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DENEB INVESTMENTS LIMITED - Unaudited Condensed Consolidated Interim Results for the Six Months Ended 30 September 2018

Release Date: 21/11/2018 15:10
Code(s): DNB     PDF:  
 
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Unaudited Condensed Consolidated Interim Results for the Six Months Ended 30 September 2018

DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
("Deneb" or "the Group" or "the company")
Registration number: 2013/091290/06
JSE share code: DNB
ISIN: ZAE000197398
The company's shares are listed under the Financial Services - Speciality Finance sector.

UNAUDITED CONDENSED CONSOLIDATED
INTERIM RESULTS
for the six months ended 30 September 2018

Financial highlights
for the six months ended 30 September 2018


- Revenue up R230 million to R1 596 million

- Profit up R31 million to R4 million

- Earnings per share up 7 cents to 1 cent

- Headline earnings per share up 3 cents to 1 cent

- Net asset value per share up 3 cents to 381 cents


Condensed consolidated statement of financial position
as at 30 September 2018

                                                                Unaudited
                                                 Unaudited   and restated          Audited
                                              30 Sept 2018   30 Sept 2017*   31 March 2018
                                                    R000's         R000's           R000's
ASSETS
Non-current assets                               2 082 271      1 848 004        2 044 076
Property, plant and equipment                      772 595        839 103          813 426
 Plant and equipment                               320 522        378 261          440 005
 Owner-occupied property                           452 073        460 842          373 421
Investment property                                978 323        732 266          907 352
Intangible assets and goodwill                      98 490         70 494           99 997
 Intangible assets                                  40 018         46 729           41 525
 Goodwill                                           58 472         23 765           58 472
Financial asset at fair value                        4 237          3 026            4 237
Long-term receivables                               58 411         81 350           56 780
Deferred tax assets                                170 215        121 765          162 284
Current assets                                   1 809 343      1 757 156        1 512 620
Non-current assets held for sale                     1 080          1 560            1 080
Inventories                                        849 677        776 257          680 935
Trade and other receivables                        937 835        933 315          786 672
Current tax assets                                   2 947          2 498            2 266
Cash and cash equivalents                           17 804         43 526           41 667

Total assets                                     3 891 614      3 605 160        3 556 696
EQUITY AND LIABILITIES
Total equity                                     1 645 046      1 623 781        1 674 626
Stated capital                                   1 452 802      1 450 888        1 452 264
Reserves                                           191 792        173 238          220 950
Equity attributable to owners of the company     1 644 594      1 624 126        1 673 214
Non-controlling interest                               452           (345)           1 412
Non-current liabilities                            939 931      1 037 711          942 059
Deferred tax liabilities                             8 870         12 323            7 142
Post-employment medical aid benefits                98 398         93 081           98 896
Deferred income                                    136 581        126 533          141 754
Interest-bearing liabilities                       688 143        804 334          688 533
Operating lease accruals                             7 939          1 440            5 734
Current liabilities                              1 306 637        943 668          940 011
Current tax liabilities                              1 203          3 646              759
Post-employment medical aid benefits                 8 114          7 219            7 619
Deferred Income                                      7 440         11 945            8 908
Interest-bearing liabilities                       152 863         52 010          169 972
Trade and other payables                           770 093        629 581          604 886
Provisions                                               -         15 691            3 991
Bank overdraft                                     366 924        223 576          143 876

Total liabilities                                2 246 568      1 981 379        1 882 070
Total equity and liabilities                     3 891 614      3 605 160        3 556 696

* Restated, refer to note 4.2 and note 7.


