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PLD
PLD
PLD - Paladin - Paladin Reviewed Results For The Year Ended 28 February
2010
Paladin Capital Limited
Incorporated in the Republic of South Africa
(Registration number: 2007/032836/06)
Share code: PLD
ISIN: ZAE000138970
("Paladin" or "the company" or "the group")
Paladin reviewed results for the year ended 28 February 2010
Headline earnings increased to 43.9 cents per share compared to a headline
loss of 4.6 cents per share in the prior year
Recurring headline earnings decreased by 3.5% to 19.3 cents per share
Intrinsic value of the portfolio increased by 140.1% to R1.17 billion and
by 65.0% to R2.03 per share
Condensed group statement of financial position at 28 February 2010
Note 28 Feb 2010 28 Feb 2009
Rm Rm
Assets
Investment in associated 2 1 052.1 709.8
companies
Deferred income tax 2.8 1.1
Financial assets
Equity securities 2.6
Loans and advances 19.5
Receivables 0.2 2.0
Cash and cash equivalents 2.3 0.1
Non-current assets held for sale 36.7
Total assets 1 057.4 771.8
Equity
Ordinary shareholders` equity 1 009.8 602.0
Minority interests 1.7
Total equity 1 009.8 603.7
Liabilities
Financial liabilities
Borrowings 42.2 150.7
Trade and other payables 5.3 1.1
Current income tax liabilities 0.1
Liabilities directly associated 16.3
with non-current assets
classified as held for sale
Total liabilities 47.6 168.1
Total equity and liabilities 1 057.4 771.8
Net asset value per share (cents) 175.7 151.9
Condensed group income statement for the year ended 28 February 2010
Note 28 Feb 2010 28 Feb 2009
Rm Rm
Income
Investment income 21.0 24.0
Fair value gains and losses on (2.2)
financial instruments
Fee income 0.7
Other operating income 1.0 0.5
Total income 22.7 22.3
Expenses
Administration and other expenses (10.2) (9.1)
Impairment charges (7.0)
(17.2) (9.1)
Results of operating activities 5.5 13.2
Finance costs (13.6) (12.5)
Share of profits/(losses) of 168.4 (43.6)
associated companies
Net income/(loss) before taxation 160.3 (42.9)
from continuing operations
Taxation 1.6 (0.2)
Net income/(loss) from continued 161.9 (43.1)
operations
Net profit for the year from 17.7 8.7
discontinued operations
179.6 (34.4)
Attributable to: 179.6 (34.4)
- minority interest 2.8
- equity holders of the company 179.6 (37.2)
Attributable to equity holders of 179.6 (37.2)
the company
Non-headline items 3 37.7 19.2
Headline earnings/(loss) 217.3 (18.0)
Earnings/(loss) per share (cents)
- attributable 36.3 (9.5)
- headline 43.9 (4.6)
Dividend per share (cents)
Interim - 2.5
Final - 2.5
Number of shares (million)
- in issue 574.6 396.2
- weighted average 495.4 390.6
Condensed group statement of comprehensive income for the year ended
28 February 2010
28 Feb 2010 28 Feb 2009
Rm Rm
Net income/(loss) of the group 179.6 (34.4)
Share of other comprehensive income 12.3
of associated company
Total comprehensive income/(loss) 191.9 (34.4)
for the year
Attributable to: 191.9 (34.4)
- minority interest 2.8
- equity holders of the company 191.9 (37.2)
Condensed group statement of cash flows for the year ended
28 February 2010
28 Feb 2010 28 Feb 2009
Rm Rm
Cash retained/(utilised) from
operating activities
Cash generated/(utilised) by operating 18.0 (54.0)
activities
Taxation paid (6.7)
Net cash flow from operating 18.0 (60.7)
activities
Net cash flow from investment (164.0) (71.1)
activities
Net cash flow from financing 144.3 131.4
activities
Net decrease in cash and cash (1.7) (0.4)
equivalents
Cash and cash equivalents at beginning 4.0 4.4
of period
Cash and cash equivalents at end of 2.3 4.0
period
- Continued operations 2.3 0.1
- Discontinued operations 3.9
Condensed statement of changes in equity for the year ended
28 February 2010
28 Feb 2010 28 Feb 2009
Rm Rm
Ordinary shareholders` equity at beginning of 602.0 633.6
period
Net shares issued (net of buy-backs and share 342.1 26.7
issue cost)
Total comprehensive income/(loss) 191.9 (37.2)
Other reserves (116.3)
Dividend paid (9.9) (21.1)
Ordinary shareholders` equity at end of 1 009.8 602.0
period
Minority interest - 1.7
Beginning of period 1.7 1.1
Net income for period 2.6
Movement in interest in subsidiaries (1.7) (0.3)
Dividend paid (1.7)
Total equity at end of period 1 009.8 603.7
Contribution to headline earnings for the year ended 28 February 2010
28 Feb 2010 28 Feb 2009
Rm Rm
Recurring headline earnings 80.5 71.3
Equity accounted headline earnings from 87.1 68.0
associates
Other (expenses)/income (6.6) 3.3
Recurring (see-through) headline 26.2 19.9
earnings(Thembeka)
