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STA
STA
STA - StratCorp - Audited Condensed Financial Results for the year ended
29 February 2008
StratCorp Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2000/031842/06)
JSE code: STA & ISIN: ZAE000034294
("StratCorp" or "the company")
Highlights
- Revenue up 65% to R82.9 million
- Net asset value per share up 30%
Audited Condensed Financial Results For The Year Ended 29 February 2008
Group Balance Sheet
Audited Audited
February February
2008 2007
R`000 R`000
Non-current assets
Investment property 1 268 -
Property, plant and equipment 6 140 1 446
Goodwill 3 532 3 532
Intangible assets 1 710 1 455
Other financial assets 6 531 1 221
Deferred tax 490 729
19 671 8 383
Current assets
Inventories 706 323
Other financial assets 19 720 10 309
Current tax receivable 4 620 -
Construction contracts work in 30 592 13 578
progress
Trade and other receivables 8 455 14 188
Cash and cash equivalents 2 094 11 641
66 187 50 039
Total assets 85 858 58 422
Equity and liabilities
Equity
Share capital 25 912 17 224
Retained income 25 278 17 334
51 190 34 558
Non-current liabilities
Compound instruments 101 10 139
Other financial liabilities 631 -
Finance Lease obligations 2 125 156
Deferred tax 3 241 3 035
6 098 13 330
Current liabilities
Compound instruments 10 409 371
Other financial liabilities 266 -
Current tax payable 203 2 123
Finance lease obligations 784 38
Trade and other payables 16 408 8 002
Bank overdraft 500 -
28 570 10 534
Total liabilities 34 668 23 864
Total equity and liabilities 85 858 58 422
Number of ordinary shares in issue 116 021 101 996
(`000) (1)
Net asset value per share (cents) 44.1 33.9
(NAVPS)
Net tangible asset value per share 39.6 29.0
(cents) (NTAVPS)
Group Income Statement
Audited Audited
February 28 February
2008 2007
R`000 R`000
Revenue 82 943 50 192
Cost of sales (35 992) (13 352)
Gross profit 46 951 36 840
Other income 315 137
Operating expenses (37 393) (17 569)
Operating profit before interest and 9 873 19 408
taxation
Fair value adjustments 892 2 636
Investment income 1 273 853
Finance cost (553) (115)
Profit before taxation 11 485 22 782
Taxation (3 541) (5 251)
Profit for the period 7 944 17 531
116 021 101 996
Number of ordinary shares in issue
(`000)(1)
Weighted average number of ordinary 110 952 101 784
shares in issue (`000)(2)
Basic earnings per share (cents) (EPS) 7.16 17.22
Headline earnings per share (cents) 7.15 17.22
(HEPS)
Reconciliation of headline earnings net
of tax
Basic earnings 7 944 17 531
Profit on sale of property, plant and (13) -
equipment
Headline earnings 7 931 17 531
Notes
1. 123 004 663 ordinary shares less 6 983 531 treasury shares (2007: 104
601 132 ordinary shares less 2 604 696 treasury shares)
2. 117 357 552 weighted average number of ordinary shares less 6 405 789
weighted average number of treasury shares (2007: 103 425 064 weighted
average number of ordinary shares less 1 640 937 weighted average number
of treasury shares)
Group Statement of Changes in Equity
Share Share Retained Total
Capital repurchase Earnings
reserve
R`000 R`000 R`000 R`000
Balance at 01 March 12 805 3 034 (197) 15 642
2006
Issue of shares 4 987 (3 034) - 1 953
Treasury shares (568) - - (568)
Profit for the year - - 17 531 17 531
Balance at 01 March 17 224 - 17 334 34 558
2007
Issue of shares 11 999 - - 11 999
Treasury shares (3 311) - - (3 311)
Net profit for the - - 7 944 7 944
period
Balance at end of 25 912 - 25 278 51 190
period
Group Cash Flow Statement
Audited Audited
February February
2008 2007
R`000 R`000
Cash flows from operating activities
Cash received from customers 88 675 37 203
Cash paid to suppliers and employees (80 334) (37 941)
Cash generated from (used in) 8 341 (738)
operations
Net interest income 745 760
Tax paid (9 637) (156)
Net cash flows from operating (551) (134)
activities
Cash flows from investing activities
Purchase of property plant and (6 035) (1 458)
equipment
Purchase of investment properties (1 267) -
Purchase of intangible assets (641) (590)
Cash acquired through business - 5 594
combinations
Purchase of financial assets (14 721) (2 233)
Sales of financial assets 892 4 814
Net cash from investing activities (21 772) 6 127
Cash flows from financing activities
Proceeds on share issue 8 688 4 420
