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STA
STA
STA - Stratcorp Limited - Abridged audited consolidated group financial results
for the year ended 28 February 2007
STRATCORP LIMITED
(Registration number 2000/031842/06)
(Incorporated in the Republic of South Africa)
Share code: STA & ISIN: ZAE000034294
("StratCorp" or "the Company" or "the Group")
ABRIDGED AUDITED
CONSOLIDATED GROUP FINANCIAL RESULTS
for the year ended 28 February 2007
Highlights for the year
Revenue up 155% (to R50,192 million)
Operating profit up with R15,4 million
Headline earnings per share up 280%
Client base up 76%
Net asset value per share up 89%
Abridged Consolidated Income Statement
(Restated)
Year Year
ended ended
28 February 28 February
2007 2006
R`000 R`000
Revenue 50 192 19 670
Profit from operations 19 407 3 988
Net interest 739 477
Fair value adjustments 2 636 (329)
Profit before taxation 22 782 4 136
Taxation (5 251) 440
Profit for the year 17 531 4 576
Number of ordinary shares in issue (`000)* 101 996 87 907
Weighted average number of ordinary shares in
issue (`000) 101 784 82 698
Cents Cents
Basic earnings per share 17,22 5,53
Headline earnings per share 17,22 4,53
Diluted earnings per share 17,22 5,53
Dividend per share - -
R`000 R`000
Reconciliation of headline earnings net of tax:
Basic earnings 17 531 4 576
Profit on sale of subsidiary - (834)
Headline earnings 17 531 3 742
*104 601 132 ordinary shares less 2 604 696 treasury shares (2006: 89 259 464
ordinary shares less 1 352 190 treasury shares). 103 425 064 weighted average
number of ordinary shares less 1 640 937 weighted average number of treasury
shares (2006: 84 666 243 weighted average number of ordinary shares less 1 968
640 weighted average number of treasury shares).
Abridged Consolidated Cash Flow Statement
(Restated)
Year Year
ended ended
28 February 28 February
2007 2006
R`000 R`000
Cash flow from/(to) operating activities (737) 1 213
Net interest 760 477
Tax paid (156) -
Cash flow from investing activities 6 127 (1 038)
Cash flow from financing activities 3 207 631
Net cash flow for period 9 201 1 283
Cash and cash equivalents at beginning of year 2 440 1 157
Cash and cash equivalents at end of year 11 641 2 440
Consolidated Balance Sheet
(Restated)
At At
28 February 28 February
2007 2006
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 1 446 556
Goodwill 3 532 1 318
Intangible assets 1 455 1 023
Other financial assets - 760
Deferred tax 729 719
7 162 4 376
Current assets
Inventories 323 346
Other financial assets 11 530 10 715
Construction contracts 13 578 -
Trade and other receivables 14 188 1 200
Cash and cash equivalents 11 641 2 440
51 260 14 701
Total assets 58 422 19 077
Equity and liabilities
Equity
Share capital 17 224 12 805
Reserves - 3 034
Distributable reserves 17 334 (197)
34 558 15 642
Non-current liabilities
Compound instruments 10 139 -
Finance lease obligation 156 -
Deferred tax 3 035 53
13 330 53
Current liabilities
Compound instruments 371 -
Financial liabilities - 1 053
Current tax payable 2 123 -
Finance lease obligation 38 -
Trade and other payables 8 002 2 329
10 534 3 382
Total liabilities 23 864 3 435
Total equity and liabilities 58 422 19 077
Number of ordinary shares in issue (`000)* 101 996 87 907
Cents Cents
Net asset value per share 34 18
Net tangible asset value per share 29 15
*104 601 132 ordinary shares less 2 604 696 treasury shares (2006: 89 259 464
ordinary shares less 1 352 190 treasury shares).
Consolidated Statement of Changes in Equity
Share
Share repurchase Retained
capital reserve earnings Total
R`000 R`000 R`000 R`000
Opening balance as
previously reported 10 438 - (1 242) 9 196
Change in accounting policy - - (3 531) (3 531)
Balance at 1 March 2005 -
restated 10 438 - (4 773) 5 665
Issue of shares 2 374 3 034 - 5 408
Treasury shares (7) - - (7)
Profit for the year -
restated - - 4 576 4 576
Balance at 1 March 2006 -
restated 12 805 3 034 (197) 15 642
Issue of shares 4 987 (3 034) - 1 953
Treasury shares (568) - - (568)
Net profit for the year - - 17 531 17 531
Balance at end of year 17 224 - 17 334 34 558
Notes:
1.These results have been audited by the Company`s auditors, PKF (Pretoria)
Incorporated.
2. Basis of preparation
The annual Group consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and the Companies
Act of South Africa, 1973. The annual Group financial statements have been
prepared on the historical cost basis and incorporate the principal accounting
policies set out below.
These accounting policies are consistent with the previous period, except for
the changes set out in note 3.
3. Changes in accounting policy
The annual Group financial statements have been prepared in accordance with
International Financial Reporting Standards on a basis consistent with the prior
year, except for the following revised standards:
-IAS 32: Financial Instruments: Disclosure and Presentation; and
-IAS 39: Financial Instruments: Recognition and Measurement.
