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Short-Form Announcement: Condensed Consolidated Annual Results for the Year-Ended 29 February 2020
HULISANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2015/363903/06)
Share code: HUL
ISIN: ZAE000212072
(“Hulisani” or “the Company”)
SHORT-FORM ANNOUNCEMENT: CONDENSED CONSOLIDATED ANNUAL RESULTS
FOR THE YEAR-ENDED 29 FEBRUARY 2020
HULISANI WELL-POSITIONED FOR GROWTH AS UNDERLYING INVESTMENTS
PERFORM AHEAD OF EXPECTATIONS
The financial year under review was characterised by our focus on keeping costs under
control, strengthening the balance sheet, and building capacity for growth with the underlying
investments generating more income than budgeted. Apart from the necessary write-downs
to strengthen the balance sheet, we are pleased to report positive cashflow in line with our
business strategy, this being achieved in exceedingly difficult trading circumstances. Hulisani
is well-positioned for growth as underlying investments perform ahead of expectations.
1. SALIENT FEATURES
- Revenue increased by 38% to R69.4 million, from R50.3 million in the prior
corresponding period.
- Operating loss increased by 25% to R21.1 million, from R16,9 million in the prior
corresponding period.
- Loss per share and headline loss per share increased by 18% to 59 cents per share,
from 50 cents per share in the prior corresponding period.
2. FINANCIAL REVIEW
Revenue grew by 38% in the current period driven by the reclassification of the income from
Legend Power Solutions (“LPS”) to revenue from finance income to better reflect the nature
of the income. Income from LPS grew significantly in the current period driven mainly by
increased utilization of the power plant in response to higher demand for electricity during the
period.
Operating expenses for the period under review amounted to R73.6 million (2019: R73.3
million). The costs for the current period were largely in line with the prior corresponding year.
Major contributors to the expenses in the current year are a once off settlement costs of R8.5
million in a litigation matter in respect of Momentous Technologies (Proprietary) Limited and
R5.2 million in settlement of fees due to Nibira (Proprietary) Limited following arbitration
proceedings. There were, however, offsetting gains, including the reversal of the expected
credit losses following the full settlement of the Pele SPV13 (Pty) Ltd (“Pele”) loan.
During the year, we took the decision to write off the full investment in Ignite (Proprietary)
Limited (“Ignite”) amounting to R25.7 million. This write off followed a comprehensive
assessment and evaluation of the current pipeline of the company, and the prevailing market
conditions, and is in line with our decision to clean-up our balance sheet to better represent
our business operations. The impact of this write off is once-off and non-recurring.
Management will continue to look to recover this write-off in the future.
Each year, we undertake a valuations process to value our investments. This involves using
estimates and an element of judgement. The inputs/assumptions used in these valuations are
reviewed and agreed with the external auditors and independent service providers. As a result
of this process, we had the following outcomes:
- A fair value gain of R4.8 million relating to our investment in LPS
- A fair value gain of R3 million relating to our investment in GRI
We account for our 6.67% investment in Kouga as an associate. We are pleased to note that
during the year, our share of profits from this investment increased to R7.6 million, from R5.3
million in the prior year.
Other than the write-off of the preference share investment in Ignite mentioned above, which
is a significant contributor to the loss for the period, management believes that the group has
delivered an improved set of results.
3. OUTLOOK
There is greater policy certainty in the energy sector, with the following notable changes to
date:
- Integrated Resource Plan 2019 (“IRP2019”) has been finalized and adopted. IRP2019
sets out the energy to be procured through the central government procurement
process run by the IPP office until 2030.
- A Section 34 Ministerial Determination has been issued to give effect to the IRP2019,
enabling the procurement of new energy plants.
- The National Energy Regulator (“NERSA”) has asked for public comment to the
Section 34 Ministerial Determination, thereby seeking to give concurrence to the
aforementioned and pave the way for procurement of new energy plants through the
the central government procurement process run by the IPP office in terms of IRP2019;
- Concurrence for the 2000MW Risk Mitigation Power Procurement Programme
(“RMPPP”) has been received from Nersa. This is an expedited power procurement
programme to alleviate the immediate to medium-term energy requirements to
alleviate supply shortages.
- No capacity constraint on installed capacity, meaning that there is no limit to installed
capacity above 1MW. As a result, there has been a significant increase in the request
for proposals from large power consumers looking to procure power from Independent
Power Producers;
- Municipalities in good financial standing are now able to procure their own power from
independent power producers; and
- Eskom has commenced with the process of divisionalising its three operating activities
– generation, transmission, and distribution This will lead to a competitive electricity
market, visibility in terms of cost allocation at Eskom and open up space for
independent power producers to participate competitively in line with international best
practice.
This certainty in energy policy is likely to position the independent power producer sector as
a key economic growth area. The commitment to easing the country off its dependence on
one central energy supplier is likely to result in a lower cost of doing business as lower
renewable energy tariffs are blended with Eskom tariffs, whilst achieving price certainty and
scalability.
The Carbon Tax Act was signed into law during the year under review, which is likely to prompt
large power users to pursue the procurement of renewable energy to offset their carbon
emissions.
The global economic fallout of COVID-19 has exposed the need for countries to diversify their
supply chains by procuring a greater percentage of inputs locally. In this regard, it is our view
that GRI is ideally positioned to contribute to the 14 000MW of wind expected to be procured
in terms of IRP2019. Local content requirements for the procurement of components used in
the manufacture of power plants should be applied consistently to give price stability and
create jobs and skills needed in the economy.
With the implementation of the IRP2019 underway, Hulisani is well-positioned to capitalise on
a growing local energy sector.
4. SHORT-FORM ANNOUNCEMENT
This short-form announcement is the responsibility of the directors of the Company. It contains
only a summary of the information in the full announcement (“Full Announcement”) and does
not contain full or complete details. The Full Earnings Announcement can be found at:
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/HULE/FY20.pdf
Copies of the Full Announcement is also available for viewing on the Company’s website at
https://hulisani.co.za/investment-opportunities-hulisani or may be requested in person, at the
Company’s registered office or the office of the sponsor, at no charge, during office hours.
Any investment decisions by investors and/or shareholders should be based on consideration
of the Full Announcement, as a whole.
These annual results have been audited by the Company’s auditors,
PricewaterhouseCoopers Inc, who expressed an unmodified audit opinion thereon. The full
auditor’s report includes details of key audit matters. This auditor’s report is available, along
with the annual financial statements, on the Company’s website at
https://hulisani.co.za/investment-opportunities-hulisani.
Johannesburg
29 May 2020
Sponsor
PSG Capital
Date: 29-05-2020 03:40:00
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