| Tue 25 Mar 2008, 9:46 | | ADW - African Dawn - Audited Condensed Financial Results for the year |
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ADW
ADW
ADW - African Dawn - Audited Condensed Financial Results for the year
ended 29 February 2008
AFRICAN DAWN CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/020520/06)
JSE code: ADW & ISIN: ZAE000060703
("African Dawn" or "the company" or "the group")
Highlights
- Free cash flow per share up 192% to 65,9 cents per share
- Revenue up 394% to R258.8 million
- Headline earnings up 275% to R103.3 million
- Headline earnings per share up 169% to 56.9 cents per share
- Net asset value per share up 106% to 145.1 cents per share
AUDITED CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 29 February 2008
Condensed Group Balance Sheet
Audited Audited
February 2008 February 2007
R`000 R`000
ASSETS
Non-current assets 146 719 33 533
Fixed assets 13 547 4 225
Goodwill on acquisition of 111 079 10 897
subsidiaries
Financial receivables 22 093 18 411
Current assets 554 840 101 134
Trade and other receivables 1 627 16 151
Financial receivables 501 987 80 016
Cash and cash equivalents 51 226 4 967
Total assets 701 559 134 667
EQUITY AND LIABILITIES
Shareholders` funds 290 001 102 688
Share capital and premium 158 302 74 261
Accumulated profit 131 699 28 427
Non-current liabilities 365 625 12 567
Borrowings 364 594 10 951
Lease liability 1 031 1 616
Current liabilities 45 933 19 412
Trade and other payables 3 840 1 485
Taxation 23 080 4 454
Borrowings 19 013 12 664
Lease liability - 809
Total equity and liabilities 701 559 134 667
Net asset value per share (cents) 145.11 70.34
Net tangible asset value per share 89.53 62.87
(cents)
Number of shares in issue (`000) 199 851 145 997
Condensed Group Income Statement
Audited Audited
February 2008 February 2007
12 months 12 months
R`000 R`000
Revenue 258 785 52 375
Operating expenses (55 430) (17 958)
Cost of funding (75 014) (2 800)
Profit before depreciation 128 341 31 617
Depreciation (810) (487)
Profit before taxation 127 531 31 130
Taxation (24 259) (3 579)
Net profit for the period 103 272 27 551
Headline earnings 103 272 27 551
Basic and diluted earnings per 57.0 21.2
share (cents)
Weighted average number of shares 181 179 129 806
(`000)
Headline earnings per share 57.0 21.2
(cents)
Condensed Group Cash Flow Statement
Audited Audited
February 2008 February 2007
12 months 12 months
R`000 R`000
Cash flows from operating 119 342 20 223
activities
Cash flows from investing (24 653) (22 089)
activities
Cash flows from financing (48 430) 5 499
activities
Net movement in cash and cash 46 259 3 663
equivalents
Cash and cash equivalents at 4 967 1 334
beginning of period
Cash and cash equivalents at end 51 226 4 967
of period
Condensed Group Statement of Changes in Equity
Share Share Accumulate
capital premium d Total
R`000 R`000 profit R`000
R`000
Balance 28 February 2006 918 29 010 876 30 804
Net profit for the - - - -
period
Issue of share capital 542 43 791 27 551 71 884
Balance 28 February 2007 1 460 72 801 28 427 102 688
Net profit for the - - 103 272 103 272
period
Issue of share capital 537 83 504 - 84 041
Balance 29 February 2008 1 997 156 305 131 699 290 001
Segmental Reporting
Audited Financing Marketing
February R`000 R`000
2008
12 months
R`000
Revenue 258 785 249 642 9 143
Net profit for the period 103 272 102 317 955
Net asset value 290 001 283 914 6 087
OVERVIEW
The board of directors of African Dawn is pleased to present the audited
financial results of the group for the year ended 29 February 2008 ("2008 year
end").
NATURE OF THE BUSINESS
African Dawn is a specialist financial services group focusing on the following
two main operational areas:
Financing
Secured Financing
- This division provides:
- Bridging and structured finance to inter alia, individuals and developers -
of low-cost ("RDP") and affordable housing;
- Property advice;
- Commercial bond origination;
- Equity property finance and related participation; and
- Mezzanine finance.