Unlisted investments held for trading
During the year, the Company changed its accounting policy with respect to the
treatment of unlisted investments held for trading. Since the Company adopted
International Financial Reporting Standards, the directors used the discounted
cash flow method, IPO placement values and OTC trading prices to determine the
fair value of unlisted investments. Although the treatment was correct as per
IAS 39 (Financial Instruments: Recognition and Measurement), the directors are
of the opinion that there are too many unknown variables in using the discounted
cash flow model for new venture capital companies during the first five years of
operations. The Company now uses only the lower of cost or the net asset
valuation of its investments in unlisted companies as per IAS 39. The aggregate
effect of the changes in accounting policy on the annual Group financial
statements for the years ended 28 February 2006 and 28 February 2005 were as
follows:
Balance Sheet 2006 2005
R R
Deferred tax
Previously stated (1 189 715) 492 329
Adjustment 1 855 871 599 745
666 156 1 092 074
Unlisted investments held for trading
financial assets
Previously stated 17 965 004 8 560 781
Adjustment (12 799 112) (4 130 322)
5 165 892 4 430 459
Income Statement
Fair value adjustment income/(expense)
Previously stated 7 987 623 88 381
Adjustment (8 316 615) 1 220 993
(328 992) 1 309 374
Deferred taxation income/(expense)
Previously stated (1 662 192) (443 701)
Adjustment 1 256 125 (778 981)
(406 067) (1 222 682)
Earnings per share - restated (cents)
Basic 5,53 0,67
Diluted 5,53 0,67
Headline 4,53 0,67
Abridged Segmental Analysis
Business segment information
2007 2006
R % R %
External revenue
Property development 17 438 787 35 - -
Capital placement and
investment management 16 000 583 32 10 460 182 47
Marketing and distribution 16 752 295 33 9 210 166 53
50 191 665 100 19 670 348 100
Operating profit/(loss)
Property development 12 321 947 64 - -
Capital placement and
investment management 5 328 192 27 (164 026) (3,7)
Marketing and distribution 808 468 4 (10 392) (0,3)
Corporate 949 337 5 4 162 950 104
19 407 944 100 3 988 532 100
Segment assets
Property development 27 182 036 47 - -
Capital placement and
investment management 11 343 142 19 4 230 588 22
Marketing and distribution 3 123 323 5 1 453 664 8
Corporate 16 773 639 29 13 392 903 70
58 422 140 100 19 077 155 100
Segment liabilities
Property development 17 044 245 71 - -
Capital placement and
investment management 4 442 522 19 990 221 29
Marketing and distribution 1 557 504 7 459 308 13
Corporate 819 223 3 1 986 209 58
23 863 494 100 3 435 738 100
Comments on results
The Group experienced a highly profitable year. All divisions, although
diversified, delivered above expected returns. The Group currently has 22% of
its shares held by Previously Disadvantaged Individuals ("PDI") individuals.
Financial Services (Investments)
Through its StratEquity subsidiary (100%), the Company has been a provider of
expansion capital to developing companies and Private Equity since inception.
These investments are procured through StratEquity`s client base.
StratEquity`s subscription client base has increased from 22 113 to 38 835 (76%)
over the reporting period. The monthly premium has increased from R3,959 million
to R7,629 million (93%). StratEquity has supplied funding for developing
companies over the past year totaling R40,16 million.
To date StratEquity has been instrumental in raising in excess of R150 million
for various companies. With the equity markets remaining positive world-wide,
this division has bared the fruits thereof. The Company will henceforth
concentrate its focus on, inter alia, Broad-Based Black Economic Empowerment
opportunities in South Africa and Africa as it has in excess of 50 000 mostly
PDI monthly subscription investors on its books.
Marketing and Distribution
ICI Marketing (100%) is responsible for the marketing of StratEquity`s Wealt
Creator Subscription Plan product ("the product"). ICI distributes the product
through a unique referral marketing concept. The Company has also empowered
approximately 39 000 individuals who became ICI business owners.
ICI Marketing has grown and developed its marketing and distribution business to
such an extent that it will enable the Group in future to expand its product
offerings to its distributors. The division is performing above expectations and
would contribute positively to future growth of the Group. The division is now
operational in South Africa, Namibia, Lesotho, Swaziland and Botswana.
Property Development
The Citadin Group is involved in residential property development and sales in
the middle market segment (R350 000 to R500 000 price range). Citadin Holdings
Ltd (100%), through its subsidiaries, has acquired its first property for
development during 2005, consisting of three housing development phases. The
property was proclaimed on 1 December 2006 and at year-end 92% of Phase 1 and
38% of Phase 2 was sold out. Building in Phase 1 commenced during January 2007.
StratCorp acquired the outstanding 49% shareholding in Citadin Holdings Ltd
during August 2006. This division is doing well and has contributed positively
towards the total earnings of the Group.
Strategic investments
Strategic investments will remain an integral focus of the Group`s
operations.The Company classify these investments as "for sale" and are valued
annually at the lower of cost or net asset value. On an annual basis the
portfolio value is adjusted based on this principle and the movement is
subsequently shown in the income statement as a net movement (up or down).
