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CAE
CAE
CAE - Cape Empowerment Trust - Reviewed Financial Results For The Period Ended
31 December 2008
CAPE EMPOWERMENT TRUST LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/014606/06)
(Share code: CAE ISIN: ZAE000016952)
("Cape Empowerment Trust" or "the Group")
REVIEWED FINANCIAL RESULTS
FOR THE PERIOD ENDED 31 DECEMBER 2008
CONDENSED CONSOLIDATED INCOME STATEMENT
for the period ended 31 December 2008
Reviewed Restated
Year ended Year ended
31 December 31 December
2008 2007
R`000 R`000
Revenue 174 081 154 155
Cost of sales (122 376) (101 570)
Gross Profit 51 705 52 586
Other income 1 581 4 351
Operating expenses (59 239) (56 324)
Operating profit/(loss) before capital items (5 953) 613
Impairments (34 619) (3 612)
Profit/(loss) on sale of capital assets 4 723 (6 771)
Operating profit/(loss) after capital items (35 849) (9 770)
Investment revenue 64 953 9 737
Fair value adjustments (360 554) 198 420
Negative goodwill 3 521 19 695
Loss on non-current assets held for sale (10 873) -
Finance costs (77 744) (10 340)
(Loss)/profit before taxation (416 546) 207 742
Taxation 35 580 (47 146)
(Loss)/profit for the year (380 966) 160 596
Minority Interest (71 670) 15 594
(Loss)/profit attributable to equity holders of
the company (309 296) 145 002
(Loss)/earnings per share for profit
attributable to
the equity holders of the Group during the
period (expressed as cents per share)
Basic (91,2) 53,3
Headline (83,9) 43,9
Fully diluted (loss)/earnings per share (88,6) 50,4
Fully diluted headline (loss)/earnings per share (81,6) 41,5
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 December 2008
Reviewed Restated
Year ended Year ended
31 December 31 December
2008 2007
R`000 R`000
ASSETS
Non-current assets 281 359 1 091 061
Investment Property 2 871 2 609
Property, plant and equipment 13 923 16 577
Goodwill 13 120 29 603
Intangible assets 9 235 9 235
Other financial assets 242 210 1 033 037
Current assets 208 523 139 555
Inventories 19 629 23 253
Other financial assets 64 686 20 894
Trade and other receivables 21 748 23 853
Cash and cash equivalents 102 460 71 555
Non-current assets held for sale - 17 734
Total assets 489 882 1 248 350
EQUITY AND LIABILITIES
Equity
Share capital and premium 301 735 234 220
Treasury shares (37 853) (4 113)
Retained earnings/(accumulated loss) (22 747) 297 252
Minority interest 79 189 157 784
Total equity 320 324 685 143
LIABILITIES
Non-current liabilities 52 322 419 754
Other financial liabilities 19 068 337 343
Instalment sale obligations 4 043 3 327
Deferred tax liability 29 211 79 084
Current liabilities 117 236 143 453
Loans from shareholders 10 708 18 068
Other financial liabilities 52 479 53 420
Current income tax liabilities 19 883 18 996
Instalment sale obligations 1 797 1 307
Trade and other payables 32 166 51 079
Dividends payable 203 -
Bank overdraft - 583
Total liabilities 169 558 563 207
Total equity and liabilities 489 882 1 248 350
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the period ended 31 December 2008
Reviewed Restated
Year ended Year ended
31 December 31 December
2008 2007
R`000 R`000
Cash flow from operating activities (44 220) 20 541
Cash (utilised)/generated by operations (28 059) 25 588
Interest received 41 103 8 126
Dividends received 23 850 1 611
Interest paid (77 744) (10 340)
Taxation paid (3 370) (4 444)
Cash flow from investing activities 377 801 (535 233)
Purchase of property, plant and equipment (5 287) (3 658)
Proceeds from sale of property, plant and
equipment 3 335 1 591
Purchase of investment property - (2 609)
Purchase of subsidiary - 10 486
Sale/(purchase) of financial assets 379 753 (513 064)
Profit on sale of shares - 6 741
Non-current asset held for sale - (17 734)
Loss on sale of financial asset - (16 986)
