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STA
STA
STA - StratCorp Limited - Audited Condensed Financial Results for the year
ended 28 February 2010
StratCorp Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2000/031842/06)
JSE code: STA & ISIN ZAE000034294
("StratCorp" or "the company")
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 February 2010
Consolidated Statement of Financial Position
Audited Audited Audited
February February February
2010 2009 2008
R`000 R`000 R`000
Non-current assets
Investment property 877 562 1 268
Property, plant and equipment 6 121 6 130 6 140
Goodwill 1 318 1 318 3 532
Intangible assets 1 938 1 184 1 710
Finance lease receivables 478 - -
Investment in associates 977 - -
Other financial assets 155 1 379 6 531
Deferred tax - restated 8 259 4 580 -
20 123 15 153 19 181
Current assets
Inventories 36 748 50 194 31 298
Loans to group companies 163 - -
Other financial assets 6 912 5 814 9 972
Current tax receivable - 4 260 4 620
Finance lease receivables 282 - -
Trade and other receivables 4 430 3 344 8 463
Cash and cash equivalents 188 2 176 2 086
48 723 65 788 56 439
Total assets 68 846 80 941 75 620
Equity and liabilities
Equity
Share capital - restated 43 641 43 642 16 164
(Accumulated loss)/Retained income (5 341) 2 404 25 278
-restated
38 300 46 046 41 442
Non-current liabilities
Other financial liabilities - - 10 464 631
interest bearing
Finance Lease obligations 829 1 451 2 125
Deferred tax - restated - - 2 750
829 11 915 5 506
Current liabilities
Other financial liabilities - 12 648 9 904 10 777
interest bearing
Current tax payable 458 268 203
Finance lease obligations 1 307 969 784
Operating lease liability 825 770 -
Trade and other payables 8 849 11 069 16 408
Bank overdraft 5 630 - 500
29 717 22 980 28 672
Total liabilities 30 546 34 895 34 178
Total equity and liabilities 68 846 80 941 75 620
Number of ordinary shares in issue 158 312 158 319 101 071
(`000) (note1)
Net asset value per share (cents) 24.2 29.1 41.0
(NAVPS)
Net tangible asset value per share 22.1 27.5 35.8
(cents) (NTAVPS)
Consolidated Statement of Comprehensive Income
Audited Audited Audited
February February February
2010 2009 2008
R`000 R`000 R`000
Revenue 60 821 74 333 82 943
Cost of sales (37 318) (38 814) (35 992)
Gross profit 23 503 35 519 46 951
Other income 360 820 315
Operating expenses (35 667) (41 485) (37 393)
Impairment of loans receivable - (501) (16 319) -
restated
Impairment of goodwill - (2 215) -
Operating (loss) / profit (12 305) (23 680) 9 873
Fair value adjustments 551 (4 405) 892
Income from equity accounted 727 - -
investments
Investment revenue 479 548 1 273
Finance cost (690) (2 655) (553)
(Loss) / profit before taxation (11 238) (30 192) 11 485
Taxation - restated 3 494 7 317 (3 541)
(Loss) / profit for the year (7 744) (22 875) 7 944
Other comprehensive income - - -
Total comprehensive (loss) / income (7 744) (22 875) 7 944
Total comprehensive (loss) income
attributable to:
Owners of the parent (7 744) (22 875) 7 944
Non-controlling interest - - -
(7 744) (22 875) 7 944
158 312 158 319 101 071
Number of ordinary shares in issue
(`000)(note 1)
Weighted average number of ordinary 158 314 101 211 101 777
shares in issue (`000)(note 2)
Basic (loss) / earnings per share (4.89) (22.60) 7.81
(cents) (EPS)
Headline (loss) / earnings per (5.03) (20.39) 7.79
share (cents) (HEPS)
Reconciliation of headline / (loss)
earnings net of tax
Basic (loss) / earnings (7 744) (22 875) 7 944
Profit on sale of property, plant - (31) (13)
and equipment
Impairment of property, plant and 3 55 -
equipment
Impairment of goodwill - 2 215 -
Fair value adjustment on investment (221) - -
properties
Headline (loss) / earnings (7 962) (20 636) 7 931
Notes
180 296 330 ordinary shares less 21 984 733 treasury shares (2009: 180 296 330
ordinary shares less 21 977 731 treasury shares; 2008: 123 004 663 ordinary
shares less 21 933 531 treasury shares)
180 296 330 weighted average number of ordinary shares less 21 982 373 weighted
average number of treasury shares (2009: 123 161 626 weighted average number of
ordinary shares less 21 950 978 weighted average number of treasury shares;