Funding and STC
Paladin (11.2) (13.0)
Total recurring headline earnings 95.5 78.2
Non-recurring headline earnings/(loss) 121.8 (96.2)
Marked-to-market movement and dividend income 148.3 (76.3)
(Thembeka)
Less: recurring (see-through) earnings (26.2) (19.9)
(Thembeka)
Other income and expenses (0.3)
Total headline earnings 217.3 (18.0)
Statistics
Recurring HEPS (cents) 19.3 20.0
HEPS (cents) 43.9 (4.6)
Notes
1. Basis of presentation and accounting policies
The condensed financial statements have been prepared in terms of IAS 34 -
Interim Financial Reporting and in compliance with the Listings
Requirements of the JSE Limited. The accounting policies applied in the
preparation of the condensed financial statements are consistent with those
used in the previous year, except for the following standards which are
effective for the financial year beginning 1 March 2009: IAS 1 (revised) -
Presentation of financial statements and IFRS 8 - Operating Segments. The
adoption of these standards has no material effect on the results, nor has
it required any restatement of the results.
2. Investment in associated companies
28 Feb 2010 28 Feb 2009
Rm Rm
Carrying value
- listed 417.3 246.1
- unlisted 634.8 463.7
1 052.1 709.8
Market value of listed associates 461.2 169.3
Directors` valuation of unlisted associates 748.3 441.2
1 209.5 610.5
Paladin has tested its investments in
associated companies for impairment at year-
end and the directors are satisfied that
its carrying value is fairly stated.
3. Non-headline items (net of tax and
minorities)
Impairment of investments 60.9 10.1
Impairment of loans 6.0
Net profit on sale/dilution of investment (17.4)
in subsidiaries and minority interest
Net profit on sale/dilution of investment (8.2)
in associated companies
Non-headline items of associated companies (3.6) 9.1
37.7 19.2
4. Commitments and contingencies
Future commitments in terms of:
Property rental agreements
Due within one year 0.4
One to five years 0.3
- 0.7
Operating leases
Due within one year 0.8
One to five years 0.1
- 0.9
5. Related party transactions
Paladin sold its investment of 74.9% in PSG Capital and bought the
investment of 9.4% in Petmin during the year under review. PSG Group was
party to both transactions as part of the internal restructuring.
During the year PSG Corporate Services (Pty) Ltd ("PSGCS") charged Paladin
management fees equal to R5.2 million (2009: Rnil) which was outstanding at
year-end in terms of a management agreement entered into during the year.
PSGCS is also entitled to a performance fee calculated annually, based on
the appreciation of Paladin`s share price, with the first measurement date
on 28 February 2011. The appreciation in the share price is the difference
between the 30-day volume weighted average price of Paladin at year-end and
the initial price, being R1.528. The liability can either be settled in
cash or, if insufficient cash is available, can be settled by the issue of
ordinary shares in Paladin. Had the measurement date been 28 February 2010,
the performance fee payable would have amounted to R10.8 million.
At 28 February 2010, the loan payable to PSGCS amounted to R42.2 million
(2009: R65.5 million).
6. Segment report
For the year ended Income Recurring Non- Headline Net asset
28 February 2010 headline recurring earnings value
earnings headline
earnings
Rm Rm Rm Rm Rm
Investment companies 10.3 122.1 132.4 275.7
Services 0.1 37.5 37.5 203.0
Mining, construction 18.4 56.8 (2.5) 54.3 424.0
and related services
Manufacturing 7.3 7.3 94.5
Education 1.4 1.4 51.4
Other 1.7 (6.6) (2.2) (4.4) (1.7)
Before funding and STC 20.2 106.7 121.8 228.5 1 046.9
Funding and STC 2.5 (11.2) (11.2) (37.1)
Total 22.7 95.5 121.8 217.3 1 009.8
Non-headline (37.7)
Attributable 179.6
Recurring Non-
recurring
For the year ended Income headline headline Headline Net asset
28 February 2009 earnings earnings earnings value
Rm Rm Rm Rm Rm
Investment companies 4.3 (96.2) (91.9) 96.4
Services 27.9 27.9 193.6
Mining, construction 21.5 42.8 42.8 278.2
and related services
Manufacturing 12.9 12.9 161.9
Education
Other (1.7) 3.3 3.3 3.6
Before funding and STC 19.8 91.2 (96.2) (5.0) 733.7
Funding & STC 2.5 (13.0) (13.0) (130.0)
Total 22.3 78.2 (96.2) (18.0) 603.7
Non-headline (19.2)
Attributable (37.2)
7. Review by auditors
The company`s external auditors, PricewaterhouseCoopers Inc., have reviewed
the condensed financial statements. A copy of their unqualified review
opinion is available on request at the company`s registered office.
