| Tue 29 Sep 2009, 11:45 | | ACT/ACTP - AfroCentric - Audited condensed consolidated group results for the |
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ACT ACTP
ACT
ACT/ACTP - AfroCentric - Audited condensed consolidated group results for the
year ended 30 June 2009
AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/000570/06)
JSE Code: ACT, ACTP
ISIN: ZAE000078416, ZAE000082269
("AfroCentric" or "the Company")
AUDITED CONDENSED CONSOLIDATED GROUP RESULTS
FOR THE YEAR ENDED 30 JUNE 2009
HEADLINES
* 368% increase in profit
* 72% increase in EPS
* 90% increase in diluted EPS
CONDENSED CONSOLIDATED INCOME STATEMENT
Audited Audited
2009 2008
% increase R`000 R`000
Continuing operations
Revenue 519 867 -
Other income 8 325 -
Administration expenses (478 916) (1 366)
Net finance income 8 097 11 346
Finance income 17 794 11 406
Finance costs (9 697) (60)
Share of profit of associates 9 151 3 490
Profit before tax 394 66 524 13 470
Income tax expense (13 607) (2 660)
Profit for the year from 52 917 10 810
continuing operations
Loss for the year from (2 379) -
discontinued operations
Profit for the year 368 50 538 10 810
Attributable to:
Equity holders of the Company 221 34 701 10 810
Minority interest 15 837 -
50 538 10 810
CONDENSED CONSOLIDATED BALANCE SHEET
Audited Audited
2009 2008
R`000 R`000
Assets
Non-current assets 1 000 008 205 409
Property, plant and equipment 110 639 -
Intangible assets 600 151 -
Unlisted investments 280 -
Investment in associates 127 435 105 409
Investment in preference shares 100 000 100 000
Deferred income tax assets 61 503 -
Current assets 228 411 17 294
Trade and other receivables 156 215 6 872
Receivables from associates and joint 6 642 -
venture
Cash and cash equivalents 65 554 10 422
Non-current assets held-for-sale 515 288 -
Total assets 1 743 707 222 703
Equity and liabilities
Capital and reserves 622 021 212 348
Issued capital 382 528 196 720
Contingent shares to be issued 188 540 -
Share based payment reserve 624 -
Distributable reserves 50 329 15 628
Minority interests 31 939 -
Total equity 653 960 212 348
Non-current liabilities 349 128 -
Deferred income tax liabilities 66 532 -
Borrowings 183 523 -
Provisions 55 875 -
Post-employment medical obligations 3 930 -
Accrual for straight lining of leases 39 268 -
Current liabilities 318 195 10 355
Borrowings 11 176 -
Provisions 71 784 -
Trade and other payables 102 385 3 733
Taxation 15 037 1 508
Bank overdraft 53 661 5 114
Employment benefit provisions 64 152 -
Non-current liabilities held-for-sale 422 424 -
Total equity and liabilities 1 743 707 222 703
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited Audited
2009 2008
R`000 R`000
Balance at 30 June 2008 212 348 103 127
Issue of share capital 185 808 98 411
Contingent shares to be issued 188 540 -
Net profit for the year 50 538 10 810
Acquisition of subsidiary 17 953 -
Dividends paid (1 851) -
Revaluation of share based payment - equity 624 -
settled
Balance at 30 June 2009 653 960 212 348
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
2009 2008
R`000 R`000
Net cash generated from/(utilised) in 47 222 (8 112)
operating activities
Net cash outflow from investing activities (165 667) (92 102)
Net cash inflow from financing activities 179 225 -
Net cash flow from continuing operations 60 780 (100 214)
Net cash flow from discontinued operations 9 951 -
Net increase/(decrease) in cash and cash 70 731 (100 214)
equivalents
Cash and cash equivalents at beginning of 5 308 105 522
year
Cash and cash equivalents at end of year 76 039 5 308
Reconciled as follows:
Cash and cash equivalents on hand 65 554 10 422
Bank overdraft (53 661) (5 114)
Assets held for sale 64 146 -
76 039 5 308
RECONCILIATION OF HEADLINE EARNINGS AND EARNINGS
ATTRIBUTABLE TO EQUITY HOLDERS
Audited Audited
2009 2008
% increase R`000 R`000
Basic earnings 34 701 10 810
Adjusted by
- Loss from discontinued (1 600) -
operations
- Impairment of goodwill 287 -
- Loss on disposal of 154 -
property, plant and equipment
Headline earnings 210 33 542 10 810
Earnings per share (cents) 72 19,00 11,04
attributable to ordinary
shares
Diluted earnings per share 90 16,68 8,76
(cents)
Headline earnings per share 66 18,37 11,04
(cents) attributable to
ordinary shares
Diluted headline earnings per 84 16,12 8,76
share (cents)
SHARE CAPITAL ANALYSIS
Audited Audited
2009 2008
R`000 R`000
Number of ordinary shares in issue 257 999 496 143 954 741
Number of preference shares in 16 638 000 16 638 000
issue
Weighted average number of ordinary 182 627 122 97 958 163
shares
Weighted average number of ordinary 208 030 900 123 361 941
shares and potential ordinary
shares
SEGMENTAL ANALYSIS
Audited
2009 2008
Profit before Total
Revenue tax assets
R`000 R`000 R`000
Healthcare administration 519 867 47 172 1 413 722
Electronics - 7 597 -
Treasury activities - 13 437 110 344
Other - including inter- - (1 682) 219 641
segment eliminations
519 867 66 524 1 743 707
Audited
Profit before Total
Revenue tax assets
R`000 R`000 R`000
Healthcare administration - - -
Electronics - 3 490 -
Treasury activities - 11 406 116 210
Other - including inter- - (1 426) 106 493
segment eliminations
- 13 470 222 703
INTRODUCTION
The Board of Directors have pleasure in presenting the audited results for the
year ended 30 June 2009.
