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MVG
MVG / MVGP - Mvela Group - Reviewed results for the year ended 30 June
2007, Cash distribution and dividend declaration
Mvelaphanda Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
Ordinary share code: MVG
Preference share code: MVGP
Ordinary share: ISIN: ZAE000060737
Preference share: ISIN: ZAE000073540
("Mvela Group" or "the company")
Reviewed results for the year ended 30 June 2007
Mvela Group CEO, Yolanda Cuba, today announced a pleasing set of overall
results for Mvela Group for the year ended 30 June 2007.
"Our investments in Absa, Group Five and Life Healthcare performed
exceptionally well. On the operations front, good steady growth was
experienced other than in Coin Security whose results were exceptionally
disappointing. Operational changes have been implemented in this regard.
Profit from operations excluding Coin Security increased by 18%. As a
result of our strong balance sheet, quality investments and cash
generative operations, we are well placed to capitalise on investment
opportunities available and increase the intrinsic net asset value for
the Group".
Enquiries
Mvela Group 011 290 4200
Yolanda Cuba
Craig Lyons
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Nandile Ngubentombi 082 825 8004
Key Features
- Revenue increased by 11,6% to R3,462 billion (2006: R3,102 billion)
- Net profit from investments (including fair value adjustments) up
75,7% to R1,500 billion (2006: R853 million)
- Profit from operations R242 million (2006: R262 million)
- Net profit attributable to ordinary shareholders increased by 8,0% to
R1,237 billion (2006: R1,145 billion)
- Headline earnings per ordinary share 304,8 cents (2006: 322,1 cents)
- Cash available from operating activities R340 million (2006: R250
million)
Ordinary dividend per share for the year up 22,2% to 22 cents per share
- Intrinsic net asset value at 30 June 2007 R6,882 billion (R14,10 per
ordinary share)
The following are the reviewed results of Mvela Group and its
subsidiaries ("the Group") for the year ended 30 June 2007 with
comparative figures:
SUMMARISED GROUP BALANCE SHEET
Reviewed Audited
Year Year
ended ended
30 June 2007 30 June 2006
R`000 R`000
Assets
Non-current assets 6 002 052 5 216 779
Property, plant and equipment 389 618 349 468
Intangible assets 799 591 763 329
Investments in associates 11 215 1 174 396
Other investments 4 751 455 2 898 614
Deferred taxation 50 173 30 972
Current assets 1 997 238 1 092 872
Liquid funds 1 355 431 525 412
Short-term investments 16 101 -
Other current assets 625 706 567 460
TOTAL ASSETS 7 999 290 6 309 651
EQUITY AND LIABILITIES
Capital and reserves 6 000 490 4 793 810
Share capital and reserves 5 689 390 4 576 270
Minority interests 311 100 217 540
Non-current liabilities 1 038 148 710 822
Interest bearing liabilities 407 970 325 402
Non-interest bearing liabilities 1 400 7 066
Deferred taxation 628 778 378 354
Current liabilities 960 652 805 019
Interest bearing liabilities 101 620 127 676
Non-interest bearing liabilities 859 032 677 343
TOTAL EQUITY AND LIABILITIES 7 999 290 6 309 651
Net number of ordinary shares in 433 178 442 320
issue (000)
Diluted net number of ordinary shares 487 878 497 020
in issue (000)*
Fully diluted net number of ordinary 612 303 497 020
shares in issue (000)**
Net asset value per ordinary share 1 166,2 920,7
(cents)
Net tangible asset value per ordinary 992,0 760,9
share (cents)
Fully diluted net asset value per 1 284,8 920,7
ordinary share (cents)
Fully diluted net tangible asset 1 146,0 760,9
value per ordinary share (cents)
* Calculated on the basis that all preference shares will be converted
into ordinary shares after November 2009.
** Calculated on the basis that all preference shares and BEE shares
will be converted into ordinary shares in accordance with their terms.