Proceeds from financial liabilities 1 048 172
Repayment of financial liabilities (151) (1 384)
Finance leases 2 691 -
Net cash from financing activities 12 276 3 208
Net increase (decrease) in cash and (10 047) 9 201
cash equivalents
Cash and cash equivalents at beginning 11 641 2 440
of the year
Cash and cash equivalents at end of 1 594 11 641
the year
Condensed Segmental Reporting
Audited % Audited %
February February
2008 2007
R`000 R`000
Revenue
Property development 19 748 20 17 439 30
Investment management 25 302 26 16 019 28
Marketing and distribution 37 820 40 16 752 29
Corporate 13 780 14 7 264 13
96 650 100 57 474 100
- Inter group eliminations (13 707) (7 282)
82 943 50 192
Profit after tax
Property development 388 5 9 007 51
Investment management 6 094 75 3 897 22
Marketing and distribution 1 325 16 567 3
Corporate 343 4 4 110 24
8 150 100 17 851 100
- Inter group eliminations (206) (50)
7 944 17 531
Segment assets
Property development 44 022 38 27 182 37
Investment management 18 965 16 13 175 18
Marketing and distribution 7 718 7 8 607 12
Corporate 45 833 39 24 080 33
116 538 100 73 044 100
- Inter group eliminations (30 680) (14 622)
85 858 58 422
Segment liabilities
Property development 35 106 58 18 654 49
Investment management 9 622 16 9 926 26
Marketing and distribution 5 826 10 8 040 22
Corporate 10 483 16 1 072 3
61 037 100 37 692 100
- Inter group eliminations (26 369) (13 828)
34 668 23 864
Net cash from operating activities
Property development (6 010) (4 378)
Investment management 8 270 6 554
Marketing and distribution (2 639) 145
Corporate (29) 1 804
- Inter group eliminations (143) (4 259)
(551) (134)
OVERVIEW
The past financial year can be summarised as the year dedicated to internal
change and reorganisation. Although turnover increased substantially,
management has dedicated a lot of resources in time, effort and money to
restructure and reposition business models in order to ensure sustained
future earnings growth.
Great effort was specifically dedicated towards human resource expansion,
infrastructure and technology provision, system integrations and product
streamlining. The staff complement has virtually doubled from the previous
year and various identified senior and middle management positions were
filled.
Although all of these changes had a substantial financial implication, as
reflected in the results, management is satisfied that it was necessary to
ensure future growth. Management will consequently be able to concentrate on
increasing the bottom line profits.
NATURE OF BUSINESS
StratCorp is an investment holding company listed on AltX. StratCorp`s
business philosophy is divided into five distinct segments, namely Asset
Management and Private Equity, Marketing and Distribution, Property
Development, and Strategic Investments. It was recently announced that the
company was opening an asset finance division to provide or source finance
for typical asset rental transactions. Through its wholly owned subsidiaries,
the company is well-positioned and equipped to take its innovative products
to the market.
SUBSIDIARIES
Financial Services (Investments)
Through its StratEquity subsidiary (100%), the company has previously been a
provider of expansion capital to developing companies in the private equity
field since inception. This business model was changed during the year to an
asset management model. Different investment structures were established to
cater for a wider investment audience. The investment structures created for
investors differ from the typical Collective Investments Schemes available in
the market in the sense that investors buy a tradable share (not a unit) in
any of the 3 Investment companies. These investment companies then buy
(according to a risk based mandate) a variety of instruments on the market,
including shares in the Top 40 listed companies, high growth companies and
Satrix.
StratEquity has in excess of 50 000 monthly subscribers on its books that
invest through the investment companies.
Total investment funds received from clients during the year increased to
R68.4 million. (2007: R39.1 million - 75% increase).
The company has further identified other distribution channels for its
products and these channels will be explored during the next financial year.