Overview
Paladin is PSG Group`s private equity investment company in sectors other
than agriculture, food and beverages. Paladin invests in businesses that
are easily understood, that have strong sustainable cash flows, where
management are large shareholders and where Paladin`s share of profit after
tax is greater than R10 million. Paladin is strategically involved in its
investee companies and actively partners with the entrepreneurs and
management to advance the businesses to the next level. Paladin currently
has 13 investments across the economic spectrum which is either equity
accounted or marked-to-market from an accounting perspective.
Listing
Paladin listed on the JSE on 1 September 2009 and raised R150 million by
means of a renounceable rights offer to PSG Group shareholders shortly
thereafter.
Results
In the spirit of consistent clear and unambiguous communication to
stakeholders, management introduced the recurring headline earnings concept
as the predominant measure of Paladin`s financial performance. Previously
recurring headline earnings was defined as reportable headline earnings in
terms of accounting standards, excluding any marked-to-market movements and
one-off items.
During the past year we revisited and fine-tuned this methodology by now
measuring recurring headline earnings on a see-through basis throughout the
group. Paladin`s recurring headline earnings is the sum of its effective
interest in that of each of its underlying investees, regardless of its
percentage shareholding. The result is that investments in which Paladin or
an investee holds less than 20% and is not allowed to equity account in
terms of accounting standards, are now included in the calculation of our
recurring headline earnings. This provides management and investors with a
more realistic and simple way of evaluating Paladin`s financial performance
and provides a reasonability indicator for Paladin`s intrinsic value
calculation.
Paladin`s recurring headline earnings increased by 22.1% to R95.5 million.
This is predominantly due to an increase in earnings from investee
companies and the first time inclusion of Petmin`s results. However,
recurring headline earnings per share decreased by 3.5% from 20.0 cents to
19.3 cents, mainly as a result of:
An additional 128.2 million shares in issue relating to the aforementioned
renounceable rights offer at R1.17 per share; and
A loss contribution from GRW, an aluminium and steel road tanker
manufacturer, which was severely affected by the downturn in the economy.
Recent results have however improved significantly, with GRW returning to
profitability.
Paladin`s reportable headline earnings increased to R217.3 million (43.9
cents per share) as opposed to an R18.0 million loss (4.6 cents per share)
in the prior year. This increase is mainly as a result of marked-to-market
profits incurred in Thembeka`s investment portfolio of listed shares in the
JSE Limited, PSG Group and Capitec Bank.
Corporate action
The acquisition of a 50% interest in Curro, a private school group, for R50
million;
The acquisition of a 9.4% stake in Petmin for R92 million from PSG Group by
means of a share swap;
The acquisition of an additional 17.5% stake in Topfix for R19.6 million, a
provider of scaffolding and scaffolding personnel. Paladin now holds 28.2%;
The acquisition of a 20.4% stake in Spirit Capital, a leveraged buy-out
specialist for R12.8 million;
The disposal of Paladin`s interest in Mainfin and Axon for a total amount
of R21.4 million;
Played a key negotiating role in the merger of Erbacon with Civcon, whereby
Erbacon doubled in size; and
Thembeka`s key transactions for the year was the acquisition of 10% of
Overberg Agri for R37.7 million, and an additional 5 million PSG shares for
R77.9 million by way of a share swap and cash.
Review of operations
Paladin groups its 13 investments into five operational segments, namely;
investment companies, services, mining, construction and related services,
manufacturing and education.
Investment companies (Thembeka and Spirit)
The investment companies segment had a strong performance, with reportable
headline earnings increasing to R132.4 million as opposed to a R91.9
million loss in the prior year. This was mainly attributable to marked-to-
market profits at Thembeka.
Recurring headline earnings increased by 139.5% to R10.3 million. Inherent
to the nature of Thembeka as a BEE investment company, it is relatively
highly geared. The pleasing increase in recurring headline earnings is as a
result of the growth in the underlying earnings of Thembeka`s investee
companies exceeding the associated cost of funding.
Services (CIC, IQuad and African Unity)
Recurring headline earnings increased by 34.4% to R37.5 million.
