| Fri 13 Nov 2009, 8:00 | | MCU - m Cubed - Change Statement Abridged Report For The Year Ended 29 February |
|
MCU
MCU
MCU - m Cubed - Change Statement, Abridged Report For The Year Ended 29 February
2008, Notice Of Annual General Meeting, Declaration Of Interim Dividend And
Renewal Of Cautionary
m Cubed Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014568/06
Share code: MCU & ISIN: ZAE000033353
("m Cubed" or "the company" or "the group")
CHANGE STATEMENT, ABRIDGED REPORT FOR THE YEAR ENDED 29 FEBRUARY 2008, NOTICE OF
ANNUAL GENERAL MEETING, DECLARATION OF INTERIM DIVIDEND AND RENEWAL OF
CAUTIONARY
Shareholders are advised that the Annual Report of m Cubed for the year ended 29
February 2008 will be posted to shareholders on 18 November 2009. This report
contains the audited annual financial statements for the year ended 29 February
2008 incorporating certain modifications to the reviewed provisional
consolidated financial information that was announced on SENS on 22 July 2009.
Part A : Condensed financial statements
1. Basis of preparation
The results have been prepared in accordance with International Financial
Reporting Standards ("IFRS"),IAS 34, "Interim Financial Reporting", the
Companies Act of South Africa, (Act 61 of 1973), as amended ("Companies
Act"), and the Listing Requirements of the JSE Limited ("JSE"). The
accounting policies are consistent with those of the previous financial
period.
2. Comparative figures and IFRS 7 disclosures
The comparative information has been reclassified in certain instances
where the information is available from the underlying accounting records
in order to make comparison to the current year information more
meaningful. A full and proper restatement is not possible as the
information required to do so is not available from the group`s underlying
financial records.
These financial statements do not contain all the material disclosures
required by IFRS 7, Financial Instruments - Disclosure. All the required
information is not available from the group`s underlying accounting records
and is therefore not in full compliance with the requirements of IFRS 7.
3. Consolidated Balance Sheet (condensed)
2008 2007
Audited (restated)
R`000 R`000
Assets
Non-current assets:
Property, plant and equipment 6 857
Intangible assets 0 24 327
Financial assets 0 6 135 238
6 6 160 422
Non-current assets of disposal group 4 723 172 0
Current assets:
Loans and receivables 251 110 1 015 617
Cash and cash equivalents 126 914 277 158
378 024 1 292 775
Total assets 5 101 202 7 453 197
Equity
Capital and reserves:
Ordinary shares 7 385 7 382
Share premium 227 990 227 863
Other reserves 10 295 2 123
(Accumulated loss)/Retained earnings (2 698) 82 121
Total equity 242 972 319 489
Liabilities
Non-current liabilities:
Policyholder liabilities 0 6 988 156
- Insurance contracts 0 31 910
- Investment contracts 0 6 956 246
Deferred revenue 0 19 380
0 7 007 536
Non-current liabilities of disposal group 4 723 172 -
Current liabilities:
Provisions 30 293 -
Employee benefits 447 712
Trade and other payables 91 663 124 776
Current taxation 12 655 684
135 058 126 172
Total liabilities 4 858 230 7 133 708
Total equity and liabilities 5 101 202 7 453 197
4. Consolidated Income Statement (condensed)
2008 2007
Audited (restated)
R`000 R`000
Continuing operations:
Fee income 111 261
Net fair value gains on financial assets 36 373 34 382
Other operating income 28 433 39 347
Total income 64 917 73 990
Expenses for marketing and administration (50 497) (35 486)
Expenses for asset management services (3 891) (5 652)
Impairment of goodwill (3 000) (3 702)
Impairment of investments 0 1 180
(Loss)/profit on disposal of subsidiaries (8 602) 498
Total expenses (65 990) (43 162)
Results of operations (1 073) 30 828
Interest expense 0 (13 226)
(Loss)/profit before tax (1 073) 17 602
Income tax (30 352) (4 075)
(Loss)/Profit from continuing operations (31 425) 13 527
Discontinued operations:
(Loss)/Profit from discontinued operations (53 289) 8 667
Total (Loss) / Profit (84 714) 22 194
Attributable to equity holders of the (84 714) 22 194
company
Total attributable (loss)/earnings per (11,5) 3,0
share (cents)
Total diluted attributable (loss)/earnings (11,4) 3,0
