| Wed 16 Jul 2008, 15:37 | | FCPD - Foord Compass Limited - Interim report for the six months ended 30 June |
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JSE FCPD
FCPD
FCPD - Foord Compass Limited - Interim report for the six months ended 30 June
2008
FOORD COMPASS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003591/06)
JSE code: FCPD ISIN: ZAE000054466
("the company")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2008
BALANCE SHEET Unaudited Unaudited Audited
at 30 June 2008 30 June 30 June 31 Dec
2008 2007 2007
Notes R`m R`m R`m
ASSETS
Current assets
Investments 2 677.7 305.5 472.2
Net trade receivables and 6.3 16.0 414.8
unsettled sales
Cash 414.3 382.4 203.8
Total assets 1,098.3 703.9 1,090.8
EQUITY AND LIABILITIES
Capital and reserves 17.1 18.9 13.6
Ordinary share capital 0.1 0.1 0.1
Accumulated profits 17.0 18.8 13.5
Non-current liabilities 1,024.8 654.1 1,014.5
Unsecured debentures 3 1,017.0 632.4 998.7
Deferred taxation 7.8 21.7 15.8
Current liabilities 56.4 30.9 62.7
Taxation 4.5 - 1.3
Accounts payable 2.0 3.0 2.1
Debenture interest payable 49.9 27.9 59.3
Total equity and liabilities 1,098.3 703.9 1,090.8
Debentures in issue 138,635,11 77,562,099 136,245,02
8 5
Ordinary shares in issue 8,800,070 8,800,070 8,800,070
Cents Cents Cents
Net attributable asset value per 769.6 851.3 776.6
debenture (cum interest)
Net attributable asset value per 733.6 815.3 733.1
debenture (ex interest)
Net attributable asset value per 194.3 214.8 152.8
ordinary share
INCOME STATEMENT Unaudited Unaudited Audited
6 months 6 months Year
to to ended
30 June 30 June 31 Dec
2008 2007 2007
Notes R`m R`m R`m
Investment income 30.9 8.2 71.3
Realised profits 35.6 46.8 33.9
Administration expenditure (5.7) (5.0) (8.3)
Net distributable profit 60.8 50.0 96.9
Capital profits on sale of 13.0 19.8 33.4
investments
Revaluation of investments (24.7) (1.5) (123.2)
Net portfolio income before 49.1 68.3 7.1
debenture interest
Debenture interest (49.9) (27.9) (87.2)
Revaluation of debentures 3 (0.5) (30.5) 80.1
Profit before taxation (1.3) 9.9 -
Taxation credit (expense) 4 4.8 (3.5) 1.1
Profit for the period 3.5 6.4 1.1
Cents Cents Cents
Debenture interest per debenture 36.0 36.0 85.6
Earnings per debenture 36.4 75.3 7.0
Earnings per ordinary share 39.8 72.7 12.0
STATEMENT OF CHANGES IN
SHAREHOLDERS` EQUITY
Ordinary Accumulate Total
share d profits
capital
R`m R`m R`m
Balance at 1 January 2007 0.1 22.5 22.6
(audited)
Dividends - (10.1) (10.1)
Profit for the year - 1.1 1.1
Balance at 31 Dec 2007 (audited) 0.1 13.5 13.6
Profit for the period - 3.5 3.5
Balance at 30 June 2008 0.1 17.0 17.1
(unaudited)
Balance at 1 January 2007 0.1 22.5 22.6
(audited)
Dividends - (10.1) (10.1)
Profit for the period - 6.4 6.4
Balance at 30 June 2007 0.1 18.8 18.9
(unaudited)
CASH FLOW STATEMENT Unaudited Unaudited Audited
6 months 6 months Year
to to ended
30 June 30 June 31 Dec
2008 2007 2007
R`m R`m R`m
Net cash inflow (outflow) from 252.0 371.6 (256.0)
investing activities
Dividends and interest paid (59.3) (55.7) (83.6)
Net cash received from issue of 17.8 17.4 494.3
debentures
Net increase in cash resources 210.5 333.3 154.7
Cash resources at beginning of 203.8 49.1 49.1
period
Cash resources at end of period 414.3 382.4 203.8
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These interim financial statements are prepared in accordance with International
Financial Reporting Standards ("IFRS"). The principal accounting policies used
in the preparation of these financial statements in terms of IFRS are consistent
with those applied for the year ended 31 December 2007.