Marketing and distribution
ICI Marketing (100%) was previously only responsible for the marketing of
StratEquity`s investment products. The company has added other products to
its range that should contribute to its future profitability.
Property Development
The StratCorp property group is involved in residential property development
and sales in the middle market segment (R350 000 to R500 000 price range).
During the year, Citadin Holdings Limited changed its name to StratCorp
Property Holdings Limited; Citadin Projects (Pty) Limited was changed to
StratCorp Projects (Pty) Limited and Citadin Property Developers (Pty)
Limited changed its name to StratCorp Property Developers (Pty) Limited. The
company owns a number of development properties, all in different phases of
development. The change in the economic climate had a limited impact on the
operations; however, a major frustration experienced was the slow pace of
obtaining re-zoning approval from the different government departments
responsible therefor. This factor alone resulted in two of the budgeted
phases not being completed on time for this financial year.
STRATEGIC INVESTMENTS
Strategic investments will remain an integral focus of the group`s
operations. The company classify these investments as "held for trading" 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.
During the period under review the company held the following unlisted
investments:
APMI Holdings Limited: 15% shareholding
GlobalJewel Limited: 13% shareholding
StratCol (Pty) Limited: 31% shareholding
Supertow International Ltd: 11% shareholding.
CASH FLOWS
Cash generated from operations increased from (R738 000) (2007) to R8.34
million (2008). Infrastructural expenses (Property, Plant and Equipment)
increased from R1.458 million to R6.035 million as a result of establishing
an infrastructure to cope for future growth. Land for development and
additions to the value of R14.721 million were acquired. Although a net cash
flow of R1.594 million was recorded for the period, a certain amount of the
cash with regards to the property and finance will flow back to the company
during the course of the new financial year.
HUMAN RESOURCES
As reported in the previous year`s annual report and in the introduction to
this report, focussed attention and energy was again given to ensure a
dynamic management structure. A number of middle management and other key
positions were filled over the year which will ensure operations are managed
at acceptable levels.
CORPORATE GOVERNANCE, RISK AND COMPLIANCE
A detailed report on the past year`s Corporate Governance compliance will be
included in the annual report. The board fully supports the King Code and
will ensure the company is fully compliant therewith.
OMA Chartered Accountants has been appointed as the Internal Auditors and
Mrs. Riana Bischoff has been appointed on a full time basis as Group Risk and
Compliance Officer and Company Secretary.
Mr. MM Tshishonga (Non Executive) resigned as a director on 19 November 2007
and Mr. M Patel (Non Executive and Chairman of the Audit Committee) was
appointed to the board on 16 November 2007.
SYSTEMS AND INFRASTRUCTURE
Systems
The systems being utilised by the group are constantly evaluated and upgraded
with the necessary safeguards in place to ensure the operations of the group
are not hampered in any way. All third party software is licensed. The IT
team has been expanded to five full time employees.
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. The company has also relocated from a 660m2 to a
2400m2 floor space building. This space will hopefully be adequate to provide
for growth for the next five years.
PROSPECTS
The company will continue to streamline and optimise its current business
operations. Direct costs should be back at acceptable levels and other
business opportunities have and will be identified to ensure constant growth.
An asset finance division is being established through which the group will
provide, or source finance for typical asset rental transactions (Business to
Business and Business to Consumer).
SUBSEQUENT EVENTS
Shareholders are referred to the cautionary announcement dated 23 April 2008
and are advised that StratCorp 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 further announcement
is made.
OTHER MATTERS
The company`s listing was moved to AltX on 1 June 2007 from the Venture
Capital Market.
FINANCIAL REVIEW
The consolidated turnover of the group increased by 65% to R 82,942,780 in
2008 (2007: R50,191,665). The total consolidated profits after tax for the
full year decreased by 55% to R7,944,028. (2007: R 17,531,500) - refer to the
paragraph headed "Conflicting Trading Statements" below.