The tenure of loans is between 2 and 24 months. Interest rates, at which loans
are extended to individuals and certain juristic persons, are regulated by the
National Credit Act ("NCA"). To date the regulation of this market with the
elimination of smaller non-compliant players, has had a positive impact on
earnings and has resulted in an increased deal flow. This strong demand has
translated into both higher sales growth and improved credit quality.
Home Improvement Finance
This division provides Home improvement finance to households earning between R4
000 and R12 000 per month. To mitigate risk, African Dawn makes payment
directly to the retailers or approved suppliers.
The implementation of the NCA has resulted in positive deal flow and quality of
transactions. There is a strong emphasis on annuity income and the tenure of
loans is on average 6 to 24 months.
Marketing
Cell Phone Banking
This division, in collaboration with MTN Banking (a joint venture between
Standard Bank and MTN), offers convenient cell phone banking accounts to mainly
the previously unbanked. Although still relatively small in the overall group
context, this division is likely to grow materially over the coming years and
should contribute materially to the annuity income of the group.
Property Sales
This division markets properties via Pam Golding franchised estate agencies,
mainly in the Attridgeville and Mamelodi areas.
African Dawn provides the above services to LSM 3 to 8 income groups, enabling
these clients to manage their own finances, enter the mainstream banking
fraternity, become property owners and/or add value to their existing
properties.
Financial Literacy Education
This division provides Financial Services Board approved consumer education, to
predominantly low literacy, financially illiterate consumers.
BUSINESS COMBINATIONS
Between August 2007 and February 2008 African Dawn has acquired 100% of the
entire issued share capital of Elite Group (Pty) Limited ("Elite"), CIA Holdings
Limited ("Allegro") and Dumont Healthcare (Pty) Limited ("Dumont"). The new
acquisitions contributed to the last six months during the 2008 year end, and
will contribute for a full year in 2009. These acquisitions were in line with
African Dawn`s strategy to be a niche finance provider and will assist in
differentiating the company from retail banks and micro lenders.
Goodwill of R18.5 million was raised on the acquisition of Elite and R70 million
on the acquisition of Allegro.
A final payment in shares to the shareholders of Bhenka Financial Services (Pty)
Limited ("Bhenka") on the fulfillment of agreed performance undertakings,
resulted in total goodwill of R22,5 million being raised pertaining to this
transaction.
FINANCIAL REVIEW
Headline earnings increased by 275% to R103,3 million of which most was derived
from secured financing. Acquisitions made during the year contributed 22% to
headline earnings.
Financial receivables (short and long term) increased by R424 million. This was
due to increased activity and deal flow as well as the acquisition of Allegro.
Debtors at year end can be analysed as follows:
Gross debtors Bad debt Percentage
R`million provision
R`million
Secured finance 493 13 3%
Incremental home loans 55 12 22%
Total 548 25
A R150 million secured finance fund is managed on behalf of a client. This
contributed 25% to earnings.
Actual bad debts written off constitutes approximately 5% of gross debtors in
incremental home loan debtors and 0,5% of secured finance debtors.
Total long and short term borrowings increased by R 360.9 million mainly as a
result of the acquisition of Allegro.
SHARE CAPITAL
Share capital and premium have increased due to the issue of 25 million new
ordinary shares for cash during August 2007 at R2,90 per African Dawn share, as
well as the final issue of 28,8 million shares to Bhenka shareholders.
PROSPECTS
In general, market conditions for African Dawn remain robust, and we expect this
trend to continue into 2009. Doubtful debts as a percentage of total advances
has decreased despite the rapid growth of the group. The three acquisitions
completed in Aug 2007 have been consolidated into these results for six months,
and will have a full year impact in 2009. Funding costs as a percentage of
revenue was 29% in the 2008 year end. As African Dawn grows, the group should
find it easier to access capital at more attractive rates. Coupled with good
revenue growth, these reduced funding costs should have a meaningful impact on
earnings. In summary African Dawn looks forward to another exciting year in
2009. Some specific points for the key divisions are outlined below:
Secured Financing
- The debtors` books for all subsidiaries have increased at an average rate
of 15% per month, which bodes well for future growth.