Condensed consolidated statement of profit or loss and
other comprehensive income
for the six months ended 30 September 2018


                                                                                             Unaudited
                                                                             Unaudited    and restated
                                                                          30 Sept 2018    30 Sept 2017*
                                                                 Notes          R000's          R000's
Continuing operations
Revenue                                                                      1 595 751       1 365 860
Cost of sales                                                               (1 234 352)     (1 051 041)
Gross profit                                                                   361 399         314 819
Operating profit before finance costs                                           56 587          39 328
Finance expenses                                                               (52 779)        (46 643)
Profit/(Loss) before taxation                                                    3 808          (7 315)
Income tax expense                                                  4.1           (468)         30 411
Profit after tax                                                                 3 340          23 096
Discontinued operations
Profit/(Loss) from discontinued operations, net of tax              4.2            913         (50 358)
Profit/(Loss)                                                                    4 253         (27 262)
Other comprehensive income, net of related tax
Items that are or may be reclassified to profit or loss
Foreign operations - foreign currency translation differences                    4 544           1 878
Other comprehensive income, net of tax                                           4 544           1 878
Total comprehensive income/(loss) for the period                                 8 797         (25 384)
Profit/(Loss) attributable to:
Owners of the company                                                            4 091         (26 816)
Non-controlling interest                                                           162            (446)
                                                                                 4 253         (27 262)
Total comprehensive income/(loss) attributable to:
Owners of the company                                                            8 635         (24 938)
Non-controlling interest                                                           162            (446)
                                                                                 8 797         (25 384)
Basic earnings per share                                         (cents)          0,95           (6,25)
Basic earnings per share from continuing operations              (cents)          0,74            5,49
Basic earnings per share from discontinued operations            (cents)          0,21          (11,74)
Diluted earnings per share                                       (cents)          0,92           (6,25)
Diluted earnings per share from continuing operations            (cents)          0,71            5,49
Diluted earnings per share from discontinued operations          (cents)          0,21          (11,74)

* Restated, refer to note 4.2 and note 7.


Condensed consolidated statement of cash flows
for the six months ended 30 September 2018


                                                                             Unaudited       Unaudited
                                                                          30 Sept 2018    30 Sept 2017
                                                                                R000's          R000's
Net cash flow from operating activities                                       (177 124)       (114 986)
Cash generated from operating activities before working capital changes         26 152          21 392
Cash outflow from working capital changes                                     (143 589)        (83 117)
Net finance costs                                                              (52 779)        (46 643)
Taxes paid                                                                      (6 908)         (6 618)
Net cash flow from investing activities                                        (67 360)        (20 822)
Net cash flow from financing activities                                         (2 427)        (36 876)
Change in borrowings                                                            10 513         (24 017)
Distribution                                                                   (12 940)        (12 859)
Net decrease in cash and cash equivalents                                     (246 911)       (172 684)
Cash and cash equivalents at beginning of period                              (102 209)         (7 366)
Cash and cash equivalents at end of period                                    (349 120)       (180 050)


Condensed consolidated statement of changes in equity
for the six months ended 30 September 2018


                                                                                                         Non-
                                                Stated       Other    Retained                    controlling         Total
                                               capital    reserves      income         Total         interest        equity
                                                R000's      R000's      R000's        R000's           R000's        R000's
Balance at 1 April 2017                      1 449 653     253 456      75 220     1 778 329              101     1 778 430
Correction of error (net of tax)                     -           -    (115 450)     (115 450)               -      (115 450)
Restated total equity at the
beginning of the financial year              1 449 653     253 456     (40 230)    1 662 879              101     1 662 980
Total comprehensive profit for
the period                                           -       1 878     (26 816)      (24 938)            (446)      (25 384)
Transactions with owners of
the company
Distribution                                         -           -     (12 859)      (12 859)               -       (12 859)
Share scheme - options exercised                 1 235           -      (1 235)            -                -             -
Common control transaction
Business acquisition under common
control                                              -        (956)          -          (956)               -          (956)
Balance at 30 September 2017                 1 450 888     254 378     (81 140)    1 624 126             (345)    1 623 781

Balance at 1 April 2018                      1 452 264     266 867     (45 917)    1 673 214            1 412     1 674 626
Change in accounting policy                          -           -     (17 615)      (17 615)               -       (17 615)
Restated total equity at the
beginning of the financial year              1 452 264     266 867     (63 532)    1 655 599            1 412     1 657 011
Total comprehensive profit for
the period                                           -       4 544       4 091         8 635              162         8 797
Transactions with owners of
the Company
Distribution                                         -           -     (12 940)      (12 940)               -       (12 940)
Effects of change in holdings                        -           -      (6 700)       (6 700)          (1 122)       (7 822)
Share scheme - options exercised                   538           -        (538)            -                -             -
Balance at 30 September 2018                 1 452 802     271 411     (79 619)    1 644 594              452     1 645 046