Cash flow from financing activities (302 094) 572 822
Proceeds on share issue 33 776 180 482
Proceeds/(repayment) of borrowings (319 216) 384 327
Proceeds from other financial liabilities - 2 160
Proceeds/(repayment) of shareholders loan (7 360) 6 419
Proceeds/(repayment) of installment sale
obligations 1 206 (566)
Dividends paid (10 500) -
Net (decrease)/increase in cash 31 487 58 130
Cash surplus at the beginning of the period 70 972 12 842
Cash resources at the end of the period 102 459 70 972
SUPPLEMENTARY INFORMATION
for the period ended 31 December 2008
Reviewed Restated
Year ended Year ended
31 December 31 December
2008 2007
R`000 R`000
Number of shares in issue - consolidated
(000`s) 348 450 325 125
Fully diluted number of shares in issue -
consolidated (000`s) 363 554 345 998
Shares in issue - weighted (000`s) 339 180 272 056
Diluted number of shares - weighted
(000`s) 348 926 287 847
Net asset value per share (cents) 69.1 162.2
(Loss)/Profit attributable to ordinary
shareholders (R`000) (309 295) 145 002
(Loss)/earnings per share (cents) (91,2) 53,3
Fully diluted (loss)/earnings per share
(cents) (88,6) 50,4
Headline (loss)/earnings per share (cents) (83,9) 43,9
Fully diluted headline (loss)/earnings
per share (cents) (81,6) 41,5
Reconciliation of headline
earnings/(loss) (R`000)
(Loss)/profit for the year (309 295) 145 002
(Loss)/profit on sale of shares and assets (636) (6 741)
Negative goodwill (3 521) (19 695)
Impairments 29 110 -
Fair value adjustment on investment
property (262) -
Tax effect (19) 833
Headline (loss)/earnings (R`000) (284 623) 119 399
Reconciliation of diluted number of shares
Number of shares in issue (`000) -
weighted 339 180 272 056
Dilutive shares (`000) 9 746 15 791
Number of shares to be cancelled (`000) - -
Diluted number of shares (`000) - weighted 348 926 287 847
SEGMENTAL INFORMATION
for the period ended 31 December 2008
Loss/ (Profit)
before tax Revenue Assets Liabilities
R`000 R`000 R`000 R`000
Property 48,845 0 124,798 4,562
Security and Services 12,429 50,607 32,044 10,581
Gaming 298,023 0 166,033 82,957
Other 57,249 123,474 167,007 71,458
416,546 174,081 489,882 169,558
STATEMENT OF CHANGES IN EQUITY
for the period ended 31 December 2008
Total
Share Share share
capital premium capital
R`000 R`000 R`000
Group
Balance at 01 January 2007 231 49,393 49,624
Profit for the year - - -
Issue of shares 96 184,499 184,595
Business combinations - - -
Balance at 01 January 2008 327 233,892 234,219
Loss for the year - - -
Issue of shares 46 67,470 67,516
Purchase of own shares - - -
Dividends - - -
Business combinations - - -
Balance at 31 December 2008 373 301,362 301,735
Total
attributable
to equity
Treasury Retained holders of
shares income the group
R`000 R`000 R`000
Group
Balance at 01 January 2007 - 152,250 201,874
Profit for the year - 145,002 145,002
Issue of shares (4,113) - 180,482
Business combinations - - -
Balance at 01 January 2008 (4113) 297,252 527,358
Loss for the year - (309,295) (309,295)
Issue of shares - - 67,516
Purchase of own shares (33,740) - (33,740)
Dividends - (10,704) (10,704)
Business combinations - - -
Balance at 31 December 2008 (37,853) (22,747) 241,135
Minority
interest Total
R`000 R`000
Group
Balance at 01 January 2007 24,532 226,406
Profit for the year 15,594 160,596
Issue of shares - 180,482
Business combinations 117,659 117,659
Balance at 01 January 2008 157,785 685,143
Loss for the year (71,670) (380,965)
Issue of shares - 67,516
Purchase of own shares - (33,740)
Dividends - (10,704)
Business combinations (6,926) (6,926)
Balance at 31 December 2008 79,189 320,324
COMMENTARY
1. INTRODUCTION
Cape Empowerment Trust is a diversified BEE investment group with substantial
businesses and investments in Property, Gaming and Leisure, Security and
Services, Financial Services and Information, Communications and Technology.