During the period under review the Company held the following investments:
APMI Holdings Ltd 11% shareholding
GlobalJewel Ltd 13% shareholding
StratCol (Pty) Ltd 31% shareholding
Supertow International Ltd 11% shareholding.
Cash flows
Cash generated from operations is at acceptable levels, taking into
consideration that the Company deems itself as in a developing phase. The cash
flow is adequate to sustain and grow the infrastructure and the Company does not
anticipate acquiring further external funding for operations. Should
opportunities however arise, where acquisitions can be made to add to the
shareholders` value, such opportunities will be evaluated on merit.
Human Resources
As reported in last year`s report, focused attention and energy was given to
ensure a dynamic management structure. A number of middle management positions
were filled over the past year which ensures that the operations are managed at
an acceptable level. The executive team was also expanded with the recent
appointments of Ian Wright as Chief Information Officer and Henk van der Merwe
as Chief Operating Officer.
With the shortage of skilled people available in the market, the Group has
implemented an internal development and training programme for staff whereby the
Company contributes financially towards staff enrolling for future education
programmes.
Corporate Governance
A detailed report on the past year`s compliance is given in the annual report.
The board fully supports this Code and is serious in its approach that the
Company be fully compliant.
Systems and infrastructure
Systems
The systems being utilised by the Group are constantly being evaluated and
upgraded by the Company, with the necessary safeguards in place in order to
ensure that the operations of the Group is not hampered in any way. All third
party software is properly licensed.
Infrastructure
The control of the operations of the Group is centralised at its head office in
Centurion. Limited decentralised data capturing has taken effect as a result of
the establishment of branch offices across the country and neighbouring
countries. Two branch offices were revamped and enlarged and two new branch
offices were established over the past year. Space at head office has become
insufficient and the Company has signed a new 5 year lease with effect from 1
July 2007 totalling approximately 2 400m2 office space at new premises in
Centurion.
Prospects
The Company is continuing with the process of establishing branch offices in
identified growth areas in South Africa, Botswana, Lesotho, Namibia and
Swaziland to further increase the client base for the financial services
division. Subsequent to year-end, the client base has increased from 38 835 to
50 084.
The property division acquired two additional properties for development and is
currently involved in three residential developments, totalling approximately
650 housing units, until 2010.
The board is currently investigating the possibility of establishing a property
fund to expand the property operations into Commercial and Industrial
properties.
Other matters
StratCorp issued 4 950 000 shares to FM-JM Trust on 6 October 2006 at 33 cents
per share for the acquisition of 49% of the issued shares of Citadin Holdings
Ltd. Mr I M Wright (Chief Information Officer), Mr M M Tshishonga (Non-executive
Director) and Mr I Fazel (Non-executive Director) was appointed to the board on
1 January 2007.
Events subsequent to year-end
Mr J J Steynberg resigned as Executive Director effective 1 April 2007 and Mr I
Fazel resigned as Non-executive Director effective 10 April 2007. Mr Steynberg
remains as the General Manager of StratEquity and a director of StratEquity
Namibia (Pty) Ltd. Mr H J van der Merwe was appointed as Chief Operating Officer
on 2 April 2007.
The Company has been granted permission by the Listing Committee of the JSE
Limited to apply for a listing on ALTX.
Financial results
The consolidated turnover of the Group increased by 155% to R50,192 million in
2007 (2006: R19,670 million). The total consolidated profits after tax for the
full year increased by 283% to R17 531 500 (2006: *R4 575 715) (*restated due to
change in accounting policy - refer note 2 of the financial statements). For
comparison purposes, the preceding four years` revenue, gross profits, operating
expenses and net profit after tax are indicated in the table below:
2003 2004 2005
R R R
Gross revenue 3 350 447 11 261 490 11 050 189
Gross profit 3 257 335 10 318 286 6 502 944
Expenses (5 430 949) (7 042 214) (6 898 569)
Net profit after tax (1 338 008) (2 068 024) 501 485
2006 2007
R R
Gross revenue 19 670 348 50 191 665
Gross profit 12 165 414 36 839 659
Expenses (9 160 314) (17 569 186)
Net profit after tax 4 575 715 17 531 500
Dividends
No dividends have been declared.
General
On behalf of the board, I wish to thank our management team, personnel,
stakeholders and shareholders for their valuable input and support over the past
year.
On behalf of the board
D B Harington
Chief Executive Officer
31 May 2007
email: info@stratcorp.co.za
www.stratcorp.co.za
Directors:
D B Harrington (CEO), P J de Jongh* (Chairman)
J N de Beer (CFO), I M Wright (CIO)
H J van der Merwe (COO), M M Tshishonga*
(*Non-executive)
Registered office:
Suite 101
267 West Avenue
Centurion 0046
(PO Box 12022, Centurion 0046)
Secretary:
P H van Zyl
145 Walter Beckett Road
Arcadia, 0083
(PO Box 367, Pretoria 0001)
Transfer secretaries:
Computershare Investor Services 2004 (Proprietary) Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Date: 31/05/2007 07:36:01 Produced by the JSE SENS Department.