Against the background of a worldwide financial crisis, characterised by the
failure of several key institutions and a decline in consumer wealth and
economic activity, AfroCentric has made excellent progress. AfroCentric`s
cautious approach and the Board Investment Committee`s strict compliance with
its prescribed investment discipline has served the Company well in an extremely
difficult and volatile market.
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated group financial statements for the year ended 30 June
2009 are prepared in accordance with International Financial Reporting Standards
("IFRS"), International Accounting Standard 34, the JSE Limited Listings
Requirements and the South African Companies Act 61 of 1973 as amended. The
condensed consolidated group financial statements are prepared on the historical
cost basis and are consistent with the accounting policies applied for the year
ended 30 June 2008 in terms of IFRS.
NATURE OF BUSINESS
AfroCentric is a black owned investment holding company, its major investments
being in private healthcare, electronics and the communications industries.
AfroCentric also has an agreement of co-operation with Rio Tinto Plc for mineral
prospecting and exploration projects. More recently AfroCentric concluded
distribution agreements with Hanwha Corporation, one of the largest industrial
institutions in South Korea. In addition to these activities, AfroCentric
continued to manage its treasury funds.
During the year under review, AfroCentric acquired an initial 63,2% of the
shares in Lethimvula Investments Limited ("Lethimvula"). Being an affected
transaction as defined in the SRP Code on Takeovers and Mergers ("SRP Code")
AfroCentric made an offer to the minority shareholders of Lethimvula in
accordance with the SRP Code.
At 30 June 2009, AfroCentric owned 83,8% of Lethimvula and AfroCentric continues
to engage those Lethimvula shareholders who offer their Lethimvula shares for
sale. Lethimvula is an investment holding company with its principal asset being
a 100% interest in Medscheme Limited, a multi-medical scheme administrator,
serving Trustees and members of both open and determinate corporate medical
schemes. Medscheme is the largest black owned medical scheme administrator in
South Africa covering approximately 2 million lives in the private healthcare
administration market. Since the aforesaid acquisition, Medscheme concluded
agreements with Old Mutual, firstly to acquire their medical scheme
administration business, secondly for the disposal to Old Mutual of Medscheme
Life. In addition, reciprocal co-operation agreements were concluded between Old
Mutual and Medscheme creating a framework for mutual co-operation.
OPERATIONAL REVIEW
AfroCentric`s investments in listed Jasco Electronics Holdings Limited ("Jasco")
yielded attributable earnings for the year ended 30 June 2009 of R7,6 million
(2008: R3,5 million), and preference dividends received of R11,4 million (2008:
R1 million) a significant increase compared to last year but substantially due
to last year`s earnings being reported only for the month of June 2008. Jasco`s
various business units were severely affected by the economic downturn
experienced during the past year, but given the infrastructural nature of
Jasco`s operations and investments, the improvement in commodity prices and the
group`s contractual relationships with Telkom and Eskom, a degree of cautious
optimism prevails for the industry sector in general and the company in
particular. The results of Jasco were released on Sens on 16 September 2009 and
more information on Jasco`s earnings and operations are available under JSE
Code: JSC.