                                                                                                 30 Sept 2018  30 Sept 2017
Composition of other reserves                                                                          R000's        R000's
Foreign currency translation reserve                                                                    2 240         1 878
Revaluation of investments                                                                              1 210             -
Common control reserve                                                                                (20 219)      (16 858)
Surplus on revaluation of land and buildings                                                          288 180       269 358
                                                                                                      271 411       254 378

Condensed consolidated segmental report
for the six months ended 30 September 2018

                                                                                               Head
                                                Branded                                  Office and
                                                Product     Industrial        Textile   Centralised
                               Properties  Distribution  Manufacturing  Manufacturing      Services       Total
                                   R000's        R000's         R000's         R000's        R000's      R000's
2018
Segment revenue
Primary geographical
market
South Africa                       83 385       604 423        610 185        253 933             -   1 551 926
Other African countries                 -        31 252         13 099         11 243             -      55 594
Europe                                  -        26 649          6 264              -             -      32 913
South America                           -             -          2 534              -             -       2 534
                                   83 385       662 324        632 082        265 176             -   1 642 967
Major products/service
lines
Woven, knitted and non-
woven products                          -             -        254 863        265 176             -     520 039
Pressed, roll-formed steel
products                                -             -        309 793              -             -     309 793
Speciality chemicals                    -             -         67 426              -             -      67 426
Rentals                            83 385             -              -              -             -      83 385
Toys, electronic games and
sports goods                            -       541 694              -              -             -     541 694
Stationery, publishing and
office supplies                         -       120 630              -              -             -     120 630
                                   83 385       662 324        632 082        265 176             -   1 642 967
Timing of revenue
recognition
At a point in time                 83 385       651 236        632 082        265 176             -   1 631 879
Over time                               -        11 088              -              -             -      11 088
                                   83 385       662 324        632 082        265 176             -   1 642 967
Inter-segment sales               (21 940)            -        (12 221)        (3 232)            -     (37 393)
                                   61 445       662 324        619 861        261 944             -   1 605 574
Less: Revenue attributable to
discontinued operations                 -        (9 361)             -           (462)            -      (9 823)
Revenue as per statement
of comprehensive income            61 445       652 963        619 861        261 482             -   1 595 751
Segment results
Profit from continuing
operations before finance
cost                               56 993       (17 027)        27 831          2 445       (13 655)     56 587
Finance expenses                        -             -              -              -             -     (52 779)
Profit before taxation                  -             -              -              -             -       3 808
Total segment assets            1 334 044     1 140 079        804 631        489 712       123 149   3 891 614
Total segment liabilities          21 549       673 934        451 662        221 501       877 922   2 246 568

2017
Segment revenue
Primary geographical
market
South Africa                       78 149       593 682        400 132        367 480             -   1 439 443
Other African countries                 -         9 981         12 460         23 498             -      45 939
Europe                                  -        37 231          2 460              -             -      39 691
South America                           -             -          3 354              -             -       3 354
                                   78 149       640 894        418 406        390 978             -   1 528 427
Major products/service
lines
Woven, knitted and non-
woven products                          -             -        235 909        390 978             -     626 887
Pressed, roll-formed steel
products                                -             -        121 444              -             -     121 444
Speciality chemicals                    -             -         61 053              -             -      61 053
Rentals                            78 149             -              -              -             -      78 149
Toys, electronic games and
sports goods                            -       471 440              -              -             -     471 440
Stationery, publishing and
office supplies                         -       169 454              -              -             -     169 454
                                   78 149       640 894        418 406        390 978             -   1 528 427
Timing of revenue
recognition
At a point in time                 78 149       628 156        418 406        390 978             -   1 515 689
Over time                               -        12 738              -              -             -      12 738
                                   78 149       640 894        418 406        390 978             -   1 528 427
Inter-segment sales               (25 887)            -        (12 878)        (4 697)            -     (43 462)
                                   52 262       640 894        405 528        386 281             -   1 484 965
Less: Revenue attributable to
discontinued operations                 -       (42 377)             -        (76 728)            -    (119 105)
Revenue as per statement
of comprehensive income            52 262       598 517        405 528        309 553             -   1 365 860
Segment results
Profit from continuing
operations before finance
cost                               56 530       (16 050)        18 047          3 604       (22 803)     39 328
Finance expenses                        -             -              -              -             -     (46 643)
Loss before taxation                    -             -              -              -             -      (7 315)
Total segment assets            1 240 740     1 039 691        654 527        575 964        94 237   3 605 160
Total segment liabilities          18 988       442 515        380 521        272 299       867 057   1 981 379


