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CND
CND
CND - Conduit Capital Limited - Condensed consolidated unaudited results for the
six months ended 28 February 2010
CONDUIT CAPITAL LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/017351/06)
Share code: CND ISIN: ZAE000073128
("Conduit" or "Conduit Capital" or "the group")
CONDENSED CONSOLIDATED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY
2010
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six six year
months months ended
ended ended 31 Aug
28 Feb 28 Feb 2009
2010 2009 R`000
R`000 R`000
Gross revenue 410 355 406 943 816 394
Net insurance revenue 161 207 101 088 216 000
Other operating revenue 42 707 41 525 98 812
Net revenue 203 914 142 613 314 812
Operating expenses (197 220) (131 348) (299
150)
- Direct expenses: Insurance and risk (135 319) (64 499) (168
services 928)
- Administration and other expenses (27 872) (26 853) (52 926)
- Depreciation and amortisation (1 418) (1 484) (3 019)
- Employee costs (32 611) (38 512) (74 277)
Operating profit 6 694 11 265 15 662
Income from associates 121 851 2 171
Investment income 9 648 8 036 18 607
Finance charges (1 156) (1 889) (3 568)
Other income (expenses) 25 (6) 3 208
Profit before taxation 15 332 18 257 36 080
Taxation (4 164) (6 580) (11 454)
Total comprehensive income for the 11 168 11 677 24 626
period
Total comprehensive income
attributable to:
Ordinary shareholders 6 946 7 253 15 740
Non-controlling interest 4 222 4 424 8 886
Total comprehensive income for the 11 168 11 677 24 626
period
EARNINGS PER SHARE (CENTS)
Basic 2.78 2.90 6.29
Diluted 2.76 2.89 6.26
Headline 2.36 2.90 5.78
Diluted headline 2.35 2.89 5.75
CONDENSED SEGMENTAL REPORT
Head Insurance Direct Financial
office & and risk R`000 services
treasury services R`000
R`000 R`000
Unaudited - Six months ended 28
February 2010
Gross revenue 9 405 375 234 34 210 205
Net revenue 9 405 168 793 34 210 205
Investment income 6 726 6 875 320 37
Profit before taxation 5 730 3 299 10 400 54
Attributable earnings 5 867 2 739 2 554 49
Non-controlling interest - 351 3 833 -
Total assets 178 036 655 355 33 059 5 162
Total liabilities (2 346) (590 656) (20 649) (5 868)
Unaudited - Six months ended 28
February 2009 (restated)
Gross revenue 4 873 375 198 30 932 189
Net revenue 4 873 110 868 30 932 189
Investment income (loss) 2 013 7 045 351 (187)
Profit (Loss) before taxation 494 9 851 8 905 (159)
Attributable earnings (loss) 728 5 227 2 445 (159)
Non-controlling interest - 717 3 666 -
Total assets 171 895 1 247 155 32 695 8 314
Total liabilities (1 219) (1 189 967) (18 533) (9 275)
Audited - Year ended 31 August
2009 (restated)
Gross revenue 7 190 752 039 63 298 189
Net revenue 7 190 250 457 63 298 189
Investment income 5 429 15 140 705 49
Profit (Loss) before taxation (937) 20 133 19 054 47
Attributable earnings (loss) 627 12 375 5 190 47
Non-controlling interest - 1 040 7 784 -
Total assets 173 896 694 054 35 705 5 121
Total liabilities (3 150) (631 643) (18 680) (5 876)
Private Elimina- Total
equity tions R`000
R`000 R`000
Unaudited - Six months ended 28
February 2010
Gross revenue 911 (9 610) 410 355
Net revenue 911 (9 610) 203 914
Investment income 20 (4 330) 9 648
Profit before taxation 247 (4 398) 15 332
Attributable earnings 135 (4 398) 6 946
Non-controlling interest 38 - 4 222
Total assets 1 618 (148 056) 725 174
Total liabilities (1 996) 145 697 (475
818)
Unaudited - Six months ended 28
February 2009 (restated)
Gross revenue 985 (5 234) 406 943
Net revenue 985 (5 234) 142 613
Investment income (loss) 43 (1 229) 8 036
Profit (Loss) before taxation 367 (1 201) 18 257
Attributable earnings (loss) 213 (1 201) 7 253
Non-controlling interest 41 - 4 424
Total assets 1 077 (158 568) 1 302
568
Total liabilities (1 738) 156 203 (1 064
530)
Audited - Year ended 31 August 2009
(restated)
Gross revenue 1 922 (8 244) 816 394
Net revenue 1 922 (8 244) 314 812
Investment income 84 (2 800) 18 607
Profit (Loss) before taxation 585 (2 802) 36 080
Attributable earnings (loss) 303 (2 802) 15 740
Non-controlling interest 62 - 8 886
Total assets 1 470 (158 762) 751 484
Total liabilities (2 021) 156 397 (504
973)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at 28 as at 28 as at
Feb 2010 Feb 2009 31 Aug 2009
R`000 R`000 R`000
ASSETS
Non-current assets 105 842 97 349 91 911