- As noted, management will continue to focus on reduced funding costs.
- Current economic conditions and the prevailing power crisis are not
expected to have a material impact on the future earnings, as the focus is
on such projects which are high on Government`s priority list such as
affordable housing projects.
- This division has transacted with over 600 clients.
Home Improvement Finance
- This division has grown at a rate of 5% per month over the past financial
year and again this trend is expected to continue.
- Bad debts are not expected to increase, as the introduction of the NCA has
resulted in an improvement in the risk profile of clients. The group is
already prudently provided in this division.
- Additional funding is being secured in order to maintain growth levels. An
additional R75 million has been applied for of which R10 million has been
drawn down at prime linked rates.
- The introduction of the NCA has resulted in several smaller companies in
this industry closing down, resulting in increased deal flow for African
Dawn.
- 21 000 clients have already benefited from this product offering.
Cell Phone Banking
- This division focuses on the issuing of Standard Bank debit cards and MTN
sim cards to mainly the previously unbanked.
- Growth is expected to exponentially increase in specifically the issuing of
sim cards, where margins are substantial.
- The intention is to expand this project into other African countries in the
future.
- There is a strong annuity earnings component in this division, resulting in
long term benefits to the group.
- This division has in excess of 70 000 clients which should increase to 200
000 clients during the current year.
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The condensed financial statements comprise a consolidated balance sheet at 29
February 2008, a consolidated income statement, consolidated statement of
changes in equity and summarised consolidated cash flow statement for the year
ended 29 February 2008. The condensed financial statements have been prepared
in accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") and the presentation and disclosure
requirements of IAS34, Interim Financial reporting, JSE Listings Requirements
and South African Companies Act.
The accounting policies applied for the year are consistent with those of the
prior year.
The condensed financial statements were approved by the Board of Directors on 18
March 2008.
Basis of measurement
The condensed financial statements have been prepared on the historical cost
basis.
AUDIT OPINION
The annual financial statements have been audited by Van Dyk & Associates. The
auditors` unqualified audit report is available for inspection at the company`s
registered office.
CORPORATE GOVERNANCE
The group subscribes to the principles of, and implements where possible, the
recommendations of the King II Code on Corporate Governance.
DIVIDENDS
The group will continue to retain and utilise cash generated within the
business. The Board will consider declaration of dividends, once the cost of
funding has been reduced satisfactorily.
SUBSEQUENT EVENTS
Shareholders are referred to the cautionary announcement dated 17 March 2008 in
which shareholders were advised that African Dawn has entered into negotiations,
which if successfully concluded may have a material effect on the price of the
company`s securities. Accordingly, shareholders are advised to exercise caution
when dealing in the company`s securities until a full announcement is made.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis since the
directors have every reason to believe that the company has adequate resources
in place to continue in operation for the foreseeable future.
For and on behalf of the Board
JM van Tonder CM van Nieuwkerk
Chief Executive Officer Financial Officer
25 March 2008
CORPORATE INFORMATION
Non executive directors: LI Mophatlane (Chairman), SW
de Bruyn, C de W Vivier
Executive directors: JM van Tonder (CEO), CM van
Nieuwkerk (FD), MN Ramasehla, CJ Odams
Registration number: 1998/020520/06
Registered address: 1st Floor, Dunkeld Place, 12 North
Road, Dunkeld West, 2196
Postal address: PO Box 61051, Marshalltown, 2107
Company secretary: CM van Nieuwkerk
Telephone: (011) 341 0860
Facsimile: (011) 788 7271
Transfer secretaries: Computershare Investor Services
2004 (Pty) Limited
Auditors: Van Dyk & Associates
Designated Adviser: Vunani Corporate Finance
Date: 25/03/2008 09:46:49 Produced by the JSE SENS Department.
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