SUMMARISED GROUP INCOME STATEMENT
Reviewed Audited
Year Year
ended ended
30 June 2007 % 30 June 2006
R`000 change R`000
Revenue 3 461 586 11,6 3 102 432
Profit from operations 241 625 (7,9) 262 204
Fair value adjustments and 1 499 523 75,7 853 352
net profit from investments
Income from associates 669 279 716
Net interest received/(paid) 80 905 (9 726)
Cost of BEE transaction and (72 328) -
share options
Net profit before taxation 1 750 394 26,3 1 385 546
Taxation expense (382 943) (223 246)
Normal, deferred, capital (378 826) (213 965)
gains and foreign tax
Secondary tax on companies (4 117) (9 281)
Net profit after taxation 1 367 451 17,7 1 162 300
Attributable to:
Ordinary shareholders 1 237 092 8,0 1 144 933
Other shareholders 130 359 17 367
- Preference shareholders 30 085 4 781
- Minority interests 100 274 12 586
1 367 451 17,7 1 162 300
Weighted average net number 441 518 423 407
of ordinary shares in issue
(000)
Diluted weighted average net 496 218 478 107
number of ordinary shares in
issue (000) *
Fully diluted weighted 620 643 478 107
average net number of
ordinary shares in issue
(000) **
Earnings per ordinary share 280,2 3,6 270,4
(cents)
Headline earnings per 304,8 (5,4) 322,1
ordinary share (cents)
Diluted earnings per ordinary 255,4 6,6 239,5
share (cents)
Diluted headline earnings per 277,2 (2,8) 285,3
ordinary share (cents)
Fully diluted earnings per 225,3 (5,9) 239,5
ordinary share (cents)
Fully diluted headline 242,8 (14,9) 285,3
earnings per ordinary share
(cents)
Distributions/dividends per 22,0 18,0
ordinary share (cents)
- Interim 6,0 5,0
- Final 16,0 13,0
Dividends per preference 55,0 36,0
share (cents)
- Interim 27,7 8,7
- Final 27,3 27,3
* Calculated on the basis that all preference shares will be converted
into ordinary shares after November 2009.
** Calculated on the basis that all preference shares and BEE shares
will be converted into ordinary shares in accordance with their terms.
SUMMARISED GROUP CASH FLOW STATEMENT
Reviewed Audited
Year Year
ended ended
30 June 2007 30 June 2006
R`000 R`000
Profit from operations 241 625 262 204
Non-cash items 128 578 97 728
Working capital changes (41 930) (23 357)
Cash generated from operations 328 273 336 575
Net interest received/(paid) 80 905 (9 726)
Investment income 11 590 3 575
Taxation paid (80 951) (80 660)
Cash available from operating 339 817 249 764
activities
Cash effects of investing activities 734 420 (375 877)
Cash effects of financing activities (217 858) 541 465
Dividends paid (30 085) (67 316)
Net movement in cash and cash 826 294 348 036
equivalents
Cash and cash equivalents at the 525 412 177 376
beginning of the year
Cash and cash equivalents at the end 1 351 706 525 412
of the year
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
Year Year
ended ended
30 June 2007 30 June 2006
R`000 R`000
Balance at the beginning of the year 4 793 810 2 670 430
(Disposal)/acquisition of
investments, subsidiaries
and businesses (480) 478 923
Shares issued/(bought back) (105 175) 553 339
Cost of BEE transaction non- 65 375 -
distributable reserve
Net profit after taxation 1 367 451 1 162 300
Distribution/dividends (120 491) (71 182)
Balance at the end of the year 6 000 490 4 793 810
RECONCILIATION BETWEEN NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
AND HEADLINE NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
Reviewed Audited
Year Year
ended ended
30 June 2007 30 June 2006
R`000 R`000
Net profit attributable to ordinary 1 237 092 1 144 933
shareholders
Goodwill impaired/written off - 356
Disposal/impairment of investments 109 698 336 185
and subsidiaries
Negative goodwill (discount) on - (111 733)
acquisition of subsidiaries and
investments
Profit on sale of property, plant and (1 212) (5 788)
equipment
Headline net profit attributable to 1 345 578 1 363 953
ordinary shareholders
SEGMENTAL INFORMATION
Reviewed
Audited
Year
Year
ended
ended
30 June 2007
30 June 2006
R`000
R`000
NET ASSETS
Operations
946 296
1 210 090
Investments
5 054 194
3 583 720
6 000 490
4 793 810
NET PROFIT AFTER TAXATION
Operations
158 857
180 526
Investments
1 280 922
981 774
Cost of BEE transaction and share
options
(72 328)
-
1 367 451
1 162 300
COMMENTARY
Overview
Revenue increased by 11,6% to R3,462 billion, net profit after taxation
increased by 17,7% to R1,367 billion and intrinsic net asset value per
ordinary share increased by 19,8% to R14,10.
The Group`s investments performed exceptionally well as a result of the
buoyant market conditions experienced during the year. Profit from
investments, including income from associates, for the current year
exceeded R1,500 billion.