For comparison purposes, the preceding four years` revenue, net profit after
tax, EPS and NAVPS are indicated in the table below:
2004 2005 2006 2007 2008
Revenue 11,261,490 11,050,189 19,670,348 50,191,665 82 942 /780
Net (2,068,024) 501,485 4,575,715 17,531,500 7 944 028
profit
after
tax
EPS - (2.98) 0.67 5.53 17.22 7.16
cents
HEPS - (2.73) 0.67 4.53 17.22 7.15
cents
NAVPS - 6.1 7.5 30.2 33.9 44.1
cents
Conflicting Trading statements
The company released a trading statement on 12 May 2008, stating that
earnings per share and headline earnings per share for the year ended 29
February 2008 were expected to be between 23 cents and 25 cents per share for
basic earnings and headline earnings. The statement further stated that the
aforementioned represented an increase of between 35% and 45% over the
respective earnings and headline earnings per share for the year ended 28
February 2007.
On 15 May 2008 the following Trading Statement was released:
"Shareholders are referred to the updated trading statement released on 12
May 2008, where shareholders were advised that the company`s earnings and
headline earnings per share for the year ended 29 February 2008 were expected
to be between 23 cents and 25 cents per share for basic earnings and headline
earnings per share, representing an increase of between 35% and 45% over the
respective earnings and headline earnings per share for the year ended 28
February 2007. Following the completion of the audit for the year ended 29
February 2008, Shareholders are advised that the earnings and headline
earnings per share will in fact be between 7.0 cents and 7.5 cents per share,
representing a decrease of between 56% and 60% over the respective earnings
and headline earnings per share for the year ended 28 February 2007. The
decrease in earnings and headline earnings per share from the previous
figures disclosed in the trading statement of 12 May 2008 is due to the
reclassification of investment properties as construction contracts work in
progress and an impairment of trade receivables."
The facts behind the two conflicting statements
1. A trading statement is normally released when management is reasonably
sure that the figures represented in a trading statement and the final
audited figures would not differ materially.
2. The company decided in terms of its accounting policies to treat the
property it owns as investment property, resulting in the revaluation
value being recognised through the income statement. This revaluation
formed part of the headline earnings and earnings per share
calculations.
3. Following the completion of the audit, the company on further
investigation decided that the property strictly should be dealt with as
stock in trade. The result is no revaluation through its income
statement. The first trading statement included fair value adjustments
of R19,1 million after tax if the development land was shown as
investment property.
4. Impairment of trade receivables. A decision was made to impair the
debtors` book in one of the subsidiaries (ICI Marketing) to the value of
R8.6 million. Impairment was created for all ICI Marketing debtors
outstanding longer than the normal collection period, resulting in a
clean up of the balance sheet. The practice to supply credit to
contractors in this specific subsidiary has been terminated and this
impairment would therefore not re-occur in future.
5. Going forward, the group is well positioned to continue to generate
strong revenue (as in the previous year). In addition, solid net
earnings should channel through to the bottom line profits.
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.
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 PKF (Pretoria) Inc. The
auditors` unqualified audit report is available for inspection at the
company`s registered office.
DIVIDENDS
No dividends have been declared.
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.
SHARE CAPITAL
The authorised share capital of the company comprises 400 000 000 no par
value shares. The issued share capital comprises 123 004 663 no par value
shares.
StratCorp issued 18 403 531 shares to the StratCorp Personnel Incentive Trust
on 9 July 2007. 15 000 050 of these shares were subscribed for by way of
share options at 65.2 cents per share by Executive and Non-Executive
Directors and Managers.
BORROWINGS
In order to finance the expansion in property plant and equipment, the group
obtained debt financing amounting to R3.731 million during the year.
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
21 May 2008
CORPORATE INFORMATION
Non executive directors: PJ de Jongh (Chairman), M
Patel* (Chairman of Audit Committee)
*Independent
Executive directors: DB Harington (CEO), JN de Beer
(CFO), IM Wright (CIO), HJ van der Merwe (COO)
Registered address: 3rd Floor, Lakeside Building A, 2004
Gordon Hood Drive, Centurion, 0046
Postal address: PO Box 12022, Centurion, 0046
Company secretary: R Bisschoff
Telephone: (012) 643 7400
Facsimile: (012) 663 2914
Transfer secretaries: Computershare Investor Services
(Pty) Limited
Auditors: PFK (Pretoria) Inc
Designated Adviser: Vunani Corporate Finance
Date: 21/05/2008 09:16:01 Produced by the JSE SENS Department.
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