Statistics per share
for the six months ended 30 September 2018


                                                                      Unaudited       Unaudited
                                                                   30 Sept 2018    30 Sept 2017*
                                                                     Six months      Six months
Weighted average number of shares in issue                ('000)        431 453         428 789
Number of shares in issue                                 ('000)        431 579         429 559
Diluted weighted average number of shares in issue        ('000)        444 325         428 789
Basic earnings                                           (cents)           0,95           (6,25)
 Continuing operations                                   (cents)           0,74            5,49
 Discontinued operations                                 (cents)           0,21          (11,74)
Headline earnings                                        (cents)           1,26           (1,47)
 Continuing operations                                   (cents)           1,05            5,56
 Discontinued operations                                 (cents)           0,21           (7,03)
Diluted earnings                                         (cents)           0,92           (6,25)
 Continuing operations                                   (cents)           0,71            5,49
 Discontinued operations                                 (cents)           0,21          (11,74)
Diluted headline earnings                                (cents)           1,22           (1,47)
 Continuing operations                                   (cents)           1,01           10,27
 Discontinued operations                                 (cents)           0,21          (11,74)
Reconciliation between profit and headline earnings
Income attributable to shareholders                     (R000's)          4 091         (26 816)
Impairment of property plant and equipment              (R000's)          1 629          20 223
Surplus on disposal of property, plant and equipment    (R000's)           (272)           (219)
Surplus of disposal of subsidiary                       (R000's)           (955)              -
Loss on disposal of property, plant and equipment       (R000's)          1 846             645
Total tax effect of adjustments                         (R000's)           (897)           (119)
Headline earnings                                       (R000's)          5 442          (6 286)
Net asset value per share                                (cents)            381             378

*Restated, refer to note 4.2 and note 7.

Notes to the unaudited condensed consolidated
interim results for the for the six months ended 30 September 2018

1. Basis of preparation

   The unaudited condensed consolidated interim results for the six months to September 2018 have been prepared in
   accordance with, and containing the information as required by, International Accounting Standard (IAS) 34 Interim
   Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the
   Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and are in compliance
   with the Listings Requirements of the JSE Limited and the requirements of the South African Companies Act as
   amended. These results do not include all the information required for a complete set of IFRS financial statements.
   However, selected explanatory notes are included to explain events and transactions that are significant to an
   understanding of the changes in the Group's financial position and performance since the last annual consolidated
   financial statements for the year ended 31 March 2018.

   These results have been prepared under the supervision of the Financial Director, Gys Wege (CA)SA, and have not
   been audited or reviewed by the Group's auditors, PwC Inc.


2. Significant accounting policies

   The unaudited condensed consolidated interim results have been prepared under the historical cost convention,
   except for the revaluation of certain properties and financial instruments. The accounting policies adopted are in terms
   of IFRS and consistent with those followed in the preparation of the Group's annual financial statements for the year
   ended 31 March 2018, except for the adoption of new standards and interpretations effective as at 1 April 2018. Refer
   to note 3 for an explanation on the impact of the new standards on the condensed consolidated financial statements.


