| Tue 20 Jan 2009, 15:30 | | FCPD - Foord Compass Limited - Preliminary Report For The Year Ended 31 |
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JSE FCPD
FCPD
FCPD - Foord Compass Limited - Preliminary Report For The Year Ended 31
December 2008 And Interest Payment And Election
FOORD COMPASS LIMITED
JSE Code: FCPD ISIN: ZAE000054466
Registration Number: 1987/003591/06
PRELIMINARY REPORT FOR THE YEAR ENDED 31 DECEMBER 2008 AND INTEREST PAYMENT
AND ELECTION
- Total return 2008: 6.3%
- Five year return: 20.7% p.a.
- Record high interest distribution of 93.6c
- Interest payment up 18% per debenture
- Net attributable asset value 743c per debenture
CONDENSED BALANCE SHEET Notes Reviewed Audited
at 31 December 2008 2008 2007
Rm Rm
ASSETS
Current assets 1,639.7 1,333.7
Investments 2 1,224.8 715.1
Income receivables and unsettled sales 26.3 414.8
Cash and cash equivalents 388.6 203.8
Total assets 1,639.7 1,333.7
EQUITY AND LIABILITIES
Capital and reserves 17.6 13.6
Ordinary share capital 0.1 0.1
Accumulated profits 17.5 13.5
Non-current liabilities 952.8 1,014.5
Unsecured debentures 3 950.7 998.7
Deferred taxation 2.1 15.8
Current liabilities 669.3 305.6
Accounts payable 2.1 1.9
Taxation 3.5 1.3
Short investment positions 2 579.0 242.9
Unsettled purchases 4.8 0.2
Debenture interest payable 79.9 59.3
Total equity and liabilities 1,639.7 1,333.7
Debentures in issue 138,730,846 136,245,025
Ordinary shares in issue 8,800,070 8,800,070
Cents Cents
Net attributable asset value per 742.9 776.6
debenture (cum interest)
Net attributable asset value per 685.3 733.1
debenture (ex interest)
Net attributable asset value per 200.0 152.8
ordinary share
CONDENSED INCOME STATEMENT Notes Reviewed Audited
2008 2007
Rm Rm
Investment income 129.4 72.6
Realised trading profits 26.6 33.9
Operating expenditure (11.9) (9.6)
Net distributable profit 144.1 96.9
Capital profits on sale of investments 13.1 33.4
Revaluation of investments (98.8) (123.2)
Net portfolio income before debenture 58.4 7.1
interest
Debenture interest (129.8) (87.2)
Revaluation of debentures 3 66.5 80.1
Loss before taxation (4.9) -
Taxation credit 4 8.9 1.1
Profit for the year 4.0 1.1
Weighted average number of debentures 138,404,567 101,912,669
in issue
Cents Cents
Interest per debenture (weighted) 93.8 85.6
Earnings per debenture 45.7 7.0
Earnings per ordinary share 45.5 12.0
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Ordinary Accumulat Total
share ed
capital profits
Rm Rm Rm
Balance at 31 December 2006 (audited) 0.1 22.5 22.6
Dividends - (10.1) (10.1)
Profit for the year - 1.1 1.1
Balance at 31 December 2007 (audited) 0.1 13.5 13.6
Profit for the year - 4.0 4.0
Balance at 31 December 2008 (reviewed)
0.1 17.5 17.6
CONDENSED CASH FLOW STATEMENT Reviewed Audited
2008 2007
Rm Rm
Net cash inflow (outflow) from investing 278.1 (256.0)
activities
Dividends, interest and taxation paid (111.8) (83.6)
Net cash received from issue of debentures 18.5 494.3
Net change in cash resources 184.8 154.7
Cash resources at beginning of year 203.8 49.1
Cash resources at end of year 388.6 203.8
These results have been reviewed by our auditors, Deloitte & Touche, whose
unmodified review opinion is available for inspection at the registered office
of the company.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
The condensed financial statements have been prepared using accounting
policies consistent with International Financial Reporting Standards and in
accordance with International Accounting Standard (IAS) 34 Interim Financial
Reporting.
