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STA
STA
STA - StratCorp - Audited Condensed Consolidated Financial Results For The
Year Ended 28 February 2009
STRATCORP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2000/031842/06)
JSE code: STA & ISIN ZAE000034294
("StratCorp" or "the company")
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 February 2009
Consolidated Balance Sheet
Audited Audited
February February
2009 2008
R`000 R`000
Non-current assets
Investment property 562 1 268
Property, plant and equipment 6 130 6 140
Goodwill 1 318 3 532
Intangible assets 1 184 1 710
Other financial assets 1 379 6 531
Deferred tax 5 494 490
16 067 19 671
Current assets
Inventories 50 194 31 298
Other financial assets 12 841 19 720
Current tax receivable 4 260 4 620
Trade and other receivables 3 344 8 455
Cash and cash equivalents 2 176 2 094
72 815 66 187
Total assets 88 882 85 858
Equity and liabilities
Equity
Share capital 53 390 25 912
Retained income 595 25 278
53 985 51 190
Non-current liabilities
Other financial liabilities - 10 464 631
interest bearing
Finance Lease obligations 1 451 2 125
Deferred tax - 3 240
11 915 5 996
Current liabilities
Other financial liabilities - 9 904 10 777
interest bearing
Current tax payable 268 203
Finance lease obligations 969 784
Operating lease liability 770 -
Trade and other payables 11 071 16 408
Bank overdraft - 500
22 982 28 672
Total liabilities 34 897 34 668
Total equity and liabilities 88 882 85 858
Number of ordinary shares in issue 173 269 116 021
(`000) (note1)
Net asset value per share (cents) 31.2 44.1
(NAVPS)
Net tangible asset value per share 29.7 39.6
(cents) (NTAVPS)
Consolidated Income Statement
Audited Audited
February February
2009 2008
R`000 R`000
Revenue 74 333 82 943
Cost of sales (38 814) (35 992)
Gross profit 35 519 46 951
Other income 820 315
Operating expenses (41 485) (37 393)
Impairment of loans receivable (19 040) -
Impairment of goodwill (2 215) -
Fair value adjustments (4 405) 892
Investment revenue 548 1 273
Operating (loss) / profit (30 258) 12 038
Finance cost (2 655) (553)
(Loss) profit before taxation (32 913) 11 485
Taxation 8 230 (3 541)
(Loss) / profit for the period (24 683) 7 944
173 269 116 021
Number of ordinary shares in issue
(`000) (note 1)
Weighted average number of ordinary 116 161 110 952
shares in issue (`000)(note 2)
Basic (loss) / earnings per share (21.25) 7.16
(cents)
Headline (loss) / earnings per share (19.32) 7.15
(cents)
Reconciliation of headline (loss) /
earnings net of tax
Basic (loss) / earnings (24 683) 7 944
Profit on sale of property, plant and (31) (13)
equipment
Impairment of property, plant and 55
equipment
Impaiment of goodwill 2 215
Headline (loss) / earnings (22 444) 7 931
Notes
1. 180 296 330 ordinary shares less 7 027 731 treasury shares (2008: 123
004 663 ordinary shares less 6 983 531 treasury shares).
2. 122 566 437 weighted average number of ordinary shares less 6 405 789
weighted average number of treasury shares (2008: 117 357 552 weighted
average number of ordinary shares less 6 405 789 weighted average number
of treasury shares).
Consolidated Statement of Changes in Equity
Share Retained Total
Capital Earnings
R`000 R`000 R`000
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
year
Balance at 01 March 25 912 25 278 51 190
2008
Issue of shares 27 500 - 27 500
Treasury shares (22) - (22)
Net loss for the - (24 683) (24 683)
period
Balance at end of 53 390 595 53 985
period
Consolidated Cash Flow Statement
Audited Audited
February February
2009 2008
R`000 R`000
Cash flows from operating activities
Cash received from customers 80 264 88 675
Cash paid to suppliers and employees (101 744) (80 334)
Cash generated from (used in) (21 480) 8 341
operations
Net interest income (1 707) 888
Tax paid 413 (9 637)
Net cash flows from operating (22 774) (408)
activities
Cash flows from investing activities
Purchase of property, plant and (2 022) (3 081)
equipment
Sale of property, plant and equipment 337 15
Purchase of investment properties - (1 267)
Sale of investment properties 1 261 -
Purchase of intangible assets (28) (641)
Purchase of financial assets (12 965) (4 973)
Sales of financial assets 1 550 892
Net cash from investing activities (11 867) (9 055)
Cash flows from financing activities
Proceeds on share issue 27 478 (1 060)
Proceeds from financial liabilities 29 893 1 048
Repayment of financial liabilities (20 933) (151)
Finance leases (1 215) (420)
Net cash from financing activities 35 223 (583)
Net increase (decrease) in cash and 582 (10 046)
cash equivalents
Cash and cash equivalents at beginning 1 594 11 642
of the year
Cash and cash equivalents at end of 2 176 1 594
the year
Condensed Segmental Reporting
Audited % Audited %
February February
2009 2008
R`000 R`000
Revenue
Property development 70 054 45 19 748 20
External customers 26 783 19 748
Inter segment 43 271 -
Investment management 23 817 15 25 302 26
External customers 23 129 25 302
Inter segment 688 -
Marketing and distribution 35 063 22 37 861 38
External customers 24 171 37 820
Inter segment 10 892 41
Corporate 27 187 17 15 806 16
External customers 241 73
