeting shall consist of at least three shareholders personally present (and if the shareholder is a body corporate, it must be represented) and entitled to vote at the general meeting. In addition:
• a quorum shall comprise at least 25% of the voting rights that are entitled to be exercised by shareholders in respect of at least one matter to be decided at the general meeting; and
• a matter to be decided at the general meeting may not begin to be considered unless sufficient persons are present to exercise, in aggregate, at least 25% of all the voting rights that are entitled to be exercised in respect of the matter at the time the matter is called on the agenda.
The date on which shareholders must be recorded as such in the register maintained by the transfer secretaries, Computershare Investor Services Proprietary Limited, for the purposes of being entitled to attend, participate in and vote at the general meeting is Friday, 28 July 2017.
SHAREHOLDERS
General instructions
Shareholders are encouraged to attend, speak and vote at the general meeting.
Electronic participation
The company has made provision for shareholders or their proxies to participate electronically in the general meeting by way of telephone conferencing. Should you wish to participate in the general meeting by telephone conference call as aforesaid, you, or your proxy, will be required to advise the company thereof by no later than 10:00 on Monday, 7 August 2017, by submitting by e-mail to the company at [email protected], relevant contact details, including an e-mail address, cellular number and landline as well as full details of the shareholder’s title to securities issued by the company and proof of identity, in the form of copies of identity documents and share certificates (in the case of certificated shares) and written confirmation from the shareholder’s Central Securities Depository Participant (“CSDP”) confirming the shareholder’s title to the dematerialised shares (in the case of dematerialised shares). Upon receipt of the required information, the shareholder concerned will be provided with a secure code and instructions to access the electronic communication during the general meeting. Shareholders must note that access to the electronic communication will be at the expense of the shareholders who wish to utilise the facility.
Shareholders and their appointed proxies attending by conference call will not be able to cast their votes at the general meeting through this medium.
Proxies and authority for representatives to act
A form of proxy is attached for the convenience of any shareholder holding certificated shares, who cannot attend the general meeting but wishes to be represented thereat.
The attached form of proxy is only to be completed by those shareholders who are:
• holding shares in certificated form; or• recorded on the company’s sub-register in dematerialised electronic form with “own-name” registration.
All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the general meeting, must instruct their CSDP or broker to provide them with the necessary letter of representation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker. These shareholders must not use a form of proxy.
In order to ensure an orderly arrangement of affairs at the general meeting, forms of proxy should be deposited at the transfer secretaries, Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 (PO Box 61051, Marshalltown 2107), faxed to +27 11 370 5238 or emailed to [email protected], to be received by no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be returned to the chairman at any time.
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Any shareholder who completes and lodges a form of proxy will nevertheless be entitled to attend, speak and vote in person at the general meeting should the shareholder decide to do so.
A proxy shall be deemed to have the right to demand or join in demanding a poll.
A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death or incapacity of the shareholder concerned or revocation of the proxy or of the authority under which the proxy was executed or the transfer of shares in respect of which the proxy was given, provided that no intimation in writing of such death, incapacity or revocation shall have been received by the company at the office of its transfer secretaries more than, and that the transfer has been given effect to by the company less than, 30 (thirty) minutes before the commencement of the general meeting.
A company that is a shareholder, wishing to attend and participate at the general meeting should ensure that a resolution authorising a representative to so attend and participate at the general meeting on its behalf is passed by its directors. Resolutions authorising representatives in terms of section 57(5) of the Companies Act must be lodged with the company’s transfer secretaries prior to the general meeting.
The company does not accept responsibility and will not be held liable for any failure on the part of the CSDP or broker of a dematerialised unitholder to notify such shareholder of the general meeting or any business to be conducted thereat.
GENERAL NOTES
1. A shareholder entitled to attend and vote at the general meeting may appoint a proxy to attend, speak and vote in his or her stead. A proxy need not be a shareholder of the company.
2. In order to ensure an orderly arrangement of affairs at the general meeting, all forms of proxy or other instruments of authority should be deposited with the transfer secretaries, so as to be received by no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time.
3. A shareholder which is a company or other body corporate may, by resolution of its directors or other governing body, authorise any person to act as its representative at the general meeting.
4. Shareholders who have not dematerialised their shares and “own-name” dematerialised shareholders who are unable to attend the general meeting and wish to be represented thereat, should complete the attached form of proxy in accordance with the instructions therein and return it to the transfer secretaries, so as to be received by no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time.
5. Shareholders who have dematerialised their shares with a CSDP or broker, other than with “own-name” registration, should advise their CSDP or broker with their voting instruction in terms of the agreement entered into between them and their CSDP or broker. Shareholders who have dematerialised their shares and wish to attend the general meeting must contact their CSDP or broker who will furnish them with the necessary authority to attend the general meeting.
