| Wed 20 Jan 2010, 17:25 | | FCPD - Foord Compass - Preliminary Report For The Year Ended 31 December 2009 |
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JSE FCPD
FCPD
FCPD - Foord Compass - Preliminary Report For The Year Ended 31 December 2009
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 2009 AND INTEREST PAYMENT AND
ELECTION
CONDENSED STATEMENT OF FINANCIAL Notes Reviewed Audited
POSITION
at 31 December 2009 2009 2008
Rm Rm
ASSETS
Current assets
Investments 3 1,200.9 1,224.8
Income receivables and unsettled 35.3 26.3
sales
Cash and deposits 564.7 388.6
Total assets 1,800.9 1,639.7
EQUITY AND LIABILITIES
Capital and reserves 31.5 17.6
Ordinary share capital 0.1 0.1
Accumulated profits 31.4 17.5
Non-current liabilities 1,044.7 952.8
Unsecured debentures 4 1,037.5 950.7
Deferred taxation 7.2 2.1
Current liabilities 724.7 669.3
Accounts payable 2.3 2.1
Taxation 1.3 3.5
Short investment positions 3 647.8 579.0
Unsettled purchases 9.2 4.8
Debenture interest payable 64.1 79.9
Total equity and liabilities 1,800.9 1,639.7
Debentures in issue 145,504,265 138,730,846
Ordinary shares in issue 8,800,070 8,800,070
Cents Cents
Net attributable asset value per 757.1 742.9
debenture (cum interest)
Net attributable asset value per 713.0 685.3
debenture (ex interest)
Net attributable asset value per 358.0 200.0
ordinary share
CONDENSED STATEMENT OF Notes Reviewed Audited
COMPREHENSIVE INCOME
2009 2008
Rm Rm
Investment income 122.8 129.4
Realised trading profits 23.2 26.6
Operating expenditure (13.5) (11.9)
Net distributable profit 132.5 144.1
Capital profits on sale of 8.3 13.1
investments
Revaluation of investments 43.1 (98.8)
Net portfolio income before 183.9 58.4
debenture interest
Debenture interest (119.3) (129.8)
(Increase) decrease in debenture 4 (40.8) 66.5
value
Profit (loss) before taxation 23.8 (4.9)
Taxation (expense) credit 5 (9.9) 8.9
Profit attributable to ordinary 13.9 4.0
shareholders
Weighted average number of 142,661,438 138,404,567
debentures in issue
Cents Cents
Interest per debenture (weighted) 83.6 93.8
Earnings per debenture (weighted) 112.2 45.7
Earnings per ordinary share 158.0 45.5
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Ordinary Accumulated
share profits Total
capital
Rm Rm Rm
Balance at 31 December 2007 0.1 13.5 13.6
(audited)
Profit for the year - 4.0 4.0
Balance at 31 December 2008 0.1 17.5 17.6
(audited)
Profit for the year - 13.9 13.9
Balance at 31 December 2009 0.1 31.4 31.5
(reviewed)
CONDENSED STATEMENT OF CASH FLOWS Reviewed Audited
2009 2008
Rm Rm
Net cash inflow from operating 272.2 278.1
activities
Interest and taxation paid (142.1) (111.8)
Net cash received from issue of 46.0 18.5
debentures
Net change in cash resources 176.1 184.8
Cash resources at beginning of year 388.6 203.8
Cash resources at end of year 564.7 388.6
AUDITOR`S REVIEW REPORT
These results have been reviewed in terms of ISRE2410 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
2008. During the period, the company adopted IAS 1 (revised 2007) Presentation
of Financial Statements, which is effective for annual periods commencing 1
January 2009. There is no impact on the reported disclosures.
2. Operating segments
The company has one principal operating segment and accordingly additional
segmental disclosures have not been made.
3. Investments
Investments comprise both long and short exposures to listed and unlisted
securities managed to achieve a total return which over the long term exceeds
the investment objective (CPI + 10%). 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.