Profit from operations decreased by 7,9% from R262 million for the year
ended 30 June 2006 to R242 million for the current year. The decrease is
attributable to the decrease in profitability in Coin Security,
notwithstanding the steady growth achieved by the Group`s other
operations.
Net profit attributable to ordinary shareholders for the current year
was R1,237 billion, up 8,0% from R1,145 billion for the year ended 30
June 2006.
Intrinsic net asset value per ordinary share increased by 19,8%, from
R11,77 at 30 June 2006, to R14,10 at 30 June 2007. Details of the
calculation of the intrinsic net asset value per share are set out
below:
30 June 2007 30 June 2006
Intrinsic Per Intrinsic Per
net net
asset value share asset value share
Rm (1) R (2), (3) Rm (1) R (2), (4)
Absa 1 786 3,66 1 256 2,53
Life 1 502 3,08 812 1,63
Healthcare
Group Five 465 0,95 102 0,21
Other 38 0,08 26 0,05
Operations 1 787 3,66 2 081 4,19
Net cash 1 304 2,67 1 571 3,16
Total 6 882 14,10 5 848 11,77
1 Intrinsic net asset value is calculated based on the market value or
directors` valuation of investments and operations, net of capital gains
tax and associated debt.
2 Based on the fully diluted net number of 488 million ordinary shares
after share buy-backs and assuming that all the preference shares will
be converted into ordinary shares after November 2009.
3 The redeemable option-holding shares issued in June 2007 have not been
taken into account in calculating the intrinsic net asset value per
ordinary share as the minimum option strike price of R17,50 is greater
than the current Mvela Group ordinary share price.
4 Calculated on the assumption that the disposal of the Mvelaphanda
Resources interest had been implemented on 30 June 2006 and the net cash
proceeds received on that date.
Investments
Mvela Group`s investments performed extremely well in the year under
review. Profit from investments, which includes the unrealised gains on
the revaluation of investments (net of costs relating to the investment
activities), increased by 75,7% from R853 million for the year ended 30
June 2006 to R1,500 billion for the current year.
This performance was largely as a result of the strong share price
appreciation of the Group`s strategic investments in Absa and Group
Five, and the growth in profitability and reduction in gearing at Life
Healthcare.
Mvela Group disposed of its 22,9% interest in Mvelaphanda Resources
Limited in August 2006 for R1,183 billion (before costs) in cash. The
disposal of the Mvela Resources interest resulted in a realised profit
of approximately R400 million for Mvela Group, which was accounted for
in the previous financial year as a result of having equity accounted
for this investment.
In September 2006 Mvela Group acquired an additional 4% effective
economic interest in Life Healthcare for a net purchase price of R182
million, paid in cash from existing cash resources. Mvela Group`s
effective interest in Life Healthcare has increased from 18% to 22%.
In March 2007, as part of an equity capital raising undertaken by Group
Five, Mvela Group subscribed for a further 2 million Group Five ordinary
shares at R43 per Group Five ordinary share. The net purchase price of
R86 million was paid in cash from existing cash resources. At 30 June
2007 Mvela Group held 12,7 million Group Five shares, equivalent to a
10,7% interest.
Operations
Revenue increased by 11,6% from R3,102 billion for the year ended 30
June 2006 to R3,462 billion for the current year. Profit from operations
decreased by 7,9% from R262 million for the year ended 30 June 2006 to
R242 million for the current year.
Coin Security continued to be impacted by a high level of armed attacks
on operators in the assets-in-transit industry and concomitant costs,
including cash losses.
Operational changes at Coin Security, particularly in the assets-in-
transit division, are expected to improve profitability.
Mvela Group has implemented a strategy to merge Coin Security and Protea
Security. This merger will ensure that the Group`s security division
offers a more focused range of services to clients and is able to
compete more aggressively in the market.
Profit from operations for the operating subsidiaries excluding Coin
Security increased by 18%, which includes TFMC whose profit from
operations was in line with the previous year, as expected. Excellent
growth in profit from operations was achieved by Protea Security
Services, Trollope Mining Services, Novare and Zonke Monitoring Systems.
Cash generated from operations remained strong. Net capital expenditure
in the current period increased to R170 million to fund future growth
initiatives.
Broad-based BEE ownership initiative
At the general meeting of Mvela Group shareholders held on 6 June 2007,
Mvela Group ordinary shareholders approved an initiative to broaden the
Group`s broad-based BEE ownership to maximise the BEE scorecard points
achieved by Mvela Group and its subsidiaries in terms of the Codes of
Good Practice on Black Economic Empowerment and further implement the
Group`s commitment to promoting BEE at all levels of the South African
economy.