2. Investments Unaudited Unaudited Audited
30 June 30 June 31 Dec
2008 2007 2007
R`m R`m R`m
Gross long positions 1,106.0 690.5 715.1
Gross short positions (428.3) (385.0) (242.9)
Net position 677.7 305.5 472.2
3. Unsecured debentures
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2008 2007 2007
R`m R`m R`m
Unsecured debentures comprise
Debenture capital at issue price 939.9 445.2 922.1
Cumulative revaluation of 77.1 187.2 76.6
debentures
Fair value of debentures 1,017.0 632.4 998.7
Reconciliation of balance
Balance at beginning of period 998.7 584.5 584.5
Net proceeds on issue of 17.8 17.4 494.3
debentures
Revaluation - current period 0.5 30.5 (80.1)
Balance at end of period 1,017.0 632.4 998.7
Revaluation of debentures
Net portfolio income before 49.1 68.3 7.1
debenture interest
90% allocation to debenture 44.2 61.5 6.4
holders
Less: proportionate share of 6.2 (3.1) 0.7
taxation credit (expense)
Less: interest distribution for (49.9) (27.9) (87.2)
the period
Revaluation - current period 0.5 30.5 (80.1)
4. Taxation
Taxation comprises
Current taxation - current period 3.2 - 1.3
Deferred taxation (credit) charge (8.0) 3.5 (2.4)
- current period
Net (credit) charge to income (4.8) 3.5 (1.1)
statement
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
The board is pleased to announce that it has maintained the interim interest
distribution at 36 cents per debenture, despite difficult trading conditions in
H1 2008. The distribution results in an income yield on the debentures of 4.9%
for the period. Net distributable profit increased 22% to R61 million on the
back of improved investment income off a higher asset base. Net portfolio
income after capital profits and revaluations declined from R68 million to R49
million. The company was however able to maintain the capital of debenture
holders with the NAAV increasing marginally to 733.6 cents after deducting the
36 cents interest distribution.
Debentures earned the following returns for the period:
Unaudited Unaudited Audited
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2008 2007 2007
Income 4.9% 4.7% 10.2%
Capital 0.1% 5.1% -5.6%
Total return * 5.0% 9.8% 4.6%
Benchmark (CPI + 10% per annum) ** 12.0% 9.3% 19.0%
* Calculated with reference to monthly net attributable asset values per
debenture
** Lagged one month
COMMENTARY
The volatile and difficult economic conditions which characterised the second
half of 2007 continued apace into the first half of 2008, but with added vigour
and severity. The global equity bear market, which started in late 2007,
confirmed its trend latterly after a rally in April/May 2008. Bond yields and
interest rates have been rising in most parts of the world (including SA), in
response to rising inflation. Commodity prices, lead by oil, have risen across
the complex (with a few minor exceptions). The rand has been a weak currency.
Under these conditions, the SA equity market has bifurcated over the last six
months, with the resources sector growing 33% while the industrials (-9%) and
financials (-25%) have joined the global bear market. Listed property declined
28%.
In this difficult environment, the investment portfolio has done well to
maintain both its capital value and interest payment for the first six months of
2008. Significant positive returns were recorded from the foreign assets, the
short bond position and cash, while equities and listed property were negative.
It is anticipated that SA CPI and interest rates will reach a cyclical peak in
the second half of 2008 as the SA consumer economy continues to slow down while
overall growth is supported by fixed investment spend and rising exports. This
scenario should lay the base for some improvement in the equity and property
markets later in the year. However, uncertainty levels are likely to remain
high which implies that investment risks remain high. Diversification of risk
through effective asset allocation will remain a priority in the management of
the portfolio and we will continue to look for further means of dissipating risk
and uncertainty, thereby aiming to preserve and grow the capital base and income
payout for our debenture investors.
The asset allocation of the portfolio at 30 June 2008 at effective economic
exposures is as follows:
30 June 31 Dec
2008 2007
JSE equities (net position) 48% 65%
JSE listed property 4% 3%
SA fixed interest -39% -17%
JSE corporate debt 1% 0%
Foreign assets * 44% 0%
Rand cash 42% 49%
100% 100%
* Average 35% exposure in 2007
INVESTMENT PORTFOLIO
Debenture holders will be aware that since inception in 2002 the management of
the company`s investments has been effected through two portfolios. The long-
term portfolio was managed for long-term appreciation and capital profits
resulting from this portfolio were retained in the company for future growth.
The trading portfolio comprised positions that were more short-term in nature
and profits from this portfolio, when realised, were distributed to debenture
holders in accordance with the provisions of the Debenture Trust Deed.