Reviewed Audited
2009 2008
4. Unsecured debentures Rm Rm
Unsecured debentures comprise
Debenture capital at issue price 986.6 940.6
Cumulative revaluation of debentures 50.9 10.1
Fair value of debentures 1,037.5 950.7
Reconciliation of balance
Balance at beginning of year 950.7 998.7
Net proceeds on issue of debentures 46.0 18.5
Revaluation - current year 40.8 (66.5)
Balance at end of year 1,037.5 950.7
Revaluation of debentures
Net portfolio income before debenture 183.9 58.4
interest
90% allocation to debenture holders 165.5 52.6
Add: proportionate share of taxation (5.4) 10.7
(charge) credit
Less: interest distribution for year (119.3) (129.8)
Revaluation - current year 40.8 (66.5)
5. Taxation expense (credit)
Current taxation charge - current year 4.8 4.8
Deferred taxation charge (credit) - 5.1 (13.7)
current year
Net expense (credit) to income 9.9 (8.9)
statement
Deferred taxation relates to the revaluation of investments. The debenture
share of the net taxation charge (2008: credit), which amounts to R5.4 million
(2008: credit of R10.7 million), has been deducted from (2008: added to) the
carrying value of the debentures as set out in note 4 above.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
The achieved returns to debenture holders are shown in the table below:
5 years 3 years 1 year
to 31 December 2009 (% per
annum)
Income 13.0% 11.7% 12.2%
Capital 6.9% -2.8% 4.0%
Total return * 19.9% 8.9% 16.2%
Benchmark (CPI + 10% p.a.) ** 16.7% 18.3% 15.8%
* Calculated with reference to monthly net attributable asset value per
debenture
** Lagged one month
It is pleasing to record that the portfolio`s investment objective has been met
over the last twelve months as the total return of 16.2% exceeded the benchmark
return of 15.8%. This was, however, insufficient to offset the single digit
returns of the prior two years, resulting in the 3 year return lagging the
benchmark. The 5 year return of 19.9% p.a. still remains ahead of the
benchmark, which is inflation plus 10% p.a.
In line with the total return achieved for debenture holders, total earnings per
debenture increased to 112.2 cents (2008: 45.7 cents) on a weighted average
basis. The total interest distribution for the year was 83.6 cents (2008: 93.8
cents). This represents a decline in distribution for the year of 11%, which
given the income circumstances that prevailed in 2009 is seen as a positive
outcome (see Comment below).
Net distributable profit for the year decreased 8% to R132.5 million (2008:
R144.1 million) due to lower dividends received and lower interest rates.
Realised trading profits were R3.4 million lower than the previous year.
Operating expenditure increased 13%, due mainly to management fees on a higher
average asset base and scrip borrowing fees. Investors will recall that
dividends received were unusually high in 2008 due to some significant
unbundling transactions in that year. Dividend receipts normalised in 2009.
The mark-to-market revaluation of investments was a positive R43.1 million in
2009 against a negative R98.8 million in 2008. This resulted in a 4% increase
in the Net Attributable Asset Value (NAAV) per debenture, after the final
distribution, to 713.0 cents (2008: 685.3 cents).
PORTFOLIO STRUCTURE
The effective asset structure of the investment portfolio at 31
December is as follows:
Domestic Foreign Total
2009 2008 2009 2008 2009 2008
Equities 53% 39% 24% 23% 77% 62%
Listed property 9% 6% 0% 0% 9% 6%
Government bonds -46% -50% 0% 0% -46% -50%
Corporate debt 12% 5% 12% 10% 24% 15%
Commodities 0% 0% 2% 2% 2% 2%
Cash and money 26% 57% 8% 8% 34% 65%
market instruments
54% 57% 46% 43% 100% 100%
There has been a significant increase in the effective exposure to equities,
especially in the second half of the year. The short bond position was reduced
slightly, while the corporate bond position was increased. The allocation to
listed property was also increased. Net effective cash exposure amounted to 34%
(2008: 65%) of portfolio at the year end, while actual cash holdings exceeded
50% of portfolio (2008: 61%). The effective gearing is 12%. The net asset
value of the portfolio at year end was R1 140 million (2008: R1 050 million).