Inter segment 26 946 15 733
Other 9 1 - -
External customers 9 -
Inter segment - -
156 130 100 98 717 100
- Inter segment eliminations (81 797) (15 774)
74 333 82 943
Profit after tax
Property development (7 480) 30 388 5
Investment management (184) 1 5 888 75
Marketing and distribution (179) 1 1 325 16
Corporate (16 690) 67 343 4
Other (150) 1 - -
(24 683) 100 7 944 100
Segment assets
Property development 53 119 60 39 090 45
Investment management 3 998 4 10 120 12
Marketing and distribution 5 472 6 7 573 9
Corporate 26 102 29 29 074 33
Other 191 1 1 1
88 882 100 85 858 100
Segment liabilities
Property development 25 652 74 19 064 55
Investment management 322 1 6 356 18
Marketing and distribution 3 194 9 4 260 12
Corporate 5 710 15 4 987 14
Other 19 1 1 1
34 897 100 34 668 100
OVERVIEW
During the year under review, trading conditions were extremely difficult and
operations were hampered by various challenges. However, the group decreased
the operational loss before impairments, fair value adjustments and taxation
("net operating loss") of R 3.9 million incurred during the first 6 months to
reflect a total net operational loss of R5.1 million for the full year,
effectively resulting in a net operational loss of R 1.2 million for the
latter half of the financial year.
The group posted its worst results in its history and accordingly the
executive management implemented a number of initiatives to ensure that the
group continues to increase turnover and return to profitability in future.
NATURE OF BUSINESS
StratCorp is an investment holding company listed on AltX. StratCorp`s
business philosophy is divided into four distinct segments, namely Asset
Management and Private Equity, Marketing and Distribution, Asset Finance and
Property Development. Through its wholly owned subsidiaries, the company is
well-positioned and equipped to take its innovative products to the market.
SUBSIDIARIES
Asset Finance
During the year under review, the company started its Asset Finance division
under the name StratCorp Financing Company (Proprietary) Limited. The company
acquired the business of Xpress Holdings (Proprietary) Limited. The agreement
was cancelled in October 2008. Details of the cancellation were published in
the interim results on SENS during October 2008. A provision for R 5.1
million was made for cost incurred in the process.
The Asset Finance division continued under StratFin (Proprietary) Limited and
acquired and implemented the necessary infrastructure to enable it to provide
focussed finance solutions to the consumer and business market in partnership
with selected product providers.
Asset Management and Private Equity
Through its StratEquity subsidiary (100%), the company provides a traditional
asset management model. 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 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 Exchange
Traded Funds. The first of these vehicles have already attracted substantial
investments in the period under review.
StratEquity has in excess of 44 000 monthly subscribers on its books that
invest through the investment companies.
Total investment funds received from clients during the year increased to R
84.4 million. (2008: R 68.4 million -
25.3% increase).
The company has further identified other distribution channels for its
products and these channels will be explored during the 2010 financial year.
As a result of past activity in StratEquity, the group acquired certain
investments, which investments were classified as "held for trading". Held
for trading investments are carried at cost as fair value cannot be
determined. The carrying amount of these investments is tested for impairment
annually in accordance with IAS 39. 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 (note 1)
Supertow International Ltd: 11% shareholding
Note 1 The group does not exercise any significant influence over this
investment as it is autonomously managed without any input from the
StratCorp.
Marketing and Distribution
ICI Marketing (100%) was previously only responsible for the marketing of
StratEquity`s investment products. The company has added the I-Cura range of
products (health and nutrition) to its range which is expected to contribute
to its future profitability. Since its launch in October, I-cura has been
well accepted in the market.
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 the development of its residential units in Soldonne (phase 3
of the Orchards X33 development) has been completed, with 60 out of the total
134 units already being transferred. The remaining units have either been
sold and are in the process of being transferred or are rented on an
incidental basis until the sale of the unit. Unsold properties are reflected
as inventory. All external liabilities relating the development should be
settled by the middle of 2009. No new developments on current vacant land
owned by the group are currently contemplated due to the current state of the
economy. This decision will be reviewed constantly. Management is focusing on
the rental pool as well as the marketing of building packages on full title
stands.