The condensed financial statements have been prepared under the historical
cost convention, except for the revaluation of financial instruments. The
same accounting policies, presentation and methods of computation are followed
in these condensed financial statements as were applied in the preparation of
the company`s financial statements for the year ended 31 December 2007.
2. Investments
Investments comprise listed and unlisted securities managed to achieve a total
return which over the long-term exceeds the investment objective. In managing
the investment portfolio, securities may be held for trading within twelve
months or may be realised over longer periods as deemed appropriate by the
manager.
3. Unsecured debentures Reviewed Audited
2008 2007
Rm Rm
Unsecured debentures comprise
Debenture capital at issue price 940.6 922.1
Cumulative revaluation of debentures 10.1 76.6
Fair value of debentures 950.7 998.7
Reconciliation of balance
Balance at beginning of year 998.7 584.5
Net proceeds on issue of debentures 18.5 494.3
Revaluation - current year (66.5) (80.1)
Balance at end of year 950.7 998.7
Revaluation of debentures
Net portfolio income before debenture interest 58.4 7.1
90% allocation to debenture holders 52.6 6.4
Plus: proportionate share of taxation credit 10.7 0.7
Less: interest distribution for year (129.8) (87.2)
Revaluation - current year (66.5) (80.1)
4. Taxation credit
Current taxation charge - current year 4.8 1.3
Deferred taxation credit - current year (13.7) (2.4)
Net credit to income statement (8.9) (1.1)
The deferred taxation credit arose as a result of the negative revaluation of
investments over the year. The debenture share of the net taxation credit
which amounts to R10.7 million (2007: R0.7 million) has been credited to the
carrying value of the debentures as set out in note 3 above.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
The directors are pleased to announce a final interest distribution for the
six months ended 31 December 2008 of 57.6 cents per debenture - an increase of
32% over the corresponding distribution in 2007. This brings the total
interest distribution for 2008 to 93.6 cents per debenture - an increase of
18% over the 79.5 cents paid out in 2007. The 2008 interest payment is a
record high distribution for the company.
Due to the issue of new debentures during the year, on a weighted average
basis interest per debenture amounts to 93.8 cents (2007: 85.6 cents).
Net distributable profit for the year increased nearly 50% to R144.1 million
(2007: R96.9 million). This increase was driven by a trebling in dividends
received due to some significant unbundling distributions (Wesco, Remgro).
Realised trading profits decreased to R26.6 million (2007: R33.9 million) due
to reduced market opportunities in the course of the year. Similarly,
realised capital profits were lower. The mark-to-market revaluation of
investments held at the year end was less than in 2007, but was still a
negative value which reduced the net asset value.
The Net Attributable Asset Value (NAAV), ex interest, per debenture declined
to 685.3 cents (2007: 733.1 cents).
The returns to debenture holders for the years to 31 December 2008 are shown
in the table below:
5 years 3 years 1 year
to 31 December 2008 (% per
annum)
Income 13.6% 12.2% 12.8%
Capital 7.1% -0.1% -6.5%
Total return * 20.7% 12.1% 6.3%
Benchmark (CPI + 10% p.a.) ** 16.1% 18.5% 21.8%
* Calculated with reference to monthly net attributable asset values per
debenture
** Lagged one month
Two consecutive years of single digit returns for debenture holders have
reduced the 3-year return to 12.1% p.a., which is below the long-term
investment objective of CPI + 10%. The 5-year return of 20.7% p.a. remains
ahead of the benchmark.
The effective asset structure of the investment portfolio at 31 December is as
follows:
2008 2007
Domestic Foreign Total Total
Equities 39% 23% 62% 51%
Listed property 6% 0% 6% 4%
Government bonds -50% 0% -50% -12%
Corporate debt 5% 10% 15% 0%
Commodities 0% 2% 2% 0%
Cash and money market instruments 57% 8% 65% 57%
57% 43% 100% 100%
The portfolio remains conservatively positioned across all asset classes, with
cash and near-term money market instruments making up 65% of the asset base.