3. Changes in accounting policies

   This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
   with Customers on the Group's financial statements and also discloses the new accounting policies that have been
   applied from 1 January 2018, where they are different to those applied in prior periods.

   3.1 IFRS 9 Financial Instruments - Impact of adoption

        IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial
        assets and financial liabilities, derecognition of financial instruments, and impairment of financial assets.

        The adoption of IFRS 9 Financial Instruments from 1 April 2018 resulted in changes in accounting policies and
        adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in
        this note. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated.

        The total impact on the Group's retained earnings as at 1 April 2018 is as follows:

                                                                                                                    2018
                                                                                                                  R000's
        Closing retained earnings 31 March - IAS 39                                                              (45 917)
        Adjustment to retained earnings from adoption of IFRS 9 on 1 April 2018                                  (17 615)
        Increase in provision for trade receivables (refer to note below)                                        (24 466)
        Increase in deferred tax assets relating to impairment provisions                                          6 851
        Opening retained earnings 1 April - IFRS 9                                                               (63 532)

        Impairment of financial assets

        The Group has trade receivables that are subject to IFRS 9's new expected credit loss model and was required
        to revise its impairment methodology under IFRS 9. The impact of the change in impairment methodology on
        the Group's retained earnings and equity is disclosed in the table below.

        The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
        expected loss allowance for all trade receivables. To measure the expected credit losses all trade receivables
        have been grouped based on shared credit characteristics and the days past due.

        The loss allowance for trade receivables as at 31 March 2018 reconciles to the opening loss allowance
        on 1 April 2018 as follows:

                                                                                                                     Trade
                                                                                                               receivables
                                                                                                                    R000's
         At 31 March 2018 - calculated under IAS 39                                                                 28 817
         Amounts restated through opening retained earnings                                                         24 466
         Opening allowance as at 1 April 2018 - calculated under IFRS 9                                             53 283

         The loss allowances increased by a further R1,6 million to R54,9 million for trade receivables during the six months
         to 30 September 2018.

         Trade receivables are written off when there is no reasonable expectation of recovery.

         Accounting policies applied from 1 April 2018:

         Trade, long-term and other receivables

         Trade and other receivables originated by the Group continue to be stated at amortised cost less impairment
         losses. Interest income from long-term receivables are included in finance income using the effective interest
         rate method.

         Impairment

         The Group applies the simplified approach permitted by IFRS 9 in determining provision on impairment allowances
         for receivables. This approach requires expected losses to be recognised from initial recognition of all receivables.

   3.2   IFRS 15 Revenue from Contracts with Customers - Impact of adoption

         The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 April 2018 which resulted in
         additional disclosures required and changes in accounting policy. However, there were no significant changes to
         amounts recognised in the financial statements.

         The Group manufactures and sells a range of goods and services across its different segments. Revenue from
         these sales are recognised when goods or services are transferred to the customer, being when control is passed.

         Some products are sold with volume rebates, rights of returns and trade discounts. Revenue from these sales
         are recognised based on the price specified in the contract, net of the estimated returns and discounts to the
         extent that it is highly probable.

   3.3   IFRIC 22 Foreign Currency Transactions and Advance Consideration - Impact of adoption

         The Group has adopted IFRIC 22 from 1 April 2018. The standard affects transactions which include the receipt
         or payment of advance consideration. The spot rate used to translate a non-monetary asset or liability is the
         earlier of the date of initial recognition of the non-monetary prepayment asset or the non-monetary deferred
         income liability and the date the asset, expense or income is recognised in the financial statements. The Group
         has applied this accounting prospectively.

   3.4   IFRS 16

         The standard is effective for the year commencing 1 April 2019. The Group has decided not to early adopt. There
         has been no significant change in the Group's assessment of the impact of IFRS 16 since the 31 March 2018
         annual financial statement disclosures that were made.


