| Thu 4 Mar 2010, 9:30 | | MVG / MVGP - Mvelaphanda Group - Unaudited results for the six months ended 31 |
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MVG / MVGP - Mvelaphanda Group - Unaudited results for the six months ended 31
December 2009
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
("Mvela Group" or "the company")
Ordinary share code: MVG
Preference share code: MVGP
Ordinary share ISIN: ZAE000060737
Preference share ISIN: ZAE000073540
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2009
- Revenue increased by 1% to R1 908 million or 10% on a comparable basis
- Operating profit increased 34% to R150 million or 43% on a comparable basis
- Strong performance from Mvelaserve with EBITDA increasing 8% to R214 million
or 28% on a comparable basis
- Cash generated from operations increased by 9% to R238 million
- Intrinsic net asset value per ordinary share at 31 December 2009 of R9,32
(2008: R7,36)
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
ASSETS
Non-current assets 6 305 472 5 638 290 5 802 582
Property, plant and equipment 330 214 298 738 322 610
Intangible assets 833 905 859 966 860 812
Investments in associates 725 818 769 614 720 580
Strategic investments 4 381 963 3 577 455 3 864 909
Financial asset - derivative - 3 242 -
financial instrument
Deferred taxation 33 572 129 275 33 671
Current assets 1 267 147 1 302 857 1 262 555
Strategic investments 2 005 37 958 11 254
Other current assets 706 693 726 480 781 749
Cash and cash equivalents 558 449 538 419 469 552
TOTAL ASSETS 7 572 619 6 941 147 7 065 137
EQUITY AND LIABILITIES
Capital and reserves 4 522 672 3 894 713 4 017 546
Shareholders` equity 4 324 103 3 750 508 3 839 890
Minority interest 198 569 144 205 177 656
Non-current liabilities 2 236 883 2 177 129 2 210 824
Interest-bearing liabilities 1 652 189 1 743 916 1 700 628
Non-interest-bearing - 357 -
liabilities
Financial liability - 31 527 - 34 199
derivative financial instrument
Deferred taxation 553 167 432 856 475 997
Current liabilities 813 064 869 305 836 767
Interest-bearing liabilities 67 632 80 779 64 084
Non-interest-bearing 24 900 2 697 25 021
liabilities
Other current liabilities 720 532 785 829 747 662
TOTAL EQUITY AND LIABILITIES 7 572 619 6 941 147 7 065 137
Net number of ordinary shares 407 139 406 665 406 665
in issue (000)
Diluted net number of ordinary 465 484 465 482 465 482
shares in issue (000)#
Fully diluted net number of 589 562 589 907 589 907
ordinary shares in issue
(000)##
Net asset value per ordinary 928,9 805,7 824,9
share (cents)
Net tangible asset value per 742,6 593,2 632,8
ordinary share (cents)
Fully diluted net asset value 733,4 635,8 650,9
per ordinary share (cents)
Fully diluted net tangible 586,3 468,1 499,3
asset value per ordinary share
(cents)
# Calculated on the basis that all preference shares will be converted into
ordinary shares before 4 November 2010.
## Calculated on the basis that all preference shares and BEE shares will be
converted into ordinary shares in accordance with their terms.