6. Shareholders who have dematerialised their shares, other than with “own-name” registration, must not return the form of proxy to the transfer secretaries. Their instructions must be sent to their CSDP or broker for action.
7. On a show of hands, any person present and entitled to vote shall only have one vote, irrespective of the number of shares he holds or represents.
8. On a poll a shareholder who is present in person or represented by a proxy shall be entitled to one vote for each share of which he is the registered holder or representative.
9. A resolution put to the vote at the general meeting shall be decided by way of a poll.
11 July 2017
By order of the board.
eXtract Group Limited
eXtract Group Limited(previously Eqstra Holdings Limited)
(Incorporated in the Republic of South Africa)(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZAE000223202(“eXtract” or “the company”)
FORM OF PROXY FOR EXTRACT SHAREHOLDERS
THIS FORM OF PROXY IS ONLY FOR USE BY:
• registered shareholders who have not yet dematerialised their eXtract shares;• registered shareholders who have already dematerialised their eXtract shares and which shares are registered in their own names in the company’s sub-register.For completion by the aforesaid registered shareholders of eXtract who are unable to attend the general meeting of the company to be held at the offices of the company at 61 Maple Street, Pomona, Kempton Park, 1619 at 10:00 on Thursday, 10 August 2017 (the “general meeting”).If you are a dematerialised shareholder, other than with “own name” registration, do not use this form. Dematerialised shareholders, other than with “own name” registration, should provide instructions to their appointed Central Securities Depository Participant (“CSDP”) or broker in the form as stipulated in the agreement entered into between the shareholder and the CSDP or broker.
I/We (BLOCK LETTERS PLEASE)
of (ADDRESS)
Telephone number: Cell phone number: Email address:
being the holder/s of eXtract shares hereby appoint:
1. or failing him/her,
2. of failing him/her,
3. the chairman of the general meeting,
as my/our proxy to attend and speak and to vote for me/us and on my/our behalf at the general meeting and at any adjournment or postponement thereof, for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed at the general meeting, and to vote on the resolutions in respect of the ordinary shares registered in my/our name(s):Please indicate with an “X” in the appropriate spaces below how you wish your votes to be cast. Unless this is done the proxy will vote as he/ she thinks fit.
In favour of Against AbstainOrdinary resolution 1 – approval of a related party transaction and as a category 1 transaction – MCC designated sharesOrdinary resolution 2 – approval of a related party transaction and as a category 1 transaction – eXtract consideration sharesOrdinary resolution 3 – approval of the disposal by MCC to Tharisa of the Tharisa assets as a category 1 transactionOrdinary resolution 4 – approval of the disposal by MCC to Sandton Plant of the MCC properties as a category 1 transactionOrdinary resolution 5 – approval of the disposal by eXtract and/or MCC of the excess assets as a category 1 transactionOrdinary resolution 6 – placing control of the authorised but unissued eXtract shares in the hands of the eXtract board solely for the issue of the eXtract consideration sharesOrdinary resolution 7 – waiver of mandatory offerOrdinary resolution 8 – General authority to issue shares for cashSpecial resolution 1 – increase in the number of authorised but unissued eXtract sharesSpecial resolution 2 – amendment of the MOISpecial resolution 3 – authorisation for the issue of 30% or more of eXtract shares for the purposes of implementing the restructureSpecial resolution 4 – consolidation of sharesSpecial resolution 5 – Share repurchases
* One vote per share held by eXtract shareholders recorded in the register on the voting record date.
Unless otherwise instructed, my/our proxy may vote or abstain from voting as he/she thinks fit.
Signed this day of 2017SignatureAssisted by me (where applicable)(State capacity and full name)
A shareholder entitled to attend and vote at the general meeting is entitled to appoint a proxy to attend, vote and speak in his/her stead. A proxy need not be a shareholder of the company. Each shareholder is entitled to appoint one or more proxies to attend, speak and, on a poll, vote in place of that shareholder at the general meeting.
In order to ensure an orderly arrangement of affairs at the general meeting, forms of proxy should be deposited at Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, posted to PO Box 61051, Marshalltown, 2107, faxed to +27 11 370 5238 or emailed to [email protected], so as to arrive by no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time.Please read the notes on the reverse side hereof
NOTES TO THE FORM OF PROXY
1. Only shareholders who are registered in the register of the company under their own name on the date on which shareholders must be recorded as such in the register maintained by the transfer secretaries, Computershare Investor Services Proprietary Limited, being Friday, 28 July 2017 (the “voting record date”), may complete a form of proxy or attend the general meeting. This includes shareholders who have not dematerialised their shares or who have dematerialised their shares with “own name” registration. The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow. A proxy need not be a shareholder of the company.