AfroCentric`s investment in Lethimvula yielded earnings of R47,2 million (before
tax) for the five month period ended 30 June 2009, these being substantially
consistent with the earnings estimates and projections computed during the due
diligence exercise. Medscheme is an impressive administration business,
professionally and efficiently managed by a highly motivated, competent and
experienced team of executives. The life assurance business was disposed of to
Old Mutual during July 2009, and operational management will now focus its
attention on its administration client base, including bedding down the Old
Mutual acquisition, the Oxygen Medical Scheme recently won on tender and the
tender award for the managed healthcare of the Government Employees Medical
Scheme ("GEMS").
AfroCentric will continue to provide guidance and support for Medscheme`s
expanding operations including the necessary research and resources for
appropriate structures and feasible solutions for the proposed National Health
Insurance initiatives.
AfroCentric`s exploration and prospecting relationship with Rio Tinto Plc
continues in terms of the reciprocal strategic co-operation agreement. While a
number of projects are at various stages of geophysical surveying and research,
drilling programmes carried out during the year continue to be evaluated.
Additional prospecting rights in the Northwest province were awarded to
AfroCentric during the year and these will form part of an existing Rio Tinto
project for further exploration.
FINANCIAL RESULTS
AfroCentric`s group earnings after tax increased 368% to R50,5 million (2008:
R10,8 million). This increase arises substantially as a result of attributable
earnings from associates and the consolidation of the income and earnings of
Lethimvula for the five month period ended 30 June 2009. Earnings per share
(EPS) increased 72% to 19,00 cents (2008: 11,04 cents) and diluted EPS increased
90% to 16,68 cents (2008: 8,76 cents). Headline earnings per share (HEPS)
increased 66% to 18,37 cents (2008: 11,04 cents) and diluted HEPS increased 84%
to 16,12 cents (2008: 8,76 cents).
In terms of the Lethimvula acquisition agreement, the vendors of shares in
Lethimvula warranted profits after tax for the years ending 30 June 2011, 2012
and 2013 at an average of R180 million. Should such warranty be fulfilled and to
the extent that AfroCentric owns 100% of Lethimvula, AfroCentric will implement
the allotment to the vendors of "Contingent shares to be issued", the number not
exceeding 138,5 million shares. The allotment of such shares will be reduced in
terms of the formula, should the warranted profits not be attained. The
accounting, the disclosures and the references hereto are provided in terms of
IFRS 3.
PROSPECTS
The Board of Directors are satisfied with the progress of AfroCentric for the
year and the Company`s sound platform for future earnings. Having regard to the
current economic climate, the Board Investment Committee will continue to apply
the rigid principles of its investment policy, regularly monitoring the progress
of each enterprise and guiding and supporting management in each case on matters
of strategy, new products and expansion. A regular deal flow continues to
receive the attention of the Board Investment Committee and several propositions
are currently being evaluated.
It is too early to judge whether the growth in earnings and profit warranty
thresholds in the Lethimvula acquisition will be fulfilled, but given the five
month performance of Lethimvula, and the new business growth disclosed herein,
including the efficiencies of greater scale and specialisation, the Board is
encouraged by the early and positive trend and direction. Absent some unexpected
event or regulatory intervention, Lethimvula and its subsidiary, Medscheme, will
become a leading enterprise in healthcare administration.
SUBSEQUENT TO YEAR END EVENTS
AfroCentric signed a co-operation and distribution agreement with Hanwha
Corporation on 1 September 2009. Hanwha is a global conglomerate headquartered
in South Korea. This relationship will position AfroCentric as a facilitator for
a wide range of consumer and industrial products, skills and services in the
South African manufacturing, construction, finance, technology, and healthcare
sectors. Several of Hanwha`s products and services will be introduced to
AfroCentric`s associates and to enterprises with which AfroCentric has and will
develop relationships.
DIRECTORS
There were no changes in the constitution of the Board of Directors during the
year under review.
DIVIDENDS
No dividends were declared or paid during the year under review.
AUDITOR`S REPORT
The Auditors, SizweNtsaluba VSP have issued an unqualified audit report and a
copy is available for inspection at the Company`s registered office.
By order of the Board
MI Sacks CA(SA), AICPA(ISR)
Company Secretary
Johannesburg
29 September 2009
Directors
NB Bam* (Chairperson), NMJ Canca*, MSV Gantsho*
JM Kahn**, MI Sacks**#, Prof DI Swartz*, B Joffe**
*independent non-executive
**non-executive
#company secretary
Registered Office
PKF
41 Wierda Road West
Wierda Valley, Sandton, 2196
Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 29/09/2009 11:45:01 Produced by the JSE SENS Department.
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