Mvela Group issued 124 425 055 redeemable option-holding shares ("BEE
shares") on 19 June 2007 at par value to broad based BEE groups,
including directors and employees of the Group. Each BEE share has an
option attached to it allowing the holder of the BEE share to subscribe
for one Mvela Group ordinary share at a minimum subscription price of
R17,50 between the fourth and fifth anniversaries of the date of issue
of the BEE shares.
The cost to Mvela Group of the options attached to the BEE shares is R65
million and has been recognised in the income statement in accordance
with AC 503, Accounting for BEE Transactions, and IFRS 2, Share-based
Payments.
Financial review
Income from associates decreased to R0,7 million from R280 million for
the year ended 30 June 2006 following the sale of the Mvela Resources
interest.
Net interest received increased to R81 million due to the Group`s
increased cash balances mainly as a result of the receipt of the cash
proceeds of R1,183 billion (before transaction costs and capital gains
tax) on the sale of the Mvela Resources interest in August 2006.
The net profit attributable to outside shareholders of R100 million
includes the net profit attributable to the outside shareholders in the
Batho Bonke consortium and the outside shareholders in certain of the
operating subsidiaries.
A provision for capital gains tax of approximately R70 million arising
on the disposal of the Mvela Resources interest is included in the
taxation expense in the current year, and is included in the adjustments
for the calculation of headline net profit attributable to ordinary
shareholders.
During the year under review Mvela Group acquired 9,3 million Mvela
Group ordinary shares at a cost of approximately R100 million.
The weighted average net number of ordinary shares in issue increased by
4,3% from 423 million ordinary shares for the year ended 30 June 2006 to
442 million ordinary shares for the current year, as a result of the
inclusion for the full year of the ordinary shares issued in partial
settlement of the purchase consideration for the acquisition of the
additional effective interest of 2,47% in Absa in December 2005, net of
the effect of share buy-backs.
The fully diluted weighted average number of ordinary shares in issue
increased from 478 million to 621 million as a result of the
implementation of the BEE transaction, and is the main reason for the
decrease in the fully diluted earnings per ordinary share and the fully
diluted headline earnings per ordinary share, as was anticipated at the
time of announcing the BEE transaction.
Outstanding capital balances in respect of non-recourse funding
contained in special purpose vehicles (which are not classified as
subsidiaries of Mvela Group) relating to the original acquisition of
certain investments by Mvela Group, decreased from R535 million at 30
June 2006, to R468 million at 30 June 2007.
Strategic review and objectives
Mvela Group is committed to its strategy of growing shareholder value
(as measured primarily by intrinsic net asset value) through the
combination of quality investments and cash generative operations.
To achieve this strategy the Group seeks to maintain a balanced exposure
through its investments and operations in the following five key growth
sectors of the South African economy which it believes will outperform
the market in the medium to long term:
- Financial Services
- Consumer Services
- Construction and Infrastructure
- Non-Mining Resources and Energy
- Telecoms, Media and Technology
These five pillars will underpin the Group`s growth strategy going
forward.
Mvela Group is in a strong financial position with cash resources of
more than R1,15 billion available for investing in appropriate
opportunities. The Group continues to identify and pursue potential
investment targets in its targeted sectors with a view to concluding one
or two material, value enhancing investment transactions per annum. In
the context of the current buoyant market conditions, securing such
targets at appropriate prices has been difficult.
The Group is committed to achieve an optimal return on capital employed
by ways of organic and acquisitive means in pursuit of its strategic
objectives.
The Group`s operations are a key element of the Group`s overall strategy
and will provide the Group with free cash flow which can be used by the
Group in its investing activities. Each operating subsidiary is
evaluated in terms of its size and profitability within the context of
the Group, its ability to generate free cash flow, its current
performance and growth prospects, and its ability to contribute to
growing the Group`s intrinsic net asset value.
To achieve these objectives the Group`s operations may be supplemented
through acquisitions or merged with other operating companies or groups,
similar to the merger of Coin Security and Protea Security.
As part of the process of streamlining Mvela Group`s investment
portfolio, the number of investments held by Mvela Group has been
reduced from seventeen in June 2005, of which the four strategic
investments at that time comprised 90% of the intrinsic value of the
Group`s investments, to eight at 30 June 2007, of which the three
strategic investments comprise 99% of the intrinsic value of the Group`s
investments.
During the year under review Mvela Group disposed of its effective
interests of 30% in Abvest Associates, 20% in Broll Property Group,
37,5% in Mvelaphanda Properties, 16,5% in Siemens Business Services and
60% in Stamford Sales. The amounts realised for these investments were
in line with their intrinsic values at the time of disposal.