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 % 2008 2009
R`000 change R`000 R`000
Revenue 1 908 476 1,0 1 889 659 3 745 662
Profit from operations 149 726 34,1 111 613 255 590
Net interest paid (52 398) (87 977) (144 681)
Share of profit/(loss) 8 894 (12 733) (34 130)
from associates
Net fair value 544 488 412,7 106 191 365 463
adjustments and profit
and loss from
investments
Cost of BEE transaction (8 088) (8 088) (16 175)
Profit before taxation 642 622 489,5 109 006 426 067
Taxation expense (120 577) (62 787) (249 619)
Normal, deferred, (116 670) (50 582) (221 218)
capital gains and
foreign taxation
Secondary tax on (3 907) (12 205) (28 401)
companies
Profit for the period 522 045 1 029,5 46 219 176 448
Total comprehensive 522 045 1 029 5 46 219 176 448
income for the period
Profit attributable to:
Owners of the parent 477 315 7 680 88 974
Other shareholders 44 730 38 539 87 474
- Preference 15 042 14 919 29 962
shareholders
- Minority shareholders 29 688 23 620 57 512
522 045 46 219 176 448
Total comprehensive
income attributable to:
Owners of the parent 477 315 7 680 88 974
Other shareholders 44 730 38 539 87 474
- Preference 15 042 14 919 29 962
shareholders
- Minority shareholders 29 688 23 620 57 512
522 045 46 219 176 448
Weighted average net 406 792 406 665 406 665
number of ordinary
shares in issue (000)
Diluted weighted average 465 137 465 482 465 482
net number of ordinary
shares in issue (000)#
Earnings per ordinary 117,3 6112,4 1,9 21,9
share (cents)
Headline earnings per 124,9 9 1,3 49,7
ordinary share (cents) 566,6
Diluted earnings per 105,9 934,1 4,9 25,6
ordinary share (cents)
Diluted headline 112,5 2 495,7 4,3 49,9
earnings per ordinary
share (cents)
Dividends per preference 27,5 27,5 55,0
share (cents)
Interim 27,5 27,5 27,5
Final - - 27,5
# Calculated on the basis that all preference shares will be converted into
ordinary shares before 4 November 2010.
## Calculated on the basis that all preference shares and BEE shares will be
converted into ordinary shares in accordance with their terms.
SUMMARISED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
Profit from operations 149 726 111 613 255 590
Non-cash items 50 126 67 885 116 456
Working capital 37 748 39 434 (9 101)
Cash generated from operations 237 600 218 932 362 945
Net interest paid (27 945) (47 949) (93 179)
Investment income 165 069 8 890 51 751
Normal taxation paid (30 286) (68 131) (120 586)
Cash available from operating 344 438 111 742 200 931
activities before the payment of
capital gains tax
Capital gains tax paid - - (342)
Cash available/(utilised) from 344 438 111 742 200 589
operating activities
Cash effects of investing (112 820) 13 522 (52 399)
activities
Cash effects of financing (126 868) (357 486) (434 236)
activities
Dividends paid (15 853) (100 439) (115 481)
Net movement in cash and cash 88 897 (332 661) (401 527)
equivalents
Cash and cash equivalents at the
beginning
of the period 469 553 871 080 871 080
Cash and cash equivalents at the 558 450 538 419 469 553
end of the period
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
Balance at the beginning of the 4 017 545 3 943 488 3 943 488
period
Acquisition/(disposal) of (7 351) - (427)
subsidiaries
Cost of BEE transaction 8 088 8 088 16 175
Net profit after taxation 522 045 46 219 176 448
Dividends/distributions (17 655) (103 083) (118 139)
Balance at the end of the 4 522 672 3 894 712
period 4 017 545
RECONCILIATION BETWEEN PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT AND HEADLINE
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
Profit attributable to owners 477 315 (7 680) 88 974
of the parent
After tax and minority interest
adjustments:
Loss on disposal of 31 864 (1 965) (1 438)
subsidiaries and investments
Profit on sale of property, (938) (460) (603)
plant and equipment
Headline profit attributable to 508 241 (5 255) 86 933
owners of the parent
SEGMENTAL INFORMATION
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
NET ASSETS
Consumer services 3 392 048 2 803 306 3 065 568
Financial services 713 711 1 083 032 613 572
Infrastructure and Construction 167 287 247 995 146 138
Telecoms, Media and Technology 249 626 (239 620) 192 268
4 522 672 3 894 713 4 017 546
REVENUE
Consumer services 1 908 476 1 889 659 3 745 662
Financial services - - -
Infrastructure and Construction - - -
Telecoms, Media and Technology - - -
1 908 476 1 889 659 3 745 662
NET PROFIT/(LOSS) AFTER TAXATION
Consumer services 425 957 256 814 524 231
Financial services 134 354 185 211 199 676
Infrastructure and Construction 21 148 (119 893) (127 455)
Telecoms, Media and Technology (51 326) (267 825) (403 829)
Cost of BEE transaction (8 088) (8 088) (16 175)
522 045 46 219 176 448
Commentary
The performance of the Group held up very well in the tough first half to 31
December 2009. Revenue of R1 908 million for the six-month period ended 31
December 2009 was 1% ahead of the prior year (2008:R1 890 million) with the
Group`s profit from operations increasing by 34% to R150 million (2008: R112
million).