per share (cents)
5. Consolidated cash flow statement (condensed)
2008 2007
Audited (restated)
R`000 R`000
Operating activities: (1 962 989) (4 657 746)
Continuing operations 741 504 (4 657 746)
Discontinued operations (2 704 493) 0
Investing activities: 1 823 315 4 720 442
Continuing operations 6 140 4 720 442
Additions to property, plant and equipment (101) (738)
Proceeds on disposal of property, plant 20 616
and equipment
Disposal of businesses 6 221 157 036
Decrease in investments 0 4 563 528
Discontinued operations 1 817 175 0
Financing activities: 25 234
Continuing operations 25 234
Sale of shares by share incentive trust 25 234
Discontinued operations 0 0
Net movement in cash and cash equivalents (139 649) 62 930
Cash and cash equivalents in subsidiaries (10 595) (151)
disposed of
Net cash and cash equivalents beginning of 277 158 214 379
year
Net cash and cash equivalents at end of year 126 914 277 158
6. Consolidated statement of changes in equity (condensed)
6.1 For the year ended 29 February 2008:
Foreign
currency Accumu-
Audited Share Share Trans- lated
lation
capital premium reserve profits Total
R`000 R`000 R`000 R`000 R`000
Balance at 1 March 7 382 227 863 2 123 82 121 319 489
2007
Increase in
translation reserve - - 8 172 - 8 172
Net loss for the year - - - (84 714) (84 714)
Shares sold by share
incentive trust 3 127 - (105) 25
Balance at 29
February 2008 7 385 227 990 10 295 (2 698) 242 972
6.2 For the year ended 28 February 2007:
Foreign
currency Accumu-
Restated Share Share Trans- lated
lation
capital premium reserve profits Total
R`000 R`000 R`000 R`000 R`000
Balance at 1 March 7 363 226 878 (1 447) 60 516 293 310
2006
Opening balance
adjustments to assets - - - 44 143 44 143
Decrease in life fund - - - (44 143) (44 143)
Restated balance at 1 7 363 226 878 (1 447) 60 516 293 310
March 2006
Increase in
translation reserve - - 3 570 - 3 570
Net profit for the - - - 22 194 22 194
year
Share-based payments - - - 181 181
Shares sold by share
incentive trust 19 985 - (770) 234
Balance at 28 February
2007 7 382 227 863 2 123 82 121 319 489
7. Segmental results
Primary segments Wealth Management
Continued operations Discontinued
operations
2008 2007 2008 2007
(Audited) (Restated) (Audited) (Restated)
R`000 R`000 R`000 R`000
Revenue 40 941 15 772 472 662 817 393
Operating profit/(loss) 12 109 2 418 (36 597) 16 457
Depreciation 0 0 19 41
Total assets 103 265 176 695 4 723 172 6 988 156
Total liabilities 86 840 108 399 4 723 172 6 988 156
excluding taxation
Specialised
investments, lending
Asset management and treasury
2008 2007 2008 2007
(Audited) (Restated) (Audited) (Restated)
R`000 R`000 R`000 R`000
Revenue 68 14 741 23 908 43 477
Operating (loss)/profit (206) 6 824 (12 976) 21 587
Depreciation 0 0 17 1 287
Total assets 2 232 20 515 272 533 267 831
Total liabilities 52 4 796 35 512 31 673
excluding taxation
Secondary segments
Continued operations Discontinued
operations
2008 2007 2008 2007
(Audited) (Restated) (Audited) (Restated)
South Africa R`000 R`000 R`000 R`000
Revenue 35 881 57 531 472 662 817 393
Operating (loss)/profit (25 504) 22 825 (36 597) 16 457
Depreciation 17 1 287 19 41
Total assets 353 941 434 472 4 723 172 6 988 156
Total liabilities 121 527 137 584 4 723 172 6 988 156
excluding taxation
2008 2007
(Audited) (Restated)
Offshore R`000 R`000
Revenue 29 036 16 459
Operating profit 24 431 8 002
Depreciation 0 0
Total assets 24 089 30 569
Total liabilities 876 7 284
excluding taxation
8. Discontinued operations
8.1 Background
m Cubed Life Limited ("m Cubed Life") reinsured its policyholder
business with PSG FutureWealth Limited ("PSG FutureWealth") with
effect from 1 March 2007. In terms of the reinsurance agreement, PSG
FutureWealth assumed full responsibility for the management and daily
administration of the policyholder business with effect from 1
September 2007. In order to give permanence to the reinsurance
transaction, the said policyholder business (i.e. the assets and
liabilities) was subsequently transferred to PSG FutureWealth on 8
July 2008 in terms of an order of the High Court of South Africa. All
of the above took place with the consent of the Financial Services
Board and the shareholders of m Cubed.