2008: 117 357 552 weighted average number of ordinary shares less 15 580 584
weighted average number of treasury shares)
Consolidated Statement of Changes in Equity
Share Retained Earnings Total
Capital / (Accumulated
loss)
R`000 R`000 R`000
Balance at 01 March 17 224 17 334 34 558
2007
Issue of shares 11 999 - 11 999
Treasury shares - (13 059) - (13 059)
restated
Net profit for the - 7 944 7 944
year
Balance at 01 March 16 164 25 278 41 442
2008
Issue of shares 27 500 - 27 500
Treasury shares (21) - (21)
Net profit for the - (22 875) (22 875)
year - restated
Balance at 01 March 43 643 2 403 46 046
2009
Treasury shares (2) - (2)
Net profit for the - (7 744) (7 744)
year
Balance at end of 43 641 (5 341) (38 300)
period
Consolidated Statement of Cash Flow
Audited Audited Audited
February February February
2010 2009 2008
R`000 R`000 R`000
Cash flows from operating
activities
Cash received from customers 60 103 80 264 88 675
Cash paid to suppliers and (60 234) (101 736) (80 342)
employees
Cash generated from (used in) (131) (21 472) 8 333
operations
Net interest income (54) (1 707) 888
Tax received (paid) 4 265 413 (9 637)
Net cash flows from operating 4 080 (22 766) (416)
activities
Cash flows from investing
activities
Purchase of property, plant and (901) (2 022) (3 081)
equipment
Sale of property, plant and 99 337 15
equipment
Purchase of investment properties (58) - (1 267)
Sale of investment properties - 1 261 -
Purchase of intangible assets (985) (28) (641)
Loan advanced to group company (163) - -
Purchase of financial assets (517) (12 965) (4 973)
Sales of financial assets 185 1 550 892
Net cash from investing (2 340) (11 867) (9 055)
activities
Cash flows from financing
activities
Proceeds on share issue (buy (1) 27 478 (1 060)
back)
Proceeds from financial - 29 893 1 048
liabilities
Repayment of financial (7 721) (20 933) (151)
liabilities
Finance lease payments (989) (1 215) (420)
Net investment in finance lease (647) - -
assets
Net cash from financing (9 358) 35 223 (583)
activities
Net increase (decrease) in cash (7 618) 590 (10 054)
and cash equivalents
Cash and cash equivalents at 2 176 1 586 11 640
beginning of the year
Cash and cash equivalents at end (5 442) 2 176 1 586
of the year
Condensed Segmental Analysis
Audited % Audited % Audited %
February February February
2010 2009 2008
R`000 R`000 R`000
Revenue
Property development 12 829 13 70 054 45 19 748 20
External customers 9 391 26 783 19 748
Inter segment 3 438 43 271 -
Asset management 41 177 45 58 881 37 63 163 64
External customers 40 992 47 300 63 122
Inter segment 185 11 581 41
Health and Lifestyle 10 403 11 - - - -
External customers 10 303 - -
Inter segment 100 - -
Corporate 25 453 30 27 187 17 15 806 16
External customers - 241 73
Inter segment 25 453 26 946 15 733
Other 397 1 8 1 - -
External customers 135 8 -
Inter segment 262 - -
90 259 100 156 130 100 98 717 100
- Inter segment (29 438) (81 797) (15 774)
eliminations
60 821 74 333 82 943
Profit / (loss) after
tax
Property development (6 456) 86 (7 480) 33 388 5
Asset management (5 041) 65 (362) 1 7 213 91
Health and Lifestyle (797) 10 - - - -
Corporate 4 986 (66) (14 883) 65 343 4
Other (436) 5 (150) 1 - -
(7 744) 100 (22 875) 100 7 944 100
Segment assets
Property development 41 236 60 53 118 65 39 090 52
Asset management 6 892 11 9 470 12 17 694 23
Health and Lifestyle 2 159 3 - - - -
Corporate 16 845 24 18 163 22 18 836 25
Other 1 714 2 190 1 - -
68 846 100 80 941 100 75 620 100
Segment liabilities
Property development 19 142 63 25 652 74 19 065 55
Asset management 5 365 18 3 516 10 10 616 31
Health and Lifestyle 1 238 4 - - - -
Corporate 4 393 14 5 710 15 4 987 14
Other 408 1 19 1 - -
30 546 100 34 895 100 34 178 100
OVERVIEW
During the year under review, trading conditions remained difficult. The
operational loss before impairments, fair value adjustments and taxation ("net
operating loss") of R 4.8 million incurred during the first 6 months increased
to reflect a total net operational loss of R 12.3 million for the full year,
effectively resulting in a net operational loss of R 7.5 million for the latter
half of the financial year.