4. Significant operating activities

   4.1   Taxation and deferred taxation

         Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of
         income we earn in those jurisdictions, which we expect to be fairly consistent in the near term. It is also affected
         by discrete items that may occur in any given year but are not consistent from year to year. The table below
         provides a reconciliation between our applicable tax to the effective tax from continued operations:

         Reconciliation of the applicable tax to the effective tax:
                                                                                         30 Sept 2018       30 Sept 2017
                                                                                               R000's             R000's
         Continued operations
         Profit/(Loss) before tax from continued operations                                     3 808             (7 315)
         Tax (expense)/income using the statutory rate of 28%                                  (1 066)             2 048
         Difference in tax rate from foreign jurisdiction                                         686                310
         Non-deductible expenses                                                               (1 186)              (438)
         Recognition of deferred tax asset on tax losses                                        1 098             28 491
         Effective tax                                                                           (468)            30 411

   4.2   Discontinued operations
   
         The Group discontinued certain textile and office automation businesses and sold its interest in Limtech Biometric
         Solutions. Accordingly their results have been separately disclosed on the face of the statement of profit or loss
         and other comprehensive income. Where practical these results have been restated.
      
                                                                                         30 Sept 2018       30 Sept 2017
         Results of discontinued operations                                                    R000's             R000's
         Revenue                                                                                9 825            119 105
         Operating profit/(loss) before impairments and restructuring and
         retrenchment costs                                                                     1 060            (14 444)
         Impairment of assets                                                                       -            (20 223)
         Restructuring and retrenchments costs                                                   (147)           (15 691)
         Operating profit/(loss) before finance costs                                             913            (50 358)
         Finance expense                                                                            -                  -
         Profit/(loss) before taxation                                                            913            (50 358)
         Income tax expense                                                                         -                  -
         Profit/(loss) for the period from discontinued operations                                913            (50 358)
         Cash flows used in discontinued operations
         Net cash used in operating activities                                                 (3 611)           (14 444)
         Net cash used in investing activities                                                      -               (964)
         Net cash used in discontinued operations                                              (3 611)           (15 408)

         The loss from discontinued operations is attributable entirely to equity holders of the parent.

   4.3   Relates parties

         During the period under review, in the ordinary course of business, certain companies within the Group entered
         into transactions with each other. All these intra-group transactions are similar to those in the prior period and
         have been eliminated in the condensed interim financial statements on consolidation.

5. Significant investing activities

   5.1   Capital expenditure and commitments
                                                       Capital expenditure               Contractual commitments
                                                30 Sept 2018      30 Sept 2017       30 Sept 2018       30 Sept 2017
                                                      R000's            R000's             R000's             R000's
         Investment property                          41 801                 -                  -             21 000
         Land and buildings                                -               277                  -                  -
         Plant and equipment                          41 893            29 111             35 383              7 602
         Total capital expenditure                    83 694            29 388             35 383             28 602

   5.2   Business combinations

         Current period

         Sale of subsidiary

         The Group has sold its interest in Limtech Biometric Solutions Proprietary Limited for a total consideration of
         R2,2 million on 30 June 2018, of which R1,5 million was paid upfront in cash and the remaining balance shall
         be paid in equal instalments commencing on 1 July 2019.

         The following table summarises proceeds on disposal, net cash flow on disposal and analysis of assets and
         liabilities disposed.
                                                                                                         30 Sept 2018
                                                                                                               R000's
         Property, plant and equipment                                                                            109
         Trade and other receivables                                                                            3 843
         Inventory                                                                                                903
         Cash and cash equivalents                                                                                153
         Long-term borrowings                                                                                    (219)
         Trade and other payables                                                                              (2 210)
         Provisions                                                                                              (960)
         Other current liabilities                                                                               (201)
         Net asset value disposed of                                                                            1 418
         Gain on disposal of subsidiary                                                                           955
         Disposal proceeds set off against repurchase consideration
         Deferred disposal proceeds                                                                              (720)
         Cash and cash equivalents disposed of                                                                   (153)
         Net cash inflow on disposal                                                                            1 500

   5.3   Purchase additional shares in subsidiary

         On 5 April 2018, the Group subscribed for 930 shares following a rights issue in Oops Global SA, increasing its
         shareholding from 60% to 66,2%. On 16 May 2018, the Group purchased 1 220 additional shares in
         Oops Global SA for a consideration of R7,8 million, further increasing its shareholding to 86,4%.