Net interest paid for the six-month period under review amounted to R52 million
compared to net interest paid of R88 million for the comparable period.
The gross interest earned on cash balances reduced to R17 million as a result of
lower average balances and a reduction in interest rates. The fair value
adjustments and profit and loss from investments amounted to R544 million for
the six months to 31 December 2009 compared to R106 million for the comparable
period in the prior year.
Earnings per share and headline earnings per share are 117,3 cents per share and
124,9 cents per share respectively compared with 1,9 cents per share and 1,3
cents per share respectively for the six-month period ended 31 December 2008.
Financial position
The Group`s cash position increased to R558 million at 31 December 2009 from
R538 million at 31 December 2008, mainly as a result of dividends received from
Investments.
Total interest bearing liabilities at 31 December 2009 decreased to R1 720
million from R1 825 million in the prior period which contributed to a decrease
of the Group`s debt to equity ratio to 38% (2008: 47%).
Capital structure
The issued ordinary shares increased by 473 831 during the six-month period
pursuant to the conversion rights of the preference shareholders in terms of
which 438 732 preference shares were converted to ordinary shares.
The weighted average net number of ordinary shares in issue at 31 December 2009
was 407 million ordinary shares. The 465 million diluted weighted average net
number of ordinary shares in issue is calculated on the basis that all the
preference shares will be converted to ordinary shares on or before 4 November
2010.
The conversion price of the convertible perpetual cumulative preference shares
remained unchanged at R9.30 per share. This means that each preference share
can be converted at the instance of the holder to 1,08 ordinary shares between 4
November 2009 and 4 November 2010 after which these shares become redeemable at
the instance of the issuer or remain perpetual preference shares at a dividend
rate of 80% of the ruling prime overdraft rate. The preference shares will
continue to earn dividends at a rate of 5,5% per annum until 4 November 2010.
Intrinsic net asset value
The Group`s intrinsic net asset value increased by R1,96 to R9,32 from R7,36 at
31 December 2008. The increase is mainly attributable to the increase in the
valuations of Absa and Life Healthcare together with an improvement in the
results from operations of subsidiaries which gave rise to an increase in
Mvelaserve`s intrinsic net asset value per share at 31 December 2009.
The intrinsic net asset value per ordinary share net of capital gains taxation
and debt is set out in the table below:
31 December 2009 31 December 2008
Intrinsic Debt Intrinsic Per Intrinsic Per
gross net asset share1, 2 net asset share1, 2
asset value value
value
(after
CGT)
Rm Rm Rm R Rm R
Life 2 273 (423) 1 850 3,96 1 431 3,07
Healthcare
Mvelaserve 1 443 (148) 1 295 2,78 1 039 2,23
Absa Group 1 018 - 1 018 2,18 860 1,85
Group Five 245 - 245 0,53 259 0,56
Vox Telecom 43 (246) (203) (0,42) (184) (0,40)
Avusa 455 (852) (397) (0,85) (516) (1,11)
Other 24 - 24 0,05 50 0,11
Investments
Net cash 558 (50) 508 1,09 488 1,05
Total 6 059 (1 719) 4 340 9,32 3 427 7,36
1 Based on the fully diluted net number of 465 million ordinary shares, assuming
that all the preference shares will be converted into ordinary shares before
November 2010(2008: 465 million ordinary shares).
2 BEE shares issued in June 2007 have not been taken into account in calculating
the intrinsic net asset value per ordinary share as the minimum option strike
price of R17,50 is greater than the current Mvela Group ordinary share price.
Based on Mvela Group`s ordinary share price listed on the JSE Limited ("JSE") of
R7,05 on 31 December 2009, the ordinary shares were trading at a discount of 24%
to the Group`s intrinsic net asset value per ordinary share of R9,32 at that
date.
This discount has narrowed since 31 December 2009 to 7% based on the closing of
the ordinary share price of R8,67 at the close of business on 2 March 2010.