The global financial and credit crisis have worsened to a scale few would have
imagined twelve months ago. This has fundamentally shaken investor confidence
and stock markets worldwide experienced painful meltdowns amidst fears of a
global (and local) recession.
Although thought to be isolated from the worst, South Africa is by no means
escaping dynamicrsa@mweb.co.za the carnage. Despite indications that our
financial system remain fundamentally sound, banks have tightened up on lending
with credit difficult to obtain and more expensive.
2. RESULTS
2.1 Unrealised losses
The unrealised impairments and fair value adjustments overshadow the Group`s
performance for the year under review. Total unrealised impairments and
downward fair value adjustments of R395 million accounted for most of the
group`s loss before taxation for the year of R416 million:
Unrealised impairments and downward
fair value adjustments R` million
Ambit Properties Ltd 40
Grand Parade Investments Ltd 288
Command Holdings Ltd 11
Purple Capital Ltd 21
Dynamic Cables RSA Ltd 31
Other 4
Total 395
Current market conditions have clearly dealt harshly with the Group`s assets
from a valuation point of view. However, we believe that the Group`s assets are
fundamentally sound and that once sanity returns to the market these losses
will reverse.
2.2 De-leveraging of balance sheet
As a result of these conditions, the board during the second half of 2008
embarked on a concerted effort to de-leverage the Group by disposing of certain
assets and repaying debt. These transactions included the realisation of the
investment of 110 000 000 linked units in Ambit Properties Ltd, the disposal of
the interest in Ambit Management Services (Pty) Ltd, the disposal of the
interest in CII Hotels and Resorts (Pty) Ltd and the disposal of Sancino Litho
(Pty) Ltd. The impact of these disposals on "the Group" balance sheet can be
clearly seen, with Total Assets reduced from R1,248 billion in 2007 to R490
million in 2008. Collectively, the disposals account for R500 million of this,
with the balance made up mainly by downward fair value adjustments on our GPI
interests.
The effect of the above actions was to reduce total interest bearing debt from
R432 million in 2007 to R108 million in 2008. Of this, a further R52 million
was repaid in January 2009 from available cash resources, leaving total
interest bearing debt at R56 million and total cash resources at R47 million.
Included in other current financial assets of R65 million is R49 million due in
terms of the Ambit and CII disposals, of which R35 million has been received
after year end.
As a result of the de-leveraging, the Group now have a robust balance sheet
well able to weather the current economic storm.
3. REVIEW OF INVESTMENTS
3.1 Property
The Group`s property investments consist of:
- A 25% interest in African Alliance Real Estate Investment Trust Ltd and
African Alliance Management Services (Pty) Ltd, a black-owned and managed
property business, which interest is valued at R50 million;
- A 41% economic interest in Lions Hill Development Company (Pty) Ltd, valued
at a cost of R12 million. A decision has been taken with the project financiers
to landbank the development until market conditions improve;
- A 20% interest in Rapiprop 159 (Pty) Ltd, an agricultural property-based
farming venture with Capespan Ltd and Total Produce Plc, currently valued at
cost, being R10,7 million.
3.2 Security and Services
Investments include a 24.4% interest in listed Command Holdings Ltd (valued at
R8 million at year end) and a 90% interest in Alexandra Security. Subsequent to
year end Alexandra Security acquired the business of Toto Security for R6
million. The Group has also reached agreement in principle to merge Alexandra
Security with a specialist provider of cleaning and related services to the
hospitality sector which will result in Cape Empowerment Trust owning 52% of
the enlarged group.
We view this sector as a key driver of future growth for the Group and we will
continue to build our investments in this area.