During the period, the board reviewed this long-standing arrangement in order to
remove this constraint on the portfolio manager as he seeks to achieve superior
long-term returns according to his prevailing best investment view and a total
asset allocation strategy. While the retention of capital profits remains a
requirement of the Deed, the board has resolved to manage a single portfolio of
assets. In accordance with newly promulgated tax legislation, capital profits
are only recognised when the investment holding period exceeds three years.
RETIREMENT OF CHAIRMAN AND TRUSTEE
Our founding chairman, Mr Clive Hirschsohn, retired at the recent annual general
meeting of the company. On behalf of debenture holders and shareholders, the
board thanks him for his sound leadership and wise counsel over the past seven
years. His contribution has been highly valued and appreciated.
Mr Louis van Zyl, the debenture Trustee, retired at the end of June 2008. On
behalf of debenture holders, the board thanks him for his loyal stewardship and
contribution. Mr John Levin has accepted the company`s nomination to serve in
the capacity of debenture Trustee. Mr Levin is a consultant in the corporate
law department of Webber Wentzel and the directors are pleased to have someone
of Mr Levin`s calibre and standing accept the nomination. The company will
shortly convene a meeting of debenture holders for the purpose of approving Mr
Levin`s appointment by special resolution.
INTEREST DECLARATION
Notice is hereby given that a debenture interest payment (number 42) of 36 cents
per debenture in respect of the six months ended 30 June 2008 is payable to
debenture holders recorded in the debenture register of the company on the
record date. In compliance with the Listings Requirements, the following dates
are applicable:
Last date to trade Friday, 1 August 2008
Debentures trade ex-interest Monday, 4 August 2008
Record date Friday, 8 August 2008
Payment date Monday, 11 August 2008
IMPORTANT: ELECTION TO RECEIVE DEBENTURES IN LIEU OF A CASH INTEREST PAYMENT
As provided for in section 6.4 of the Debenture Trust Deed, the board has
resolved that debenture holders recorded in the debenture register at the close
of business on the record date may elect to receive new fully paid Foord Compass
Limited Variable Rate debentures in lieu of a cash interest payment ("the
debentures"). The motivation for this decision is to retain cash and build
capital for debenture holders. The tax implications of the settlement of the
debenture interest payment by the issue of debentures or by the payment of cash
should be the same. However, debenture holders are encouraged to consult their
professional advisors should they be in any doubt as to the appropriate action
to take.
Certificated debenture holders who wish to elect to receive debentures in
respect of all or a part of their interest entitlement, must complete the Form
of Election (mailed under separate cover) in accordance with the instructions
therein and return such election form to the company`s transfer secretaries to
be received by no later than 12:00 on the record date, being Friday, 8 August
2008. Dematerialised debenture holders who wish to elect to receive debentures
in respect of all or a part of their interest entitlement must, in terms of the
agreement between themselves and their Central Securities Depository Participant
("CSDP") or broker, instruct their CSDP or broker accordingly.
If the election to receive debentures is not made by dematerialised debenture
holders by the cut-off time stipulated by their CSDP or broker, or by 12:00 on
Friday, 8 August 2008 in the case of certificated debenture holders, debenture
holders will be deemed to have elected to receive a cash interest payment. As
indicated above, the last day to trade in the company`s debentures on the JSE to
ensure that a purchaser appears as an owner on the record date will be Friday, 1
August 2008. The number of debentures to be issued ("the ratio") will be
determined with reference to the ex-interest net attributable asset value per
debenture as at 30 June 2008 of 733.6 cents. Accordingly, the ratio is 4.907
interest debentures for each 100 debentures held on the record date. Only
rounded numbers of interest debentures will be issued based on conventional
rounding principles. No fractions will be paid. The right to receive
debentures may not be traded on the JSE.
Subject to JSE approval of the debenture election, application will be made to
the JSE Limited for a listing of the maximum number of debentures to be issued
with effect from the commencement of business on Monday, 4 August 2008. An
adjustment to the number of debentures listed will be made on or about Monday,
11 August 2008 in accordance with the actual number of debentures issued having
regard to the elections made.
Cheques and/or new debenture certificates will be posted by registered post to
certificated debenture holders and the safe custody accounts updated and/or
credited by CSDPs or brokers of dematerialised debenture holders on or about
Monday, 11 August 2008.
Signed on behalf of the board
MO HODGES D FOORD
16 July 2008
Directors: MO HODGES* (Chairman), D FOORD*, JC GREYLING, DA MOIR, JC VAN
NIEKERK * British
Company secretary: PE CLUER
Date: 16/07/2008 15:37:01 Produced by the JSE SENS Department.
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