2. Certificated shareholders wishing to attend the general meeting have to ensure beforehand with the transfer secretaries of the company (being Computershare Investor Services Proprietary Limited) that their shares are registered in their own name.
3. Beneficial shareholders whose shares are not registered in their “own name”, but in the name of another, for example, a nominee, may not complete a form of proxy, unless a form of proxy is issued to them by a registered shareholder and they should contact the registered shareholder for assistance in issuing instruction on voting their shares, or obtaining a proxy to attend, speak and, on a poll, vote at the general meeting.
4. Dematerialised shareholders who have not elected “own name” registration in the register of the company through a Central Securities Depository Participant (“CSDP”) and who wish to attend the general meeting, must instruct the CSDP or broker to provide them with the necessary authority to attend.
5. Dematerialised shareholders who have not elected “own name” registration in the register of the company through a CSDP and who are unable to attend, but wish to vote at the general meeting, must timeously provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between that shareholder and the CSDP or broker.
6. A shareholder may insert the name of a proxy or the names of two or more alternative proxies of the shareholder’s choice in the space, with or without deleting “the chairman of the general meeting”. The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
7. The completion and lodging of this form will not preclude the relevant shareholder from attending the general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed, should such shareholder wish to do so. In addition to the aforegoing, a shareholder may revoke the proxy appointment by (i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and (ii) delivering a copy of the revocation instrument to the proxy, and to the company.
8. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the relevant shareholder as of the later of the date:
8.1 stated in the revocation instrument, if any; or
8.2 upon which the revocation instrument is delivered to the proxy and the relevant company as required in section 58(4)(c)(ii) of the Companies Act.
9. Should the instrument appointing a proxy or proxies have been delivered to the company, as long as that appointment remains in effect, any notice that is required by the Companies Act or the company’s memorandum of incorporation to be delivered by the company to the shareholder must be delivered by the company to:
9.1 the shareholder, or
9.2 the proxy or proxies if the shareholder has in writing directed the relevant company to do so and has paid any reasonable fee charged by the company for doing so.
10. A proxy is entitled to exercise, or abstain from exercising, any voting right of the relevant shareholder without direction, except to the extent that the memorandum of incorporation of the company or the instrument appointing the proxy provide otherwise.
11. If the company issues an invitation to shareholders to appoint one or more persons named by the company as a proxy, or supplies a form of instrument for appointing a proxy:
11.1 such invitation must be sent to every shareholder who is entitled to receive notice of the meeting at which the proxy is intended to be exercised;
11.2 the company must not require that the proxy appointment be made irrevocable; and
11.3 the proxy appointment remains valid only until the end of the relevant meeting at which it was intended to be used, unless revoked as contemplated in section 58(5) of the Companies Act.
12. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies. A deletion of any printed matter and the completion of any blank space(s) need not be signed or initialled.
13. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form unless previously recorded by the transfer secretaries of the company or waived by the chairman of the general meeting.
14. A minor must be assisted by his/her parent/guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries.
15. A company holding shares in the company that wishes to attend and participate at the general meeting should ensure that a resolution authorising a representative to act is passed by its directors. Resolutions authorising representatives in terms of section 57(5) of the Companies Act must be lodged with the company’s transfer secretaries prior to the general meeting.
16. Where there are joint holders of shares any one of such persons may vote at any meeting in respect of such shares as if he were solely entitled thereto; but if more than one of such joint holders be present or represented at the meeting, that one of the said persons whose name appears first in the register of shareholders of such shares or his proxy, as the case may be shall alone be, shall be entitled to vote in respect thereof.
17. On a show of hands, every shareholder of the company present in person or represented by proxy shall have one vote only. On a poll a shareholder who is present in person or represented by a proxy shall be entitled to that proportion of the total votes in the company which the aggregate amount of the nominal value of the shares held by him bears to the aggregate amount of the nominal value of all the shares of the relevant class issued by the company. A resolution put to the vote at the general meeting shall be decided by way of a poll.
18. The chairman of the general meeting may reject or accept any proxy which is completed and /or received other than in accordance with the instructions, provided that he shall not accept a proxy unless he is satisfied as to the matter in which a shareholder wishes to vote.
19. A proxy may not delegate his/her authority to act on behalf of the shareholder, to another person.
20. A shareholder’s instruction to the proxy must be indicated by the insertion of the relevant number of shares to be voted on behalf of that shareholder in the appropriate space provided. Failure to comply with the above will be deemed to authorise the chairperson of the general meeting, if the chairperson is the authorised proxy, to vote in favour of the resolutions at the general meeting or other proxy to vote or to abstain from voting at the general meeting as he/she deems fit, in respect of the shares concerned. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholder or the proxy, but the total of votes cast in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the shareholder or the proxy.