Foreign asset exposure was increased to 43% from an average 35% in 2007.
Domestic equity exposure was reduced, while foreign equities were increased.
The "short" government bond position has been increased while corporate debt
has been introduced.
COMMENT
2008 will be remembered as one of the most volatile and challenging years in
investment history, both globally and locally. Share markets worldwide
recorded some of their biggest one-year losses in history. Property prices
declined. Commodity prices were smashed downwards. Interest rates were cut,
especially latterly, and government bond yields declined, leaving this asset
class as the only one to deliver positive returns for the year as a whole.
Corporate bond spreads, conversely, widened hugely. The rand also depreciated
28% against the US dollar. In short, there was ample opportunity to make
significant losses in 2008, while profit opportunities were very limited.
The speed and size of the asset price declines were most remarkable as
investors latterly came to realise the full implications of the credit and
liquidity crises, the onset of a global recession and potential deflation.
Under these extremely negative circumstances, your investment portfolio has
performed exceptionally well to record a positive total return of 6.3% for the
year and deliver an increase in the final interest distribution of 32%, while
limiting the capital decline to 6.5%.
Strategic asset allocation was, once again, the major contributor to the
positive outcome. Equity losses were limited due to a reduced average
weighting of this asset class during the year. The foreign asset allocation
contributed positively. Higher cash holdings benefited from higher interest
rates. Dividend payouts generally increased and advantage was taken of some
extraordinary distributions in specie. The short bond position was positive
in the first half of the year, but made a negative contribution in the second
half.
OUTLOOK
The future is, perhaps, more uncertain than it has been for a long time. This
implies that risk management and capital preservation remain the most
important focus areas for the portfolio manager. The current conservative
asset allocation reflects this focus in order to cope with the uncertain
future.
We anticipate that there will be some great investment opportunities in 2009
as global economic conditions should stabilise and then normalise. We look
forward to the end of recessionary times and the avoidance of a long
deflationary cycle. We forecast some economic growth for South Africa, albeit
below capacity. Inflation should continue to trend downwards for some time
which should be positive for interest rates and subsequent economic growth in
South Africa.
Under these circumstances, we look forward to an investment return which
exceeds the investment objective. Further commentary and detail will be made
available in the annual report which is expected to be published in March
2009.
INTEREST PAYMENT AND ELECTION
Notice is hereby given that a debenture interest payment (number 43) of 57.561
cents per debenture in respect of the six months ended 31 December 2008 is
payable to debenture holders recorded in the debenture register of the company
on the record date. In compliance with the Listings Requirements of the JSE,
the following dates are applicable:
Last date to trade Friday, 6 February 2009
Debentures trade ex-interest Monday, 9 February 2009
Record date Friday, 13 February 2009
Payment date Monday, 16 February 2009
IMPORTANT: ELECTION TO RECEIVE DEBENTURES IN LIEU OF A CASH INTEREST PAYMENT
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, 13
February 2009. 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, 13 February 2009 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, 6 February 2009. 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 31 December 2008 of 685.3 cents.
Accordingly, the ratio is 8.399 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, 9 February 2009. An
adjustment to the number of debentures listed will be made on or about
Tuesday, 17 February 2009 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 accounts updated and/or credited by
CSDPs or brokers of dematerialised debenture holders on or about Monday, 16
February 2009.
Signed on behalf of the board
MO HODGES D FOORD
20 January 2009
Directors: MO HODGES* (Chairman), D FOORD*, JC GREYLING, DA MOIR, JC VAN
NIEKERK * British
Company secretary: PE CLUER
www.foordcompass.co.za
Date: 20/01/2009 15:30:02 Produced by the JSE SENS Department.
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