Although the net result is significantly better than the previous year, the
group still posted negative results. Accordingly the executive management
continued streamlining the initiatives implemented during the previous period
and implemented a number of new initiatives to ensure that the group increases
turnover and return to profitability in future.
NATURE OF BUSINESS
StratCorp is an investment holding company listed on AltX. StratCorp`s business
is divided into four distinct segments, namely General Financing, Asset
Management, Product Marketing and Distribution, and Property Development.
SUBSIDIARIES
General Financing
The General Financing division under StratFin (Proprietary) Limited
concentrated the efforts more towards the quality of the lending book and a
positive credit experience than on the quantum advanced to clients. The
company mainly focuses on asset backed advances to clients between R 1 500 and
R 25 000 but advances of up to R 80 000 are considered from time to time. The
total outstanding receivable book at 28 February 2010 was R 1.6 million with no
bad debt write offs to date. The company constantly looks for new opportunities
in the market to provide focussed finance solutions to the consumer and
business market in partnership with selected product providers.
Asset Management
Through StratEquity (Proprietary) Limited, the company provides a traditional
asset management model. The investment structures created for investors differ
from the typical Collective Investments Schemes available in the market in the
sense that investors buy a tradable share (not a unit) in any of 3 independent
investment companies. These investment companies then buy (according to a risk
based mandate) a variety of instruments on the market, including shares in the
Top 40 listed companies, high growth listed companies and Exchange Traded
Funds.
StratEquity has in excess of 36 000 monthly subscribers on its books that
invest through the investment companies.
The total investment funds received from clients during the year decreased to R
66.1 million. (2009: R 84.4 million - 21.7% decrease).
As a result of past activity in StratEquity, the group acquired certain
investments, which investments were classified as "held for trading". Held for
trading investments are carried at cost as fair value cannot be determined. The
carrying amount of these investments is tested for impairment annually in
accordance with IAS 39. On an annual basis the portfolio value is adjusted
based on this principle and the movement is subsequently shown in the income
statement as a net movement.
During the period under review the company held the following unlisted
investments:
APMI Holdings Limited: 15% shareholding
GlobalJewel Limited: 13% shareholding
StratCol (Proprietary) Limited: 31% shareholding
Supertow International Limited: 13% shareholding
Product Marketing and Distribution
I-Cura (Proprietary) Limited successfully introduced the I-Cura product range
(health and life style) into the South African and CMA neighbouring countries.
The range has been expanded from its core I-Cura Life and Cream products to
include other health and life style ranges. In March 2010 it expanded its
footprint into Kenya. Further expansions into Botswana, Namibia and Nigeria are
planned in the year ahead.
Property Development
The StratCorp property group is involved in residential property development
and sales in the middle market segment (R 300 000 to R 500 000 price range).
During the year operations were limited to building packages sold to bank
approved clients. Stands for this purpose were acquired from 3rd party property
developers. The group`s Soldonne development (phase 3 of the Orchards X33
development) has been marketed to prospective clients, but sales were extremely
slow given the prevailing economic conditions. Currently 56 units are still
available for sale. In order to cover costs the unsold units are rented on an
incidental basis until the sale of the unit takes place. Unsold units are
reflected as inventory. The total outstanding external liabilities relating to
the development (development bond) were R 1.8 million at 28 February 2010 and
should be settled by mid 2010. No new developments on current vacant land
owned by the group are currently contemplated due to the current state of the
economy. This decision will be reviewed constantly. Management is focusing on
the sale of the rental pool as well as the marketing of building packages on
full title stands.