21. In order to ensure an orderly arrangement of affairs at the general meeting, it is requested that this form of proxy be lodged or posted or faxed to the transfer secretaries, Computershare Investor Services Proprietary Limited at Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 by fax on +27 11 370 5238 or by email to [email protected], to be received by the company no later than 10:00 on Monday, 7 August 2017, failing which forms of proxy may be handed to the chairman at any time. A quorum for the purposes of considering the ordinary resolutions shall comprise 25% of all the voting rights that are entitled to be exercised by shareholders in respect of each matter to be decided at the general meeting. In addition, a quorum shall consist of three shareholders of the company personally present or represented by proxy (and if the shareholder is a body corporate, it must be represented) and entitled to vote at the general meeting.
22. This form of proxy may be used at any adjournment or postponement of the general meeting, including any postponement due to a lack of quorum, unless withdrawn by the shareholder.
23. The aforegoing notes contain a summary of the relevant provisions of section 58 of the Companies Act, as required in terms of that section.
eXtract Group Limited(previously Eqstra Holdings Limited)
(Incorporated in the Republic of South Africa)(Registration number 1998/011672/06)
JSE share code: EXG ISIN: ZAE000223202(“eXtract” or “the company”)
FORM OF SURRENDER (FOR USE BY CERTIFICATED SHAREHOLDERS ONLY)
The definitions and interpretations commencing on page 6 of the circular to which this form of surrender is attached and forms part, have, where necessary, been used herein.
Instructions:
1. This form of surrender is for use by certificated shareholders only and should be read in conjunction with the circular.
2. A separate form of surrender is required for each certificated shareholder.
3. Part A must be completed by all shareholders who return this form of surrender.
4. Part B must be completed by shareholders who are emigrants from or non-residents of the Common Monetary Area.
Please also read the notes on the reverse side hereof
To: eXtract Group LimitedCare of: Computershare Investor Services Proprietary Limited
Rosebank Towers15 Biermann AvenueRosebank, 2196(PO Box 61763, Marshalltown, 2107)
Dear Sirs,
I/We, the undersigned, hereby surrender and attach the following documents of title in respect of my/our shares in eXtract.
Form of surrender
PART A – Applicable to all certificated eXtract shareholders.
Share certificate/s and/or documents of title surrendered:
Name of registered holder(separate form for each holder)
Certificate number(s)(in numerical order)
Number of eXtract shares covered by each certificate Total
Total
I/We irrevocably and in rem suam authorise you to produce the signature of such documents that may be necessary to complete the replacement of the ordinary shares with shares reflecting the consolidation of the authorised and issued shares.
I/We hereby instruct you to forward the replacement share certificate to me/us, by registered post at my/our own risk, to the address below and confirm that, where no address is specified, the share certificate/s will be forwarded to my/our address recorded in the Company’s share register.
My/Our signature/s on this form constitutes my/our execution of this instruction.
Signature of shareholder:
Assisted by (if applicable):
Name Capacity Signature
Date:
Please complete the section below in BLOCK LETTERS:
Surname of Name of Corporate Body:
First names (in full), if applicable
Title (Mr, Mrs, Miss, Dr, etc.)
Postal address (preferably PO Box address)
Postal code
Telephone number (office hours) Code Number
Cellphone number
PART B
To be completed by all emigrants from and non-residents of the Common Monetary Area. The replacement share certificate will be forwarded to the authorised dealer nominated below for its control. Accordingly, non-residents who are emigrants from the Common Monetary Area must provide the following information:
Name of Authorised Dealer/Bank: Stamp and address of agent lodging this form (if any)
Address:
Account number:
If no nomination is made, the replacement share certificate will be held in trust by the transfer secretaries.
Notes:
1. All shareholders completing and returning this form of surrender must also surrender all their existing documents of title.2. No receipts will be issued for documents lodged, unless specifically requested. In compliance with the requirements of the JSE, lodging agents are
requested to prepare special transaction receipts. Signatories may be called upon for evidence of their authority or capacity to sign this form of surrender.3. Any alterations to this form of surrender must be signed in full and not initialled.4. If this form of surrender is signed under power of attorney, then such power of attorney, or a notarially certified copy hereof, must be sent with this form
of surrender for noting (unless it has already been noted by the transfer secretaries).5. Where the member is a company or a closed corporation, unless it has already been registered with the transfer secretaries, a certified copy of the director’s
or member’s resolution authorising the signing of this form of surrender must be submitted if so requested by the transfer secretaries.6. Note 5 does not apply in the event of this form of surrender bearing the stamp of a broking member of the JSE.7. Where there are joint holders of any shares, only that holder whose name appears first in the register in respect of such shares need sign this form of
surrender.8. A shareholder married in community of property or a minor must ensure this form of surrender is also signed by his/her spouse or parent or guardian,
as the case may be.