3.3 Gaming and Leisure - Grand Parade Investments Ltd ("GPI")
During the year under review CET restructured its gaming interests by disposing
of its interests in BLRT Investments Ltd, Sancino Projects Ltd, Business
Venture Investments 1275 (Pty) Ltd and certain GPI interests to its 70% held
subsidiary, CET Gaming Holdings (Pty) Ltd.
As at 31 December 2008 the Group`s effective economic interest in GPI was 47,6
million GPI shares, or approximately 10,3% of GPI. After year-end a scheme of
arrangement by Sancino Projects Ltd has resulted in the Group`s effective
economic interest increasing to 51,2 million GPI shares, or 11,1% of GPI.
GPI is now considered to be a recovery stock and as such will be held at least
until the sector recovers. CET constantly reviews its investments and will
consequently acquire additional and where necessary dispose of shares in order
to rebalance the mix in its portfolio.
3.4 Other
Cape Empowerment Trust owns 19,3 million shares (2,3%) in Purple Capital Ltd,
25% of African Independent Horizons (Pty) Ltd and 25% of Summit Fund Solutions.
These investments were valued at a total of R9,8 million at year end. Other
investments also include a 42% interest in Dynamic Cables RSA Ltd, a listed
cabling and light engineering group providing products and services to the ICT
sector.
Shareholders are referred to Dynamic`s recently published results in this
regard.
During the year under review the Group disposed of Sancino Litho (Pty) Ltd.
Inclusive of the sale proceeds the Group received total cash flows of R24
million from the investment.
4. BASIS OF ACCOUNTING
Grant Thornton, the group`s independent auditor, has reviewed the provisional
financial statements contained in this provisional report and has expressed an
unmodified review report which is available for inspection at the company`s
registered office.
The provisional condensed financial statements for the year ended 31 December
2008 were prepared in accordance with IAS 34 - Interim Financial Reporting and
in compliance with the Listings Requirements of the JSE Limited. The financial
information has been prepared on the basis of the recognition and measurement
requirements of International Financial Reporting Standards (IFRS). The
accounting policies of the group have remained consistent with those of 2007.
5. DIVIDENDS
A dividend of 3 cents per share was paid to shareholders on 16 May 2008. Given
the ongoing market volatility the board has deemed it prudent not to declare a
dividend for the year under review.
6. PRIOR PERIOD ERROR
During the 2007 financial year CGT was incorrectly accrued on the sale of
certain property interests as the CGT roll-over provisions was in fact applied
at the time.
As a result, a CGT liability of R10 033 655 was incorrectly raised in 2007 and
corrected retrospectively. The only effect on the financial statements is an
increase in the 2007 deferred tax liability and a decrease in the 2007 current
tax payable.
7. SUBSEQUENT EVENTS
7.1 A scheme of arrangement was successfully concluded by Sancino Projects Ltd
whereby the company became a wholly-owned subsidiary of CET Gaming Holdings
(Pty) Ltd.
7.2 The sale of Business Venture Investments 1232 (Pty) Ltd to ApexHi
Properties Ltd was approved by the Competition Authorities in February
2009.
7.3 Alexandra Security (Pty) Ltd acquired the business of Toto Security for R6
million and agreement was reached in principle to merge Alexandra Security
with a specialist provider of cleaning and related services to the
hospitality sector which will result in Cape Empowerment Trust owning 52%
of the enlarged group.
8. STRATEGY AND PROSPECTS
As a result of the de-leveraging the Group now have a robust balance sheet well
able to weather the current economic storm. The focus will be on operational
cash flows in the Services and other operating businesses and continued asset
growth in Property.
Until market conditions improve a conservative approach to borrowings will
prevail.
For and on behalf of the board
S L Rai J de Villiers
Executive Chairman Managing Director
Cape Town
30 March 2009
Board of Directors:
S L Rai (Executive Chairman), T D Rai (Deputy Chairman*), J de Villiers
(Managing Director), R McGregor, P B Hesseling*, O Valley*, H Takolia**,
F Calana**, M Barnes*
* Non-Executive ** Independent Non-Executive
Date: 30/03/2009 13:17:01 Produced by the JSE SENS Department.
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