   5.4   Investment property/property, plant and equipment

         The fair value of investment property as at 30 September 2018 is R978,3 million. Movements since 31 March 2018
         comprise an addition of R41,8 million and a transfer from property, plant and equipment of R29,1 million. The
         fair value has not significantly changed since year-end.

         Movements in property, plant and equipment since 31 March 2018 comprise disposals to the value of
         R101,3 million, acquisitions of R41,9 million and a transfer to investment property of R29,1 million.

6. Diluted weighted average number of shares

   The dilutive effect is due to the impact of the Group's incentive scheme on the weighted average number of shares
   in the period under review.

7. Change in comparatives

   7.1   Correction of prior period error relating to the accounting of government grants

         Government grants are recognised in profit and loss on a systematic basis over the periods in which the Group
         recognises the related costs for which the grants are intended to compensate.

         During the prior periods, the grants were deemed to be earned through compliance with their conditions and
         meeting the envisaged obligations. Where the qualifying conditions gave rise to future envisaged obligations,
         the benefits were allocated against the historic costs of complying with the conditions as well as the future
         related obligations. Where no envisaged obligations were identified, the grants were recognised when there
         was reasonable assurance that the entity will comply with all the conditions attached to the grants and that the
         grants will be received.

         It was concluded that the above accounting treatment is incorrect and that the grants related to depreciable
         assets are to be recognised in the periods in the proportions in which the depreciation expense on those assets
         are recognised, with the balance being reflected as deferred income.

         The effect of the restatement on the prior period numbers is as follows:

                                                                               Impact of restatement
                                                                  As previously
                                                                       reported        Adjustments        As restated
         30 September 2017                                               R000's             R000's             R000's
         Total assets                                                 3 577 277             27 883          3 605 160
         Deferred tax asset                                              93 882             27 883            121 765
         Total liabilities                                           (1 842 901)         3 824 280          1 981 379
         Deferred income                                                      -           (138 478)          (138 478)
         Total equity                                                (1 734 376)           110 595         (1 623 781)
         Reserves                                                      (283 833)           110 595           (173 238)

                                                                               Impact of restatement
                                                                  As previously
                                                                       reported        Adjustments        As restated
         For the period ended 30 September 2017                          R000's             R000's             R000's
         Profit before taxation                                           1 374             (8 689)            (7 315)
         Income tax                                                      31 529             (1 118)            30 411
         Loss from discontinued operations, net of tax                  (65 020)            14 662            (50 358)
         Total comprehensive income                                     (30 239)             4 855            (25 384)
         Basic earnings per share                     (cents)             (7,40)              1,15              (6,25)
         Diluted earnings per share                   (cents)             (7,40)              1,15              (6,25)

         There is no impact on the total operating, investing or financing cash flows for the six-month period
         ending 30 September 2018.

   7.2   Discontinued operations

         The results of discontinued operations have been separately disclosed on the face of the statement of profit or
         loss and other comprehensive income. Where practical these results for the prior period have been restated.
         Operations classified as discontinued operations relate to the following three businesses:

         – Berg River Textiles, a division of Winelands Textiles, has been discontinued in the previous period.
         – Automation business - all branches, other than Gauteng and the central administration office, are accounted
           for as discontinued operations.
         – Limtech Biometric Solutions Proprietary Limited, which was sold during the period under review.

         Refer to note 4.2 for further information on discontinued operations.

8. Events after the reporting period

   There have been no material events after the reporting period-end.

9. Dividends/distribution

   The directors have resolved not to declare an interim dividend/distribution for the six months ended 30 September 2018.


Commentary

Good progress has been made in the period under review. Turnover is up 17% to R1 596 million derived largely from
the new acquisitions. Two of the businesses recently acquired, namely Formex Industries, a component automotive
manufacturer based in Port Elizabeth, and HTIC (Hong Kong), which sources and distributes branded products, have
shown good growth on a like-for-like basis with turnover up 83% and 31% respectively.