CASH FLOWS
The group`s cash flow was tightly managed in the period under review. Despite
this, the company spent money in support of immediate turnover wherever
necessary as well as identified future growth initiatives. Cash generated from
operations increased from (R 21.5 million) (2009) to R 0.1 million (2010).This
was mainly due to increased focus on cash flow. Infrastructural expenses
(property, plant and equipment) decreased from R 2.1 million to R 0.9 million
as a result of the prior year`s spending to establish an infrastructure to cope
with future growth. Although a net cash flow of (R 5.4 million) was recorded
for the period, it is anticipated that a substantial portion of the cash with
regard to the property operations will flow back to the company in future.
Total borrowings at year end were R12.6 million (2009: R 20.4 million).
HUMAN RESOURCES
Although the current human resource infrastructure is adequate to ensure
sustained operation and allow for future growth, certain key positions in the
subsidiaries need to be filled in order to optimise the successful
implementation of strategies decided on. It must however be noted that due to
certain specialised operations the group is involved in, it is becoming
increasingly difficult to obtain the services of skilled staff to fill certain
key positions necessary to execute the group`s operational strategies.
CHANGES TO THE BOARD
There were no changes to the Board during the financial year.
PROSPECTS
Any prediction in the current financial and economic environment should still
be made with caution as the economy has not really managed to improve
drastically. Management however believe that the initiatives that it has
implemented and are continuously implementing, can result in the group posting
better results than the past year. Management also takes cognisance of the fact
that continuous operational losses put immense pressure on cash flow; therefore
the constant streamlining of the current infrastructures and operating
environments to optimise these businesses are of the highest priority to ensure
that growth is not hampered in any way through cash flow restraints. In
addition, management is also giving specific attention to the sale of the 56
units in the Soldonne development that the group owns, that will result in
freeing up some R20 million plus cash. This will help reducing some interest
bearing debt (linked units), as well as provide some cash to expedite the other
operations returning to profitability.
The existing businesses proved to have the ability to generate substantial
profits in the past and there is no reason, other than the current subdued
economic conditions, that these operations should not return to being
profitable again. The additional businesses added to the group over the past
two years, also have the ability to be highly profitable. There is a general
consensus among economists that trading conditions and consumer spending will
keep on improving. This should then ultimately result in the group`s return to
profitability.
SUBSEQUENT EVENTS
Subsequent to year end the company expanded the I-Cura operations into Kenya.
The group has further ceased its StratEquity operations in Lesotho. Other than
the facts and developments reported on in these audited results, there have
been no material changes in the affairs, financial or trading position of the
group since the year end.
FINANCIAL REVIEW
The consolidated turnover of the group decreased by 18.0% to R61.0 million in
2010 (2009: R74.3 million).
For comparison purposes, the preceding four years` revenue, net profit after
tax, earnings per share (EPS) and net asset value per share (NAVPS) are
indicated in the table below:
2006 2007 2008 2009 2010
Revenue - R`000 19 670 50 192 82 943 74 333 60 821
Net profit after tax - 4 576 17 532 7 944 (22 875) (7 744)
R`000
EPS - cents 5.53 17.22 7.81 (22.60) (4.89)
HEPS - cents 4.53 17.22 7.79 (20.39) (5.03)
NAVPS - cents 30.2 33.9 41.0 29.1 24.2
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The audited condensed financial statements comprise a consolidated statement of
financial position at 28 February 2010, a consolidated statement of
comprehensive income, consolidated statement of changes in equity and
summarised consolidated statement of cash flow for the year ended 28 February
2010. The audited condensed consolidated financial statements have been
prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards
("IFRS"), the AC500 standards as issued by the Accounting Practices Board or
its successor, the presentation and disclosure requirements of IAS34, Interim
Financial reporting, the JSE Listings Requirements and the South African
Companies Act.
The accounting policies applied for the year, which are in terms of IFRS, are
consistent with those of the prior year.
Basis of measurement
The condensed financial statements have been prepared on the historical cost
basis.
