| Thu 18 Sep 2008, 12:33 | | CND - Conduit Capital Limited - Disposal Of Gateway Capital Limited |
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CND
CND
CND - Conduit Capital Limited - Disposal Of Gateway Capital Limited
Conduit Capital Limited
Incorporated in the Republic of South Africa
(Registration number 1998/017351/06)
Share code: CND ISIN: ZAE000073128
("Conduit Capital" or "the group")
DISPOSAL OF GATEWAY CAPITAL LIMITED
Shareholders are advised that Conduit Capital has disposed of its
50.05% interest in Gateway Capital Limited ("Gateway") to KSO
Financial Services (Proprietary) Limited ("KSO") with effect from
31 July 2008 (the "disposal").
Gateway is an innovator in the short-term commercial bridging
finance industry, offering specialised commercial, asset and
property finance.
RATIONALE
Conduit Capital is of the view that the disposal of its interest in
Gateway is beneficial to the group and its shareholders. While the
prospects of Gateway remain good, Gateway`s business is impacted by
the current high interest rate environment, which dictates that in
order for it to develop and expand its business it would have to
pursue an aggressive growth strategy. Although consistent with the
industry in which Gateway operates, this direction would not be
aligned with Conduit Capital`s more conservative risk strategy. In
the circumstances and following discussions with management, it was
deemed appropriate for Conduit Capital to exit its stake.
TERMS AND CONDITIONS OF THE DISPOSAL
Conduit Capital has sold its shares in Gateway to KSO for an
aggregate consideration of R16 400 000, of which:
- R2 900 000 (together with interest at prime plus 2% from 31
August 2008 until the date of payment) will be paid in cash by 10
October 2008; and
- the balance of R13 500 000 will be discharged by the cession
by KSO to Conduit Capital of its loan account against Gateway (the
"KSO loan").
The KSO loan bears interest at prime plus 2% and is repayable as
follows:
- R5 000 000 by no later than 31 December 2008;
- R5 000 000 by no later than 28 February 2009; and
- the balance by no later than 31 August 2009.
The proceeeds from the disposal will be appropriately utilised
within the group.
The disposal is not subject to any conditions precedent.
FINANCIAL EFFECTS OF THE DISPOSAL
The table below sets out the unaudited pro forma financial effects
of the disposal on Conduit Capital`s earnings per share ("EPS"),
headline earnings per share ("HEPS"), diluted earnings per share
("DEPS"), diluted headline earnings per share ("DHEPS"), net asset
value ("NAV") per share and tangible net asset value ("TNAV") per
share.
The unaudited pro forma financial effects have been prepared to
illustrate the impact of the disposal on the reported financial
information of Conduit Capital for the six months ended 29 February
2008, had the disposal occurred on 1 September 2007 for income
statement purposes and on 29 February 2008 for balance sheet
purposes.
The pro forma financial effects have been prepared using accounting
policies that comply with International Financial Reporting
Standards and that are consistent with those applied in the results
for the six months ended 29 February 2008 as well as in preparing
the annual financial statements of Conduit Capital for the
18 months ended 31 August 2007.
The unaudited pro forma financial effects, which are the
responsibility of the directors, are provided for illustrative
purposes only and, because of their pro forma nature, may not
fairly present Conduit Capital`s financial position, changes in
equity, results of operations or cash flow.
Before After
disposal disposal Change
(cents) (cents) (%)
EPS 1.20 1.52 26.7
HEPS 1.20 1.36 13.3
DEPS 1.08 1.37 26.9
DHEPS 1.08 1.23 13.9
NAV per share 89.85 90.00 0.2
TNAV per share 54.72 67.72 23.8
Number of shares in issue net 226 277 226 277
of treasury shares (`000)
Weighted average number of
shares (`000) 225 856 225 856
Fully diluted number of 250 954 250 954
shares in issue (`000)
Notes and assumptions:
The figures set out in the "Before disposal" column above have been
extracted from the unaudited interim results for the six months
ended 29 February 2008.
The disposal is assumed to have been implemented on 1 September
2007 for EPS, HEPS, DEPS and DHEPS purposes and on 29 February 2008
for NAV and TNAV per share purposes.
EPS and HEPS as set out in the "After disposal" column are based on
the unaudited income statement for the six months ended 29 February
2008 and on the assumptions that:
- KSO paid R2 900 000 of the sale consideration by 10 October
2007 and two amounts of R5 000 000 each on 31 December 2007 and on
29 February 2008, respectively;
- amounts owing by KSO accrued interest at prime plus 2%, which
translated to pre-tax interest rates of between 15,5% and 16,5%;
- cash received from KSO was invested in a call account that
earned interest at pre-tax rates of between 9,2% and 10,0% per
year; and
- transaction costs of R50 000 were incurred.
- DEPS and DHEPS as set out in the "After disposal" column are
based on the unaudited income statement for the six months ended 29
February 2008 and on the assumptions that:
- KSO paid R2 900 000 of the sale consideration by 10 October
2007 and two amounts of R5 000 000 each on 31 December 2007 and on
29 February 2008, respectively;
- amounts owing by KSO accrued interest at prime plus 2%, which
translated to pre-tax interest rates of between 15,5% and 16,5%;
- cash received from KSO was invested in a call account that
earned interest at pre-tax rates of between 9,2% and 10,0% per
year; and
- transaction costs of R50 000 were incurred.
- All adjustments have a continuing effect.
CATEGORISATION OF THE DISPOSAL
The disposal is a category 2 transaction in terms of section 9.5(a)
of the Listings Requirements of JSE Limited.
18 September 2008
Sponsor
Merchant Sponsors (Proprietary) Limited
Corporate advisor
Java Capital (Proprietary) Limited
Date: 18/09/2008 12:33:01 Produced by the JSE SENS Department.
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