Investments
Mvelaserve Limited ("Mvelaserve")
Revenue for the six month period ended 31 December 2009 increased by 10% or R180
million to R1 908 million (2008: R1 729 million) on a comparable basis. EBITDA
for the period was R214 million, which was 8% higher than the prior
corresponding period or 28% on a comparable basis, excluding Trollope Mining
Services and Novare Investments. Operating margin improved by 2% from the prior
year to 9% (2008: 7%).
Cash generated from operations for the six-month period to 31 December 2009
amounted to R238 million compared to R219 million generated in the prior
corresponding period.
Capital expenditure on property, plant and equipment amounted to R70 million
(2008: R81 million) on a comparable basis. Approximately R15 million of this
capital expenditure was attributable to the replacement of assets with the
balance being used to expand and grow Mvelaserve.
Depreciation and amortisation for the six month period ended 31 December 2009
was R49 million ( 2008: R69 million).
The intrinsic net asset value per ordinary share attributable to Mvelaserve
increased to R2,78 per Mvela Group ordinary share at 31 December 2009 compared
to R2,23 per Mvela Group ordinary share at 31 December 2008. The increase in the
valuation is mainly influenced by the improvement in the underlying results of
Mvelaserve. Mvelaserve comprises 30% of Mvela Group`s intrinsic net asset
value.
Facilities Management
FM benefitted from increased project management by TFMC and capital expenditure
undertaken by Telkom as well as new business gains within Customised Solutions.
The extension of the Telkom Contract continues to be under negotiation.
Contracts in Customised Solutions performed ahead of expectations.
Security
The Security business unit continued its turnaround during the six months,
driven by growth in all divisions and new contract wins across all sectors.
Revenue and operating profit increased by 22% and 99% respectively. All
divisions performed well and the Assets-In-Transit division turned around during
the six months with the division posting positive operating results, with
continued strong growth.
Catering and Cleaning
The Catering and Cleaning business unit demonstrated an improvement in revenue
of 14% during the period under review attributable to organic growth in all
divisions. Operating profit declined compared to the corresponding six-month
period as a result of once-off start up costs on the new contracts. Catering
and Cleaning have been subject to some restructuring in the current six-month
period and we anticipate that the implemented turnaround strategy will show
positive results by the end of the financial year.
Diversified Services
On a comparable basis, revenue decreased 18% mainly due to the slowdown in the
Contract Forwarding freight business. Khuseti and Zonke revenue remained flat.
Operating profit increased 80% with Khuseti showing an improvement of over 400%
following expansion of the King Pie product range into the wholesale market.
Zonke delivered a solid result for the period under review while Contract
Forwarding`s contribution declined as imports and exports decreased.
Strategic Investments
Financial Services
Absa Group`s financial results for the year ended 31 December 2009 were slightly
better than market expectations. As expected, the results were negatively
impacted by the adverse market conditions resulting in substantial impairments.
This resulted in headline earnings per share decreasing by 26% to 1 099 cents
compared to prior year.
The Absa investment comprises 23% of Mvela Group`s intrinsic net asset value per
share at 31 December 2009.
Consumer Services
Life Healthcare continues to perform well operationally. In its financial year
ending 30 September 2009, revenue was R7,9 billion while paid patient days grew
by 4% resulting in EBITDA from continuing operations growing by 15%. The
business achieved a margin of 24% for the year.
Life Healthcare announced in November 2009 that it had appointed advisors to
advise the company on a strategic path to be followed by the business. This was
pursuant to Mvela Group`s announcement that it intends to realise value in the
most efficient manner for its shareholders.
Life Healthcare comprises 43% of Mvela Group`s intrinsic net asset value.
Construction and Infrastructure Sector
Despite the challenges that beset the construction materials market and the
slowdown in mining and private real estate, Group Five`s performance has
remained resilient. At its last reporting date, Group Five produced credible
results with revenue increasing by 36% to R12 090 million and operating profit
growing by 25% to R797 million. This resulted in a growth in headline earnings
on a fully diluted basis of 28% to R5,08 from R3,98.
Group Five released a trading update on 15 January 2010 indicating that its
headline earning per share for the six-month period to 31 December 2009 will be
between 0% and 10% higher than in the prior corresponding period.