COMMENT
The strong positive turnaround in global asset prices in 2009 has been
remarkable. There were reasonable expectations a year ago, given the meltdown
in prices in 2008, that 2009 would show some positive recovery in prices. The
vigorous extent of many price gains has been the surprise, especially among
equities and commodities where gains of over 100% have been registered in some
share markets, oil and base metals. These gains were recorded against a
background of severe economic recession and record low interest rates.
Government bonds were the only asset class to show a negative return, although
quite small in most cases. A feature of the year was the weakness of the US
dollar which depreciated globally and was nearly 30% weaker against the SA rand.
The diversified nature of the investment portfolio resulted in investment risk
being well contained through the year, while the different asset classes were
able to contribute returns commensurate with their respective market returns.
Hence, the SA equities, at 9%, were the largest contributor to the total return
of 16%. Cash contributed 5% while the other asset classes were a mixture of
small positive and negative returns. The strength of the rand offset the return
from foreign assets and the short government bond position also yielded a small
negative return. In total, NAAV and capital grew at 4% (2008: -7%).
On the income side, it must be noted that dividends paid on the JSE All Share
Index declined 36% from a year ago - the biggest single, annual decline in
dividends in 50 years, as companies felt the real impact of the recession on
their earnings and the need to shore up their balance sheets and to conserve
cash. Short-term interest rates declined by more than 40% in the course of
2009. Given these two significant negative income factors, limiting the decline
in the interest distribution to only 11% is seen as a commendable result. The
income component of the portfolio yielded 12.2% (2008: 12.8%).
OUTLOOK
The short-term outlook for equity markets seems positive, as most economies
emerge from the great recession. We expect corporate earnings to improve, which
should lead to increased dividend payouts. Interest rates are likely to rise
and the timing of this is a key risk for investment markets. Given the massive
size of the global stimulus packages, which will need to be withdrawn, the risk
of a "double dip" recession has not abated. Record budget deficits and
government debt levels will be negative for the bond markets in the longer term.
The investment portfolio continues to be well-diversified across a range of
different asset classes and economies. There is a current emphasis on equities,
but risk management and capital preservation remain as the most important focus
areas for the portfolio manager.
The aim continues to be to exceed the investment objective of a real return of
10%.
INTEREST PAYMENT AND ELECTION
Notice is hereby given that a debenture interest payment (number 45) of 44.028
cents per debenture in respect of the six months ended 31 December 2009 is
payable to debenture holders recorded in the debenture register of the company
on the record date. In compliance with the Listings Requirements, the following
dates are applicable:
Last date to trade Friday, 5 February 2010
Debentures trade ex-interest Monday, 8 February 2010
Record date Friday, 12 February 2010
Payment date Monday, 15 February 2010
IMPORTANT: ELECTION TO RECEIVE DEBENTURES IN LIEU OF A CASH INTEREST PAYMENT
As provided for in section 6.4 of the Debenture Trust Deed, 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, 12 February
2010. 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, 12 February 2010 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, 5 February 2010. 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 2009 of 713.0 cents. Accordingly,
the ratio is 6.175 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, 15 February 2010. An
adjustment to the number of debentures listed will be made on or about Tuesday,
16 February 2010 in accordance with the actual number of debentures issued
having regard to the elections made.
Cheques and/or new debenture certificates will be posted to certificated
debenture holders and the safe custody accounts updated and/or credited by CSDPs
or brokers of dematerialised debenture holders on or about Monday, 15 February
2010.
Signed on behalf of the board
MO HODGES D FOORD
20 January 2010
Directors: MO HODGES* (Chairman), D FOORD*, JC GREYLING, DA MOIR, JC VAN
NIEKERK * British
Company secretary: PE CLUER
www.foordcompass.co.za
Sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Date: 20/01/2010 17:25:01 Produced by the JSE SENS Department.
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