Due to the above, as well as the disposal of other parts of m Cubed,
the financial results at 29 February 2008 are not directly comparable
to that of prior years.
The assets and liabilities of m Cubed Life are presented herein as a
discontinued operation following the reinsurance and subsequent
transfer of its business in terms of section 37 of the Long-term
Insurance Act of 1998.
8.2 Profit/(loss)
2008 2007
(Audited) (Restated)
R`000 R`000
Net insurance premium revenue 218 250
Reinsurance rebate 20 961 0
Fee income 35 189 10 539
Net fair value gains on financial assets 403 450 715 760
Other operating income 12 844 90 844
Total income 472 662 817 393
Fair value adjustment on financial
liabilities under investment contracts (380 250) (715 760)
Policyholder benefits on insurance contracts (3 346) (2 584)
Transfer to policyholder liabilities on (929) (2 150)
insurance contracts
Expenses for acquisition of investment (32 483) (12 547)
contracts
Expenses for marketing and administration (87 880) (28 443)
Expenses for asset management services (2 828) (28 247)
Other expenses (1 543) (11 205)
Total expenses (509 259) (800 936)
(Loss)/Profit before tax (36 597) 16 457
Income tax (16 692) (7 790)
(Loss)/Profit from discontinued operations (53 289) 8 667
8.3 Assets of disposal group classified as held-for-sale
2008
(Audited)
R`000
Listed:
Equities 2 458
Unlisted:
Mutual funds 1 110 410
Cash deposits and similar securities 36 538
Loans and receivables 191 152
Investment in investment contracts 3 370 872
Investment property 11 742
4 723 172
8.4 Liabilities of disposal group classified as held-for-sale
2008
(Audited)
R`000
Insurance contract liabilities 32 885
Financial liabilities under investment contracts 4 690 287
4 723 172
9. Reconciliation of headline (loss)/earnings
2008 2007
(Audited) (Restated)
R`000 R`000
Net (Loss)/Profit for the year (84 714) 22 194
Loss/(Profit) on disposal of subsidiaries 8 602 (498)
Impairment of goodwill 3 000 3 702
Impairment of investments 0 (1 180)
Impairment of property, plant and equipment 911 0
Profit on disposal of property, plant and -17 0
equipment
Headline (loss)/earnings attributable to equity (72 218) 24 218
holders
10. Net asset value per share
2008 2007
Number of shares in issue (`000) 738 537 738 285
Net asset value per share (cents) 32,9 43,3
Net tangible asset value per share (cents) 32,9 40,0
11. Earnings per share
2008 2007
Number of shares in issue (`000) 738 537 738 285
Headline (loss)/earnings per share (cents) (9,8) 3,3
Diluted headline (loss)/earnings per share (cents) (9,8) 3,2
Part B : Notes and directors` comments
1. Nature of business
m Cubed historically owned a number of focused investment services
businesses. Currently, the group is busy unwinding its operations with the
primary objective of converting these assets to cash to unlock maximum
value for shareholders.
2. Review of operations
2.1 On 17 April 2009 the directors issued a trading statement and reported
that they expected the following results for m Cubed for the year to
29 February 2008:
(a) A net attributable loss in the range between R82.9 million and
R101.4 million; and
(b) A net asset value in the range between R211.1 million and R258.1
million.
2.2 These audited financial statements reveal results that are within the
expected range.
2.3 The following items were the main contributors to the net loss for the
financial year, and the corresponding reduction in the group`s net
asset value at year-end:
(a) A settlement reached with South African Revenue Services ("SARS")
on a matter previously reported to the shareholders, involving m
Cubed Specialised Lending (Pty) Limited;
(b) In the process of closing down m Cubed Life and transferring its
R7 billion of policyholder assets to PSG FutureWealth subsequent
to the year-end, certain of the remaining assets had to be
impaired or written off, leaving the group in a position where
its assets are tangible and realisable;
(c) Professional fees escalated during the year in question,
particularly the legal fees that were needed to regularise the
contraventions included in the settlement agreement with the
Regulator; and
(d) Various other settlement costs and provisions involving the
curators of Ovation Global Investment Services (Pty) Limited
("Ovation"), policyholders and other third parties.
3. The Regulator
The annual financial statements at 28 February 2007 made reference to a
settlement agreement that had been reached with the Regulator on 5
September 2007. As a result, R50 million is being retained by the
Regulator pending the final unwinding of those transactions referred to in
the said agreement ("the transactions"). The R50 million attracts interest
at the rate applicable to The Corporation of Public Deposits and all or a
portion thereof is refundable. The amount of R55,6 million, including
interest, has been included in trade and other receivables.