CASH FLOWS
The company raised R 27.5 million at the end of February 2009 through a
general issue for cash. This enabled the group to reduce certain gearing,
position it to withstand the current economic down turn and facilitate growth
plans. Cash generated from operations decreased from R 8.3 million (2008) to
(R 21.5 million) (2009) This was mainly due to the investment in stock and
creditor payments. Infrastructural expenses (Property, Plant and Equipment)
decreased from R 3.1 million to R 2.0 million as a result of the prior year`s
spending to establish an infrastructure to cope with future growth. Although
a marginal net cash flow of R 0.5 million was recorded for the period, a
substantial portion of the cash with regard to the property and finance
operations will flow back to the company during the course of the 2010
financial year.
Total borrowings at year end were R 20.4 million (2008: R11.4 million). The
group`s borrowings increased to finance its property development activities,
which did not impact on earnings per share or headline earnings per share
directly in the past financial year as these increased borrowing costs were
capitalised as part of stock.
HUMAN RESOURCES
The company reorganised and focused it business units during the second half
of the year under review. This action resulted in the retrenchment of 9 staff
members during October 2008. The current human resource infrastructure is
adequate to ensure sustained operation and allow for future growth.
CORPORATE GOVERNANCE
A detailed report on the past year`s Corporate Governance compliance is
included in the annual report. The board fully supports the King Code and
aims to ensure compliance therewith. The board of directors will in the new
financial year put the external audit function out on tender.
CHANGES TO THE BOARD
Mr. JN de Beer (Chief Financial Director) resigned as a director on 15
October 2008 and Prof. SR Firer (non-executive) was appointed to the board on
25 February 2009. Mr. HJ vd Merwe (previous group COO) assumed the position
of Group Financial Director on 15 October 2008.
SYSTEMS AND INFRASTRUCTURE
Systems
The systems utilised by the group are constantly evaluated and upgraded with
the necessary safeguards in place to ensure that the operations of the group
are not hampered in any way. All third party software is licensed.
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.
PROSPECTS
Any prediction in the current financial and economic environment should be
made with caution. Management however believe that the initiatives that it
has implemented and are currently implementing may result in an operational
profit for the 2010 financial year.
SUBSEQUENT EVENTS
Subsequent to year end the term loan from Standard Bank was reduced to R 4.5
million from R 9.5 million at 28 February 2009 through further property
transfers. Other than the facts and developments reported on in these
condensed audited results, there have been no material changes in the
affairs, financial or trading position of the group since the year end.
FINANCIAL REVIEW
The consolidated turnover of the group decreased by10.38% to R 74.3 million
in 2009 (2008: R82.9 million).
For comparison purposes, the preceding four years` revenue, net profit after
tax, earnings per share (EPS) and net asset value per share (NAVPS) are
indicated in the table below:
2005 2006 2007 2008 2009
Revenue - R`000 11 050 19 670 50 191 82 942 74 333
Net profit after tax -
R`000 501 4 575 17 531 7 944 (24 683)
EPS - cents 0.67 5.53 17.22 7.16 (21.25)
HEPS - cents 0.67 4.53 17.22 7.15 (19.32)
NAVPS - cents 7.5 30.2 33.9 44.1 31.2
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The audited condensed financial statements comprise a consolidated balance
sheet at 28 February 2009, a consolidated income statement, consolidated
statement of changes in equity and summarised consolidated cash flow
statement for the year ended 28 February 2009. The audited condensed
consolidated 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, the 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 (PTA) Inc. The
annual financial statements and the auditors` unqualified audit report in
respect thereof are available for inspection at the company`s registered
office.
DIVIDENDS
No dividends have been declared.
STATEMENT ON GOING CONCERN
The annual 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 180 296 330 no par value
shares.
During the year, the company issued 57 291 667 ordinary shares to public
share holders at 48 cents per share. The total issued capital of the company
is 180 296 330 at 28 February 2009.
BORROWINGS
The group substantially reduced its borrowings in the last 6 months. At
yearend total borrowings were R 20.3 million. (2008: R 11.4 million)
ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING
Shareholders are advised that the Annual Report for the year ended 28
February 2009 will be posted to them on or about 29 May 2009.
Notice is hereby given that the Annual General Meeting of shareholders will
be held at 3rd Floor, Lakeside Building a, 2004 Gordon Hood Drive, Centurion
at 12:00 on Friday, 3 July 2009, to transact the business as stated in the
notice of annual general meeting forming part of the Annual Report.
GENERAL
The board of directors have approved these audited condensed consolidated
results. 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
22 May 2009
CORPORATE INFORMATION
Non executive directors: PJ de Jongh (Chairman), M Patel* (Chairman of Audit
Committee), SR Firer*Independent
Executive directors: DB Harington (CEO), HJ van der Merwe (GFD), IM Wright
(CIO)
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: 22/05/2009 15:45:01 Produced by the JSE SENS Department.
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