ZEDER INVESTMENTS LIMITED - Change in Accounting Policy, Adoption of NAVPS as Trading Statement Measure, SOTP Value And Trading Statement

Change in Accounting Policy, Adoption of NAVPS as Trading Statement Measure, SOTP Value And Trading Statement

ZEDER INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/019240/06)
JSE Limited ("JSE") share code: ZED
ISIN: ZAE000088431
LEI code: 37890022AF5FD117D649
(“Zeder” or “the Company”)


CHANGE IN ACCOUNTING POLICY, ADOPTION OF NET ASSET VALUE PER SHARE AS
TRADING STATEMENT MEASURE, SUM-OF-THE-PARTS (“SOTP”) VALUE AND
TRADING STATEMENT


CHANGE IN ACCOUNTING POLICY TO THAT OF AN INVESTMENT ENTITY IN TERMS
OF IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS

International Financial Reporting Standards (“IFRS”) require that an entity reassess whether
it is an investment entity (“Investment Entity”) if facts and circumstances indicate changes to
one or more of the elements making up the definition of an Investment Entity or to the typical
characteristics of an Investment Entity.

Zeder recently completed the following major transactions, which have significantly impacted
the group’s composition and focus areas:

    - Zeder disposed of its entire shareholding in Pioneer Foods, its largest investment, for
       R6.4bn cash; and
    - Zeder disposed of its entire shareholding in Quantum Foods (at the time of disposal,
       its second largest associate) for R308m cash.

Zeder has, as a result of the above disposals, reassessed whether it meets the definition of
an Investment Entity in terms of IFRS 10 and the typical characteristics of an Investment Entity
and has concluded that it, in fact, did so with effect from 1 March 2020.

Accordingly, Zeder will account for it becoming an Investment Entity prospectively with effect
from 1 March 2020 by (i) ceasing to consolidate its subsidiaries (except for subsidiaries
providing investment-related services) and (ii) ceasing to equity account its associates.
Zeder's investment in Zeder Financial Services Limited, the 100% subsidiary through which it
holds its underlying subsidiaries and associates, will be measured at fair value through profit
or loss in accordance with IFRS 9 Financial Instruments, with relevant fair value disclosures
of Zeder’s investees being provided, including for the fair value determination of its unlisted
investments. The change in accounting policy impacts, inter alia, Zeder’s attributable earnings,
headline earnings, recurring headline earnings and net asset value.

Under the new accounting policy, Zeder’s attributable earnings and headline earnings will
largely comprise dividend and interest income, fair value gains and losses, less operating
expenses, financing costs and tax.

The change in accounting policy was adopted prospectively, with effect from 1 March 2020,
and, accordingly, on such date, the Company’s investment in Zeder Financial Services Limited
was deemed to be disposed of and reacquired at fair value. The results for the interim period
ended 31 August 2019 will not be restated (having been prepared in accordance with Zeder’s
previous accounting policy) and will therefore not be comparable to the results to be published
for the period ended 31 August 2020.

The change in accounting policy is expected to provide users of Zeder’s financial statements
with more relevant financial information to analyse Zeder’s performance.

ADOPTION OF NET ASSET VALUE PER SHARE AS TRADING STATEMENT MEASURE

As an Investment Entity, accounting for its investments in subsidiaries and associates at fair
value, Zeder has determined that it would be more relevant to adopt net asset value per share
(“NAVPS”) as its measurement criterion for trading statement purposes. The adoption of
NAVPS as the relevant trading statement measurement will be effective for the financial year
ended 28 February 2021 and thereafter, and will replace the previous measurement criteria of
earnings per share (“EPS”) and headline earnings per share (“HEPS”), as well as recurring
headline earnings per share (“RHEPS”), with the latter having previously been utilised by the
Company as an additional measure not required under the JSE Listings Requirements.

SOTP VALUE

Zeder has in the past presented, and will continue to present, its SOTP value per share as a
key benchmark by which its performance may be measured.

SOTP provides management and investors with a realistic and transparent way of evaluating
Zeder’s performance and is calculated using the quoted market prices for JSE-listed
investments and internal valuations for unlisted investments.

While SOTP is indicative of the value of Zeder’s underlying portfolio of net assets, it does not
take into account factors such as adjustments for the size of shareholdings, liquidity of the
underlying assets, tax on the potential disposal of underlying assets, head office operating
profit/loss and other factors.

TRADING STATEMENT

In terms of the JSE Listings Requirements, a listed company is required to publish a trading
statement as soon as it becomes reasonably certain that the financial results for the next
period to be reported on will differ by at least 20% from those of the previous corresponding
period.

Furthermore, in terms of the JSE Listings Requirements, NAVPS may only be adopted (and
EPS and HEPS cease to be utilised) as Zeder’s trading statement measure from the financial
year ended 28 February 2021 onwards. Accordingly, and notwithstanding Zeder’s change in
accounting policy to that of an Investment Entity (which occurred prospectively with effect from
1 March 2020), Zeder remains obliged to publish a trading statement, should there be a
reasonable degree of certainty that EPS and HEPS for the interim period ended 31 August
2020 will differ by at least 20% from those of the previous corresponding period.

While Zeder has done so below, shareholders and investors are cautioned that EPS and
HEPS (as well as NAVPS and RHEPS) for the 6 months ended
31 August 2020 are not comparable to those for the previous interim period ended
31 August 2019, given the change in Zeder’s accounting policy to that of an Investment Entity.

Subject to the above, Zeder hereby advises that a reasonable degree of certainty exists that,
for the six-month period ended 31 August 2020:

        •   Headline loss per share will be between 3.3 cents and 3.7 cents, compared to the
            HEPS of 2.4 cents reported for the six-month period ended
            31 August 2019; and

        •   Attributable EPS will be between 124.8 cents and 130.0 cents, compared to the
            25.8 cents reported for the six-month period ended 31 August 2019.

and that, as at 31 August 2020:

        •   Zeder’s SOTP value per share was R3.72; and

        •   NAVPS will be between 362.6 cents and 382.6 cents, being between 25% and
            20% lower than the 481.1 cents reported as at 31 August 2019.

HEPS decreased mainly due to Zeder ceasing to consolidate its subsidiaries and equity
account its associates, as a result of the aforementioned change in accounting policy to that
of an Investment Entity.

Attributable EPS increased mainly due to the gain on deemed disposal and reacquisition of
investment, as a result of the aforementioned change in accounting policy to that of an
Investment Entity.

The NAVPS decreased mainly due to the significant special dividend paid to shareholders
during the reporting period, countered by the gain on deemed disposal and reacquisition of
investment, as a result of the aforementioned change in accounting policy to that of an
Investment Entity.

The financial information contained in this announcement has not been reviewed or reported
on by the auditor of Zeder. The unaudited results for the six-month period ended 31 August
2020 will be published on or about 7 October 2020.


Stellenbosch
2 October 2020

Sponsor
PSG Capital

Independent joint sponsor
UBS South Africa

Date: 02-10-2020 04:40:00
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