Werksmans Inc.("Werksmans") who has been appointed to assist the directors
with all matters pertaining to the Regulator, is of the opinion that m
Cubed has used all reasonable endeavours to unwind the bulk of the
transactions.
The Regulator has since notified m Cubed that certain dealings, other than
the transactions mentioned above, may have been in contravention of the
regulations. These dealings are currently under investigation and will be
considered in conjunction with the transactions that are yet to be unwound.
4. Saffron Balm
The Regulator has notified m Cubed Life that an investment policy
transaction involving Saffron Balm (Pty) Ltd, a subsidiary of Fidentia
Holdings Limited, may have been in contravention of certain regulations.
As a result, the Regulator ordered that an amount of R56,3 million of m
Cubed`s assets be blocked pending the outcome of their investigations.
This amount was included in trade and other receivables.
m Cubed has endeavoured to reach agreement with the Regulator on the
matter, without success, and the board has consequently decided that it
would be best for m Cubed to seek an order from the Court. The
shareholders will be informed of the progress thereof.
5. Ovation
As previously reported, a settlement had been reached with the curators of
Ovation regarding the transfer to m Cubed Life of the business that was
previously managed by Ovation. In terms thereof, the curators of Ovation
have retained R33 million of policyholder assets to cover potential fees
and shortfalls pending the final conclusion of Ovation`s curatorship. The
Court recently ratified this agreement and ordered that the retention of
R33 million be reduced to R20 million. As the policies in question are
pure linked investment policies, the retained amount of R33 million has
been reported herein as both assets and policyholder liabilities.
6. Foreign trust
The Trustees of a discretionary offshore trust ("the trust") recently
received a notification from SARS. m Cubed is a potential capital
beneficiary of the trust. The Trustees of the trust, supported by their
legal advisors, are of the view that the trust has no liability towards
SARS in this regard.
7. Reportable irregularities
The auditors reported a number of possible contraventions of laws and
regulations by m Cubed to the Independent Regulatory Board for Auditors.
The directors responded as follows to each of these matters:
7.1 Contravention of regulations imposed by the Regulator : refer notes 3
and 4 above;
7.2 Unregistered reinsurance by m Cubed Life (section 7 of the Long-Term
Insurance Act - "the Act") : the directors obtained legal opinion on
the matter and are satisfied that m Cubed Life did not contravene
section 7 of the Act. The said reinsurance has since been terminated
in its entirety;
7.3 Borrowing by m Cubed Life (section 34(1)(c) of the Act) : m Cubed Life
owed money to m Cubed at year-end in terms of an inter-company loan
account. The loan account has since been settled in full;
7.4 Loans to policyholders by m Cubed Life (section 54 of the Act): m
Cubed Life was permitted to make loans to its policyholders, subject
to the provisions of part 4.2 of the regulations to the Act. m Cubed
Specialised Lending (Pty) Limited granted loans to policyholders of m
Cubed Life against security offered by their policies, which loans
were not subject to and in fact did not have to comply with the
provisions of the Act. The directors obtained legal advice on the
matter and, based on the information at their disposal, Werksmans
indicated that m Cubed Life was not in contravention of section 54 of
the Act. With the transfer of m Cubed Life`s policyholder business to
PSG FutureWealth on 8 July 2008, this practice was terminated and m
Cubed Life has since not conducted any insurance business as
contemplated in the Act.
Part C : Auditors` qualified opinion
The auditors, PricewaterhouseCoopers Inc., have issued their qualified opinion
on the group`s financial statements for the year ended 29 February 2008.
"Basis for qualified opinion:
As described in notes 3 and 4 to Part B to the condensed financial information
at 29 February 2008, ongoing investigations by the Regulator are taking place
involving possible contraventions of regulations. The recoverability of the
R55,6 million held in trust by the Regulator, as referred to in the
aforementioned notes, including accrued interest of R5,6 million, and the
blocked R56.3 million referred to in note 4 to Part B, remains uncertain until
such time as these matters have been resolved with the Regulator.
We have therefore been unable to obtain sufficient appropriate evidence
regarding the recoverability of the amounts included in trade and other
receivables referred to above and whether any additional penalties will be
levied.