- Property, plant and equipment 16 082 15 804 15 648
- Intangible assets 46 274 47 774 46 440
- Loans receivable 4 761 8 471 5 917
- Deferred taxation 6 915 4 970 6 830
- Investment property 3 320 8 319 8 545
- Investment in associates 2 245 4 844 2 469
- Investments held at fair value 26 245 7 167 6 062
Current assets 599 207 1 189 702 644 673
- Insurance assets 255 143 775 291 269 744
- Investments held at fair value 3 536 778 858
- Trade and other receivables 95 898 169 764 87 209
- Taxation 1 331 9 337 12 012
- Cash and cash equivalents 243 299 234 532 274 850
Non-current assets held for sale 20 125 15 517 14 900
Total assets 725 174 1 302 568 751 484
EQUITY AND LIABILITIES
Capital and reserves 249 356 238 038 246 511
- Ordinary share capital and 199 155 199 185 199 155
share premium
- Retained earnings 38 675 23 242 31 729
- Share-based payment reserve 81 802 1 004
237 911 223 229 231 888
- Non-controlling interest 11 445 14 809 14 623
Non-current liabilities 47 610 51 974 52 245
- Policyholder liabilities under 24 548 23 662 24 548
insurance contracts
- Interest-bearing borrowings 16 183 22 063 18 873
- Deferred taxation 6 879 6 249 8 824
Current liabilities 428 208 1 012 556 452 728
- Insurance liabilities 345 680 841 191 332 031
- Vendors for cash 90 95 90
- Trade and other payables 73 690 163 409 111 036
- Current portion of interest- 5 566 5 080 5 566
bearing borrowings
- Taxation 3 182 2 752 3 991
- Bank overdraft - 29 14
Total equity and liabilities 725 174 1 302 568 751 484
Net asset value per share 95.06 89.19 92.65
(cents)
Tangible net asset value per 76.57 70.10 74.10
share (cents)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
six six year
months months ended
ended ended 31 Aug
28 Feb 28 Feb 2009
2010 2009 R`000
R`000 R`000
Net cash flows from operating (7 474) 20 461 54 422
activities
Net cash flows from investing (22 529) 10 377 18 885
activities
Net cash flows from financing (1 534) (9 332) (10 046)
activities
Total cash movement for the period (31 537) 21 506 63 261
Cash at the beginning of the period 274 836 212 997 212 997
Cash disposed of - - (1 422)
Total cash at the end of the period 243 299 234 503 274 836
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Retained Other Non- Total
capital earnings reserves controlling R`000
and share R`000 R`000 interest
premium R`000
R`000
Balance at 1 199 220 15 989 604 13 074 228 887
September 2008
Share issue costs (35) - - - (35)
Profit for the period - 7 253 - 4 424 11 677
Equity options issued - - 198 - 198
to executives
Dividends paid - - - (2 689) (2 689)
Balance at 28 199 185 23 242 802 14 809 238 038
February 2009
Share issue costs (30) - - - (30)
Disposal of interest - - - ( 2 248) (2 248)
in subsidiaries
Profit for the period - 8 487 - 4 462 12 949
Equity options issued - - 202 - 202
to executives
Dividends paid - - - (2 400) (2 400)
Balance at 31 August 199 155 31 729 1 004 14 623 246 511
2009
Profit for the period - 6 946 - 4 222 11 168
Equity options issued - - 81 - 81
to executives
Equity options - - (1 004) - (1 004)
cancelled
Dividends paid - - - (7 400) (7 400)
Balance at 28 199 155 38 675 81 11 445 249 356
February 2010
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of preparation
The accounting policies applied in the preparation of these condensed
consolidated unaudited financial statements for the six months ended 28
February 2010 ("interim results") are based on reasonable judgments and
estimates and are in accordance with International Financial Reporting
Standards ("IFRS"). These accounting policies are consistent with those
applied in the annual financial statements for the year ended 31 August
2009, save for the adoption of new accounting standards detailed in
paragraph 2 below. These interim results have been prepared in terms of IAS
34 - Interim Financial Reporting, the Companies Act, 1973 (Act 61 of 1973),
as amended, and the Listings Requirements of JSE Limited.
The interim results have not been audited or reviewed by the group`s
auditors.
2 Adoption of new accounting standards
The group adopted the amendments to IAS 1: Presentation of Financial
Statements and IFRS 8: Operating Segments during the period under review.
As a result, comparative numbers have been restated in the condensed
segmental report. The restatements had no impact on the group`s financial
results.