Mining, construction and related services (Precrete, Petmin, Erbacon and
Topfix)
Recurring headline earnings increased by 32.7% to R56.8 million. This was
mainly attributable to the first time inclusion of Petmin`s results and the
full year inclusion of Topfix`s results.
Manufacturing (GRW, Lesotho Milling and Protea Gietery)
The manufacturing segment had disappointing results with recurring headline
earnings decreasing by 43.4% to R7.3 million. This was mainly as a result
of the aforementioned loss contribution from GRW.
Education (Curro)
Curro was acquired effective 1 July 2009. The results for the year were in
line with expectations for a developing high growth company.
Intrinsic value
Paladin`s intrinsic value is calculated by using market values for listed
investments and market-related multiples for unlisted investments. While
intrinsic value increased by 140.1% to R1.17 billion, on a per share basis
the increase was 65.0% to R2.03 per share as a result of a 45.0% increase
in shares in issue.
Intrinsic value 28 Feb 2010 28 Feb 2009
Company Description % held % of Value % held % of Value
port- Rm port- Rm
folio folio
Investment
companies
Thembeka BEE 49% 23% 272 49% 19% 110
investment
company
Spirit Leveraged buy- 20% 1% 15 0% 0% -
outs
24% 287 19% 110
Services
CIC FMCG 50% 18% 213 49% 15% 87
Iquad Outsourcing 43% 2% 24 42% 4% 24
services
African Unity Life and 43% 1% 17 54% 2% 9
related
insurance
21% 254 21% 120
Mining,
construction
and related
services
Precrete Mine safety 22% 14% 163 22% 16% 93
and support
services
Petmin Diversified 9% 10% 120 0% 0% -
miner
Erbacon Construction 22% 8% 100 26% 14% 85
Topfix Construction 28% 4% 48 11% 2% 10
support
services
36% 431 32% 188
Manufacturing
GRW Tank 40% 4% 49 40% 6% 38
manufacturer
Lesotho Milling Milling 25% 3% 38 25% 6% 36
Protea Gietery Non-ferrous 50% 3% 33 50% 7% 39
foundry
10% 120 19% 113
Education
Curro Private 50% 9% 100 0% 0% -
school
education
9% 100 0% -
Other 9% 59
Total investments 100% 1 192 100% 590
Net debt 2% (25) 18% (104)
Total intrinsic value 1 167 486
Shares in issue (m) 575 396
Intrinsic value per share (cents) 203 123
Intrinsic value per share at the last 212
practical date (cents)
Comprehensive details of Paladin`s investment portfolio are available on
the website at www.paladincapital.co.za.
Prospects
Our investee companies are well capitalised and positioned to grow their
business and market share in their respective industries. Paladin will
continue to add value to its investee companies through active input on a
strategic and operational level.
In addition, Paladin has initiated the following up to the last practical
date:
- Raised R100 million by means of a five-year, fixed rate preference share
with dividend and capital payable on maturity; and
- Purchased an additional 26% interest for a controlling stake in Curro
(subject to regulatory approval) for a total consideration of R52 million,
of which R43 million is payable in cash and the balance in Paladin shares.
Paladin and Curro`s experienced educational management team will
aggressively expand the current network of schools. In this regard, Paladin
has assisted Curro in concluding a R72.7 million ten-year, fixed rate loan
facility from International Finance Corporation ("IFC"), a division of the
World Bank.
Dividends
Given Paladin`s long term growth strategy, the board finds it appropriate
for Paladin not pay any dividends for the foreseeable future.
Annual general meeting
The annual general meeting will be held at Webersburg, Annandale Road,
Stellenbosch on Friday, 18 June 2010.
On behalf of the board
Jannie Mouton Francois Swart
Chairman Chief Executive Officer
Stellenbosch
13 April 2010
Paladin Capital Limited
Incorporated in the Republic of South Africa
(Registration number: 2007/032836/06)
Share code PLD
ISIN ZAE000138970
("Paladin" or "the company" or "the group")
Directors J F Mouton (Chairman), F W Swart (CEO) *, J Bezuidenhout *,
E de V Greyling #, K P Harris #, J A Holtzhausen, P J Mouton, J D Wiese #
(* executive # independent non-executive)
Secretary and registered office
PSG Corporate Services (Pty) Limited
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
PO Box 7403, Stellenbosch, 7599
Transfer secretaries
Computershare Investor Service (Proprietary) Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Corporate Advisor:
PSG Capital (Pty) Limited
Designated Advisor:
Questco Sponsors (Pty) Ltd
These results are available on our website at www.paladincapital.co.za
Date: 13/04/2010 15:48:01 Produced by the JSE SENS Department.
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