The financial statements do not contain all the material disclosures required by
International Financial Reporting Standard ("IFRS") 7, Financial Instruments:
Disclosures. The information required to comply with IFRS 7 is not available
from the group`s underlying accounting records. The inclusion of the IFRS 7
disclosure information is necessary to enable users of the financial statements
to evaluate the significance of financial instruments for m Cubed`s financial
position and performance, the nature and extent of risks arising from financial
instruments to which m Cubed is exposed during and at the end of the reporting
period and how m Cubed manages those risks.
Furthermore, the comparative information does not contain all the disclosures
required by IFRS. The information required to comply with these disclosure
requirements is not available from the group`s underlying accounting records.
The inclusion of the required disclosure information is necessary to obtain an
understanding of the current period`s financial statements.
Qualified opinion:
In our opinion, except for the possible effects of the matters described in the
Basis for Qualified Opinion paragraphs, the financial statements present fairly,
in all material respects, the consolidated and separate financial position of m
Cubed Holdings Limited as at 29 February 2008, and its consolidated and separate
financial performance and its consolidated and separate cash flows for the year
then ended in accordance with IFRS and in the manner required by the Companies
Act of South Africa.
Report on Other Legal and Regulatory Requirements
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of
the Auditing Profession Act, we report that we have identified certain possible
unlawful acts or omissions that may have been committed by persons responsible
for the then management of m Cubed, which constitute reportable irregularities
in terms of the Auditing Profession Act, and have reported such matters to the
Independent Regulatory Board for Auditors ("IRBA"). The matters pertaining to
the reportable irregularities have been described in the financial statements.
At the time of reporting to IRBA, we reported that we are of the view that the
reportable irregularities are no longer taking place."
A copy of the auditors` qualified opinion is available on request at the
company`s registered offices.
Part D : Conclusion
1. Prospects
The release of m Cubed`s audited condensed consolidated financial
information at 29 February 2008 marks an important milestone in achieving
the group`s stated objective, namely to unlock value and distribute
available cash resources to shareholders as a matter of priority. Work has
commenced on the preparation of m Cubed`s annual financials at 28 February
2009, which is expected to be less time consuming than the 2008 annual
financials.
Due to the continuous uncertainty in determining the net asset value of the
group, the directors are of the opinion that it is still necessary for m
Cubed shares to be suspended on the JSE.
2. Suspension in the trading of m cubed shares and renewal of cautionary
Trading in m Cubed`s shares was voluntarily suspended by the JSE at the
request of the Board of m Cubed in 2007. Although much progress has since
been made on several fronts, particularly with regard to the conclusion of
annual financial statements for the year ended 29 February 2008, as well as
matters concerning the Regulator and SARS, the directors are of the view
that, due to the continuous uncertainty in determining the net asset value
of the group, it is in the best interests of the shareholders that trading
in the company`s shares remain suspended on the JSE.
Further to the latest renewal of cautionary announcement to shareholders on
19 October 2009, shareholders are advised to continue to exercise caution
in the trading of m Cubed shares over the counter.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of m Cubed will be held
at 1st Floor, PSG House, Alphen Park, Constantia Main Road, 7848 on Thursday, 10
December 2009 at 11h00, to transact the business as stated in the notice of the
Annual General Meeting which is included as part of the Annual Report
distributed to shareholders on 18 November 2009.
DIVIDEND
Shareholders are further advised that the directors have declared an interim
dividend of 4 cents per share on 4 November 2009.
The salient dates that were applicable for the dividend payment are set out
below:
Last date to trade cum dividend Friday, 27 November 2009
Trading ex dividend commences Monday, 30 November 2009
Records date Friday, 4 December 2009
Payment date Monday, 7 December 2009
Share certificates may not be dematerialised or rematerialised between Monday,
30 November 2009 and Friday, 4 December 2009 both days inclusive.
Cape Town
13 November 2009
Registered office:
1st Floor PSG House, Alphen Park Constantia, Main Road, Constantia
Private Bag X3, Constantia, 7848
Telephone 021 799 8000 Facsimile 021 794 4674
Transfer offices:
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2000
PO Box 61051, Marshalltown, 2107
Telephone: 011 370 5000, Facsimile: 011 370 5487
Directors: J de V du Toit (Chairman)*, CMB Bothner*, W Roux*, J van Zyl Smit*,
AM Louw*, CJ Masson *Non-executive
Auditors: PricewaterhouseCoopers Inc.
Company secretary: Probity Business Services (Pty) Ltd
Bankers: The Standard Bank of South Africa Limited
Sponsors: PSG Capital (Pty) Limited
Attorneys: Werksmans Inc.
Date: 13/11/2009 08:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