3 Share capital
Details of the shares in issue as at the balance sheet dates are as
follows:
28 Feb 28 Feb 31 Aug
2010 2009 2009
`000 `000 `000
Number of shares in issue 250 277 250 277 250 277
- Shares in issue 256 380 256 380 256 380
- Shares held as treasury shares (6 103) (6 103) (6 103)
Weighted average number of shares 250 277 250 277 250 277
- Shares in issue 256 380 256 380 256 380
- Shares held as treasury shares (6 103) (6 103) (6 103)
Fully diluted weighted average 251 482 251 334 251 449
number of shares
- Shares in issue 257 585 257 437 257 552
- Shares held as treasury shares (6 103) (6 103) (6 103)
4 Reconciliation of headline earnings
Unaudited
six Unaudited Audited
months six year
ended months ended
28 Feb ended 31 Aug
2010 28 Feb 2009
R`000 2009 R`000
R`000
Profit for the period 11 168 11 677 24 626
Non-controlling interest (4 222) (4 424) (8 886)
Earnings used in the calculation 6 946 7 253 15 740
of basic earnings per share
Profit on disposal of subsidiaries - - (2 597)
and associates
After tax loss on revaluation of - - 1 294
investment properties
After tax (profit) loss on (25) 4 27
disposal of property, plant and
equipment
Reversal of equity options (1 004) - -
Headline earnings 5 917 7 257 14 464
5 Directors
Mr Larry Prosser was appointed as an executive director on 2 March 2010.
There were no other changes to the directorate since the annual financial
results were published on 6 November 2009.
6 Dividends
The board of directors did not recommend a dividend payment to ordinary
shareholders for the six months ended 28 February 2010 (February 2009:
Nil).
7 Post balance sheet events
Other than disclosed above, there were no material post balance sheet
events.
COMMENTARY
GROUP OPERATIONAL REVIEW
1 HEAD OFFICE AND TREASURY
Having disposed of the bulk of the listed equity portfolio in the 2008 and
2009 financial years, R52.5 million of capital was allocated to
alternative/equity and enhanced yield investments in the latter part of
2009. R46 million of this has been deployed as at the reporting date.
Further allocations will be considered as part of the group`s ongoing
investment strategy.
As at 28 February 2010 group cash and near cash resources available for
investment, other than for working capital purposes, increased to R155
million.
2 CONDUIT INSURANCE AND RISK SERVICES
Underwriting
Gross insurance revenue for the period under review increased marginally to
R410.4 million (February 2009: R406.9 million). Net insurance revenue,
however, advanced significantly to R161.2 million (February 2009: R101.1
million) as a direct result of the 2010 reinsurance program that moved
towards higher retention on select insurance lines. The program is only
likely to result in improved profitability once the book is further
diversified and reaches critical mass in certain heavily reinsured
portfolios.
Statutory funding ratio and credit rating
Global Credit Rating recently reaffirmed Constantia Insurance Company L
imited`s ("CICL`s") credit rating of A-.
Notwithstanding a R10 million dividend payment to the group and a higher
net retention of less volatile insurance risks, CICL`s statutory funding
ratio as at 28 February 2010 was a satisfactory 43%, while the
international solvency margin was at 53%. The existing balance sheet is
capable of sustaining meaningful short to medium term premium growth
without placing any strain on solvency, which the group intends to maintain
above 30% (statutory minimum: 15%). Any extraordinary acquisitive or
organic growth can be accommodated and managed through reinsurance
arrangements.
3 CONDUIT DIRECT
Anthony Richards & Associates (Proprietary) Limited ("ARA")
ARA posted a 16.8% improvement in profit before tax when compared to the
prior corresponding period. The operation remains on a steady upward
trajectory.
4 CONDUIT PRIVATE EQUITY
On Line Lottery Services (Proprietary) Limited ("Lottofun")
Following the successful appeal in the Supreme Court of Appeal in September
2009, Lottofun continues to generate modest profits. Going forward Lottofun
will not be reported on separately.
The Private Equity division has been injected with renewed focus and is
once again actively pursuing various opportunities, which will be reported
on as and when they come to fruition.
CONCLUSION
The group has made considerable headway in the recruitment of key personnel
to drive growth in each of its business segments. In particular, we welcome
Larry Prosser to the main board and have every confidence that his skills
and wealth of experience will serve us well for the future.
We have entered an exciting period in the development of Conduit Capital
and are gradually returning to our roots as a strategic investment company.
Whilst the remainder of this financial year will not be without its
challenges, the group is now well structured, supported by a robust balance
sheet and an executive team well equipped to meet its strategic objectives.
For and on behalf of the Board
Jason D Druian Lourens E Louw
Chief Executive Officer Financial Director
Johannesburg
5 May 2010
Directors:
Executive directors: Jason D Druian (Chief Executive Officer), Lourens E
Louw (Financial Director), Harold L Prosser, Stanley D Shane, Gavin Toet
Non-executive directors: Reginald S Berkowitz (Chairman), Scott M Campbell,
Gunter Z Steffens OBE
Company secretary:
Probity Business Services (Proprietary) Limited
Third Floor, The Mall Offices, 11 Cradock Avenue
Rosebank, 2196
Registered address:
Unit 7 Tulbagh, 360 Oak Avenue
Randburg, 2194
PO Box 97, Melrose Arch, 2076
Telephone: 011 686 4200
Facsimile: 011 789 3709
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Sponsor:
Merchantec Capital
Date: 05/05/2010 16:59:02 Produced by the JSE SENS Department.
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