Gross margin was down by 40 basis points to 23,6% as a result of margin pressure in some of the manufacturing
businesses. Reduced turnover in these businesses put margins under pressure due to reduced fixed-cost absorption.
Furthermore, the revenue growth at Formex and HTIC weighs on the overall gross margin as these businesses operate
high volume, low margin models.

The increased turnover and good cost containment saw operating profit up 44% to R57 million. Finance expenses are up
13% to R53 million on the back of increased debt levels due to the recent acquisitions and the debt acquired as part of
the Formex transaction.

Overall, the results reflect that the good businesses have performed solidly whilst the restructuring initiatives have ensured
that the losses have been curtailed in the more challenging businesses. There is more work to be done to get these
businesses to make a return but we believe good progress has been made. It should also be borne in mind that some of
the Group's businesses are very seasonal with results in the second half of the year usually stronger than the first.

Properties

We have mentioned previously that we are focused on growing our property portfolio, but were struggling to find properties
within our target pricing. The recent softening of the property market has seen some opportunities arise. During the period
we acquired an industrial property in Parow, Cape Town and have approved the acquisition of another industrial property in
Epping, Cape Town. The total spend on these two properties is some R85 million. In addition to these two properties, we
have approved capital expenditure of some R24 million for the redevelopment of a property in Paarl which was previously
occupied by Berg River Textiles. Countering this, we sold a commercial property in Johannesburg, which was previously
occupied by our office automation business, for R25 million.

Our property portfolio delivered revenue growth of 7% to R83 million with revenue from external tenants increasing by 18%
to R61 million. Operating profit remained flat at R57 million due to increased repairs and maintenance costs in line with our
planned maintenance programmes. In the current financial year, these costs are more heavily weighted to the first half of
the year and should normalise by year-end.

Branded Products

It was a difficult period for the businesses that interface into retail given the tough retail environment. Revenue was up
9% to R653 million due to the new acquisitions and good growth at HTIC. However, the operating loss from continuing
operations grew by 6% to R17 million. The Branded Product division is heavily seasonal and the second half of the year is
typically far more profitable than the first.

Industrial Manufacturing

On the whole the industrial manufacturing businesses performed solidly with Formex the standout performer. Revenue was
up 53% to R620 million largely driven by the growth within Formex and the fact that it was accounted for six months in the
current period as opposed to two months in the prior period. Operating profit is up 53% to R28 million.


Textile Manufacturing

Our textile manufacturing businesses have struggled to get turnover through the businesses with turnover from continuing
operations down 16% to R261 million. This has had a negative effect on margins but cost savings ensured that operating
profit was only down R1 million.


Signed for and on behalf of the board.


Stuart Queen                                              Gys Wege
Chief Executive Officer                                   Financial Director

Cape Town
21 November 2018


Corporate information

DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
("Deneb" or "the Group" or "the company")

The company's shares are listed under the Financial Services - Speciality Finance sector.

Registration number: 2013/091290/06

JSE share code:          DNB

ISIN:                    ZAE000197398

Income tax          
registration number:     9844426156

Registered office:       5th Floor, Deneb House, Cnr Main and Browning Roads, Observatory 7925, Cape Town
                         PO Box 1585, Cape Town 8000

Contact details:         info@deneb.co.za
                         www.deneb.co.za

Directors:               J A Copelyn* (Non-executive Chairperson), M H Ahmed*^ (Lead Independent Director),
                         D Duncan, T G Govender*, N Jappie*^, A M Ntuli, S A Queen (Chief Executive Officer),
                         Y Shaik*, R D Watson*^, G D T Wege (Financial Director)
                         (* Non-executive ^ Independent)
                         L Govender resigned as a non-executive director on 17 April 2018.

Company Secretary:       C Philip

Transfer Secretaries:    Computershare Investor Services Proprietary Limited
                         Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
                         PO Box 61051, Marshalltown 2107

Auditors:                PricewaterhouseCoopers Inc.

Sponsors:                PSG Capital Proprietary Limited

                         www.deneb.co.za
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