The group recorded a net loss for the six months ended 31 December 2016 of ZAR58 million (2015: ZAR50 million), resulting in an increase of 16% from the previous year.
This was mainly due to a ZAR17 million increase in finance costs, partly offset by a reduction of ZAR8 million once-off costs incurred for JSE listing fees in 2015.
Finance income remained flat at ZAR248 million due to the fixed dividend received of ZAR15.40 per share.
The group generated sufficient cash from the dividend received from the investment in Sasol Limited to fund operating activities, finance costs and to repay long-term debt during the period.
Cash generated by operating activities for the six months ended 31 December 2016 amounted to ZAR140 million (ZAR137 million for the period ended 31 December 2015 and ZAR260 million for the year ended 30 June 2016).
The investment in Sasol Limited was revalued at the closing market price of ZAR398.90 per Sasol Limited ordinary share as at 31 December 2016, to a value of ZAR6 417 million (ZAR6 746 million at 31 December 2015 at a closing market price of ZAR419,40 per share and ZAR6 388 million at 30 June 2016 at a closing market price of ZAR397.19 per share) in line with the group’s accounting policy for investment classified as available-for-sale financial assets.
At 31 December 2016, the group’s total liabilities exceeded its total assets by ZAR990 million (31 December 2015: ZAR600 million). Due to the structure of the BEE transaction, the group is regarded as a going concern despite the negative equity position.
Sufficient cash will be generated out of dividends received from Sasol Limited to pay for the operating expenses as well as preference dividends and capital repayments on the preference shares which are due in the short term.
The A preference shares are secured by a first right over the Sasol preferred ordinary shares and the B preference shares are secured by a second right over the Sasol preferred ordinary shares.
The C preference shares are guaranteed by Sasol Limited.
At the end of the empowerment period in 2018, the Sasol ordinary shares remaining after redeeming the preference shares and paying costs may then be distributed to the black public in proportion to their shareholding.
Any shortfall between the value of the investment in Sasol Limited and the outstanding C preference shares at the end of the transaction will be settled directly by Sasol Limited in terms of the guarantee issued to the lenders.
The directors have made an assessment of the group’s ability to continue as a going concern and there is no reason to believe the business will not be a going concern in the year ahead.