Changes in Board of Directors and Management
The considerable depth of the Group`s board and management team,
including the management teams of its investment companies and
operations, enable the Group to execute its strategy as set out above.
During the year under review Stephen Levenberg, John Moxon, Jackie
Mphafudi and Brett Till resigned from the Board. We thank the directors
for their contribution over the years.
Subsequent to year-end Deputy CEO Yolanda Cuba was appointed as CEO with
effect from 1 July 2007. Ernst Roth (CA (SA)) was appointed as CFO with
effect from 4 September 2007. Craig Lyons has been appointed as Group
Investment Executive. He previously was the CEO of Mvelaphanda Strategic
Investments (Mvelaphanda Holdings non-mining and non-energy investment
arm)Zolani Mtshotshisa who has been with the group for more than 4
years, has been appointed as Group Executive in charge of Corporate and
Public Affairs and Grant Pereira (CA (SA)) who joined Mvela Group in
2005 subsequent to the merger has been appointed as Group Operations
Executive.
Accounting policies and International Financial Reporting Standards
(IFRS)
The reviewed results for the year ended 30 June 2007 have been prepared
in accordance with International Financial Reporting Standards. The
accounting policies used are consistent in all respects with the
accounting policies applied in the financial statements for the year
ended 30 June 2006.
Audit review opinion
These results have been reviewed by Mvela Group`s auditors, PKF (Jhb)
Inc., and their unqualified review opinion is available for inspection
at the company`s registered office.
Cash distribution and dividend
Ordinary shares
As per the general authority obtained at the previous general meeting,
the directors of Mvela Group resolved to declare a cash distribution out
of share premium in lieu of a final ordinary dividend for the year ended
30 June 2007, of 16,0 cents per ordinary share to ordinary shareholders.
The last day to trade cum the cash distribution in order to participate
in the cash distribution is Friday, 12 October 2007. The ordinary shares
of Mvela Group will commence trading ex the cash distribution from the
commencement of business on Monday, 15 October 2007 and the record date
will be Friday, 19 October 2007. The cash distribution will be paid to
ordinary shareholders on Monday, 22 October 2007. Ordinary share
certificates may not be dematerialised or rematerialised between Monday,
15 October 2007 and Friday, 19 October 2007, both days inclusive.
Preference shares
The directors of Mvela Group have resolved to declare a cash preference
dividend (No. 4) of 27,27397 cents per preference share for the period
ended 30 June 2007 to preference shareholders. The last day to trade cum
the preference dividend in order to participate in the preference
dividend is Friday, 12 October 2007. The preference shares of Mvela
Group will commence trading ex the preference dividend from the
commencement of business on Monday, 15 October 2007 and the record date
will be Friday, 19 October 2007. The preference dividend will be paid to
preference shareholders on Monday, 22 October 2007. Preference share
certificates may not be dematerialised or rematerialised between Monday,
15 October 2007 and Friday, 19 October 2007, both days inclusive.
Prospects
Mvela Group is optimistic about the growth potential of its core
operations and the prospects to conclude value enhancing investment and
other transactions, which may include the consolidation of BEE interests
and groups and further share buy-backs, to achieve its strategic
objectives for the benefit of all stakeholders.
The Group is well placed with the required financial and human capital
available to deliver long-term sustainable growth in intrinsic net asset
value underpinned by the five pillars of its growth strategy.
T M G Sexwale Y Z Cuba
Executive Chairman Chief Executive Officer
5 September 2007
Sandton
Executive Directors:
TMG Sexwale (Executive Chairman), MSM Xayiya (Executive Deputy
Chairman), YZ Cuba (Chief Executive Officer), E Roth (Chief Financial
Officer), WV Mavimbela, MJ Willcox,
Non-Executive Directors:
KD Dlamini*, BD Hopkins*, OA Mabandla*, D Moshapalo*, MZ Mpofu*, RM
Patel*, CD Stein (* Independent)
Registered Office:
Hunts End, 36 Wierda Road West, Wierda Valley, Sandton, 2196 Telephone
+27 11 290-4200 Telefax +27 11 783-0027
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall
Street, Johannesburg, 2001
A copy of these results are available on the Mvelaphanda Group website
at: www.mvelagroup.co.za
Sandton
5 September 2007
Sponsor:
Deutsche Securities SA (Proprietary) Limited
Date: 05/09/2007 07:05:02 Produced by the JSE SENS Department.
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