Mvela Group`s investment in Group Five comprises 6% of the Group`s intrinsic net
asset value at 31 December 2009.
Telecoms, Media and Technology Sector
Vox Telecom continued to operate profitably in the year ended 31 August 2009.
Its headline earnings per share increased by 53% to 6,18 cents while its
earnings per share increased by 45% to 5,49 cents.
The Vox Telecom investment had a negative intrinsic net asset value contribution
of R0,43 at 31 December 2009 after deducting debt of R246 million.
The investment in Avusa continues to operate in a difficult environment with
soft advertising revenues. At 30 September 2009, its last reporting date,
headline earnings per share from continuing operations were 44 cents compared to
155 cents in the comparative period. Avusa`s financial position remains strong
with no material gearing and a cash balance of R200 million at their last
reporting date.
Accounting policies and International Financial Reporting Standards
The interim results have been prepared in accordance with International
Financial Reporting Standards (IFRS) including IAS 34, as well as the South
African Companies Act 61 of 1973, as amended. The accounting policies adopted
are consistent with the accounting policies applied in the last annual report
and the corresponding prior year period except as follows:
IAS 1 (Revised) Presentation of Financial Statements
The financial information set out herein incorporates changes introduced as a
result of the publication of a revised version of IAS 1 `Presentation of
Financial Statements`, effective for accounting periods commencing on or after 1
January 2009. The principal change is that an entity must present all non-owner
changes in equity in a statement of comprehensive income. All owner changes in
equity are recognised in a statement of changes in equity. There was no impact
on the Group`s results or net assets as a result of the introduction of the
revised standard.
IFRS 8 Operating segments
The Group has prepared its Segmental information using IFRS 8 Operating
Segments, which requires the disclosure of information based on the "management
approach" to reporting on the financial performance of operating segments.
Generally, the information to be reported would be what management uses
internally for evaluating segment performance and deciding how to allocate
resources to operating segments. Reclassifications of comparative segment
information have been made to align to the Group management reporting structure
described above. There was no impact on net profit or net assets.
Analyst presentation
There will be a live audiocast of the presentation to analysts and investors on
the Mvela Group website today, 4 March 2010, at 12.00 noon.
Dividend
Ordinary shares
The directors of Mvela Group have resolved not to declare an interim ordinary
dividend for the six months ended 31 December 2009 following the decision to
realise value for shareholders and preserve cash for the realisation and
unbundling process.
Preference shares
The directors of Mvela Group have resolved to declare a cash preference dividend
(No. 9) of 27,58 cents per preference share, for the six month period ended 31
December 2009, to preference shareholders. The last day to trade "cum" the
preference dividend in order to participate in the preference dividend is
Thursday, 18 March 2010. The preference shares of Mvela Group will commence
trading "ex" the preference dividend from the commencement of business on
Friday, 19 March 2010 and the record date will be Friday, 26 March 2010. The
preference dividend will be paid to preference shareholders on Monday, 29 March
2010. Preference share certificates may not be dematerialised or rematerialised
between Friday, 19 March 2010 and Friday, 26 March 2010, both days inclusive.
Prospects
Mvela Group continues to trade positively with a key focus on unlocking value
for shareholders. It remains the stated intention of the board to achieve, at a
minimum, the intrinsic net asset value for shareholders.
MSM Xayiya YZ Cuba
Chairman Chief Executive Officer
4 March 2010
Sandton
Executive directors
MSM Xayiya (Executive Chairman), YZ Cuba (Chief Executive Officer), GE Roth
(Chief Financial Officer)
Non-executive directors
KD Dlamini *, BD Hopkins *, OA Mabandla * (*Independent)
Registered office
Hunts End, 36 Wierda Road West, Wierda Valley, Sandton, 2196
Telephone: 27 11 290 4200, Telefax: 27 11 783 0027
Transfer secretaries
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg,
2001
A copy of these results is available on the Mvelaphanda Group website at
www.mvelagroup.co.za
Sponsor
Deutsche Securities SA (Pty) Limited
4 March 2010
Date: 04/03/2010 09:30:01 Produced by the JSE SENS Department.
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