AUDIT OPINION
The annual financial statements have been audited by SAB&T Chartered
Accountants Inc. The annual financial statements and the auditors` unmodified
audit report in respect thereof are available for inspection at the company`s
registered office.
DIVIDENDS
No dividends have been declared.
STATEMENT ON GOING CONCERN
The annual financial statements have been prepared on the going-concern basis
since the directors have every reason to believe that the company has adequate
resources in place to continue in operation for the foreseeable future.
RESTATEMENT
Certain prior year figures have been restated as a result of the share
incentive scheme issue in July 2007 being accounted for incorrectly in terms of
IFRS.
During the preparation of the financial statements for the current financial
year ending 28 February 2010, the group became aware that the ordinary shares
issued to the participants in the StratCorp Personnel Incentive Trust during
July 2007 was not correctly accounted for as required by IFRS. The shares were
accounted for as ordinary issued share capital, whereas it should have been
treated as treasury shares. As a further result the loans granted by the
StratCorp Personnel Incentive Trust should not have been fair valued and
impaired , were applicable, at the end of each of the accounting periods ended
29 February 2008 and 28 February 2009.This incorrect treatment results in an
error that needs correction retrospectively to the financial year ended 28
February 2008. The financial statements for the financial years ended 29
February 2008 and 28 February 2009 have been restated to correct this error.
The effect of the restatement on the relevant line items in those financial
statements is summarized below. There is no effect in the financial year ended
28 February 2010.
Group 2009
Statement of Before Change After Before
financial
position
Share capital 53,389,632 (9,747,400) 43,642,232 25,911,725
Retained 595,460 1,808,256 2,403,716 25,278,507
income
Deferred tax 5,493,459 (912,644) 4,580,815 490,155
- asset
Other 12,840,707 (7,026,500) 5,814,207 19,719,778
financial
assets -
current
Statement of
Comprehensive
Income
Impairment of (19,040,038) 2,720,900 (16,319,138) -
loans
receivable
Taxation 8,230,054 (912,644) 7,317,410 (3,541,169)
Earnings per (21.25) (1.35) (22.60) 7.16
share
Headline (19.32) (1.07) (20.39) 7.15
earnings per
share
Diluted (21.25) (1.35) (22.60) 7.16
earnings per
share
Table Continued:...
Group 2008
Statement of Change After
financial
position
Share capital (9,747,400) 16,164,325
Retained income - 25,278,507
Deferred tax - - 490,155
asset
Other financial (9,747,400) 9,972,378
assets - current
Statement of
Comprehensive
Income
Impairment of - -
loans receivable
Taxation - (3,541,169)
Earnings per 0.65 7.81
share
Headline 0.64 7.79
earnings per
share
Diluted earnings 0.65 7.40
per share
ANNUAL REPORT AND ANNUAL GENERAL MEETING
The Annual Report for the year ended 28 February 2010 will be posted to
shareholders on 31 May 2010.
Notice is hereby given that the Annual General Meeting of shareholders will be
held at 3rd Floor, Lakeside Building, 2004 Gordon Hood Drive, Centurion at
12:00 on Friday, 2 July 2010, to transact the business as stated in the notice
of annual general meeting forming part of the Annual Report.
GENERAL
The board of directors have approved these audited condensed consolidated
results. On behalf of the board, I wish to thank our management team,
personnel, stakeholders and shareholders for their valuable input and support
over the past year.
On behalf of the board.
D B Harington
Chief Executive Officer
28 May 2010
CORPORATE INFORMATION
Non executive directors: PJ de Jongh (Chairman), M Patel* (Chairman
of Audit Committee), SR Firer*
*Independent
Executive directors: DB Harington (CEO), HJ van der Merwe (GFD), IM
Wright (CIO)
Registered address: 3rd Floor, Lakeside Building A, 2004 Gordon
Hood Drive, Centurion, 0046
Postal address: PO Box 12022, Centurion, 0046
Company secretary: JPJ Louw
Telephone: (012) 643 7400
Facsimile: (012) 663 2914
Transfer secretaries: Computershare Investor Services (Pty) Limited
Auditors: SAB&T Chartered Accountants Inc
Designated Adviser: Vunani Corporate Finance
Date: 28/05/2010 14:40:02 Produced by the JSE SENS Department.
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