| Mon 19 Jul 2010, 17:35 | | FCPD - Foord Compass Limited - Interim Report for the Six Months Ended 30 |
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JSE FCPD
FCPD
FCPD - Foord Compass Limited - Interim Report for the Six Months Ended 30
June 2010 and Interest Payment and Election
FOORD COMPASS LIMITED
JSE Code: FCPD ISIN: ZAE000054466
Registration Number: 1987/003591/06
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2010 AND INTEREST PAYMENT
AND ELECTION
CONDENSED STATEMENT OF FINANCIAL POSITION
Audited
Unaudited Unaudited
at 30 June 2010 30 June 30 June 31 Dec
2010 2009 2009
Notes R`m R`m R`m
ASSETS
Current assets
Investments 3 1340.0 1005.7 1200.9
Income receivables and unsettled 21.8 23.1 35.3
sales
Cash and deposits 462.2 528.8 564.7
Total assets 1824.0 1557.6 1800.9
EQUITY AND LIABILITIES
Capital and reserves 24.2 21.5 31.5
Ordinary share capital 0.1 0.1 0.1
Accumulated profits 24.1 21.4 31.4
Non-current liabilities 1029.7 955.8 1044.7
Unsecured debentures 4 1022.9 955.1 1037.5
Deferred taxation 6.8 0.7 7.2
Current liabilities 770.1 580.3 724.7
Accounts payable 2.2 2.2 2.3
Taxation 1.6 1.7 1.3
Short investment positions 711.1 519.7 647.8
Unsettled purchases 24.6 1.5 9.2
Debenture interest payable 30.6 55.2 64.1
Total equity and liabilities 1824.0 1557.6 1800.9
Number of debentures in issue 145599536 141575823 145504265
Number of ordinary shares in 8800070 8800070 8800070
issue
Cents Cents Cents
Net attributable asset value per 723.5 713.6 757.1
debenture (cum interest)
Net attributable asset value per 702.5 674.6 713.0
debenture (ex interest)
Net attributable asset value per 275.0 244.3 358.0
ordinary share
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Audited
Unaudited Unaudited
6 months 6 months Year
to to ended
30 June 30 June 31 Dec
2010 2009 2009
Notes R`m R`m R`m
Investment income 46.7 72.8 122.8
Realised trading (losses) (5.3) (0.5) 23.2
profits
Operating expenditure (7.4) (6.2) (13.5)
Net distributable profit 34.0 66.1 132.5
Capital profits on sale of 10.1 4.1 8.3
investments
Revaluation of investments (25.8) (25.8) 43.1
Net portfolio income before 18.3 44.4 183.9
debenture interest
Debenture interest (30.6) (55.2) (119.3)
Decrease (increase) in carrying 4 15.3 15.0 (40.8)
value of debentures
Profit before taxation 3.0 4.2 23.8
Taxation expense 5 (1.5) (0.3) (9.9)
Profit attributable to ordinary 1.5 3.9 13.9
shareholders
Weighted average number of 145587529 141201689 142661438
debentures in issue
Cents Cents Cents
Interest per debenture (weighted) 21.0 39.0 83.6
Earnings per debenture (weighted) 10.5 28.5 112.2
Earnings per ordinary share 17.0 44.3 158.0
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Ordinary Accumulate Total
share d profits
capital
R`m R`m R`m
Balance at 1 January 2009 (audited) 0.1 17.5 17.6
Profit for the year - 13.9 13.9
Balance at 31 December 2009 (audited) 0.1 31.4 31.5
Dividends - (8.8) (8.8)
Profit for the period - 1.5 1.5
Balance at 30 June 2010 (unaudited) 0.1 24.1 24.2
Balance at 1 January 2009 (audited) 0.1 17.5 17.6
Profit for the period - 3.9 3.9
Balance at 30 June 2009 (unaudited) 0.1 21.4 21.5
CONDENSED STATEMENT OF CASH FLOWS
Audited
Unaudited Unaudited
6 months 6 months Year
to to ended
30 June 30 June 31 Dec
2010 2009 2009
R`m R`m R`m
Net cash (outflow) inflow from trading (28.7) 204.2 272.2
activities
Interest, dividends and taxation paid (74.5) (83.4) (142.1)
Net cash received from issue of 0.7 19.4 46.0
debentures
Net (decrease) increase in cash and (102.5) 140.2 176.1
deposits
Cash and deposits at beginning of period 564.7 388.6 388.6
Cash and deposits at end of period 462.2 528.8 564.7
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
The interim 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 interim 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 interim condensed financial statements as were applied in
the preparation of the company`s financial statements for the year ended 31
December 2009.
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. The investment objective is to achieve a total return of 10%
per annum above the SA CPI on a rolling five-year basis. 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.
4. Unsecured debentures Audited
Unaudited Unaudited
30 June 30 June 31 Dec
2010 2009 2009
R`m R`m R`m
Unsecured debentures comprise
Debenture capital at issue price 987.3 960.0 986.6
Cumulative revaluation of debentures 35.6 (4.9) 50.9
Fair value of debentures 1022.9 955.1 1037.5
Reconciliation of balance
Balance at beginning of period 1037.5 950.7 950.7
Net proceeds on issue of debentures 0.7 19.4 46.0
Revaluation - current period (15.3) (15.0) 40.8
Balance at end of period 1022.9 955.1 1037.5
(Decrease) increase in carrying value of
debentures
Net portfolio income before debenture 18.3 44.4 183.9
interest
90% allocation to debenture holders 16.5 40.0 165.5
Less: proportionate share of taxation (1.2) 0.2 (5.4)
(expense) credit
Less: interest distribution for the (30.6) (55.2) (119.3)
period
Revaluation - current period (15.3) (15.0) 40.8
5. Taxation
Taxation comprises
Current taxation charge - current period 1.9 1.7 4.8
Deferred taxation (credit) charge - (0.4) (1.4) 5.1
current period
Net expense per statement of 1.5 0.3 9.9
comprehensive income
These results have not been reviewed by the company`s auditors, Deloitte &
Touche.
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010
For the six month period under review, the debenture net attributable asset
value increased from 713.0 cents per debenture to 723.5 cents per
debenture, cum-interest. This yielded a return on the debentures of 1.5%
for the period on a net asset value basis (six months ended 30 June 2009:
4.1%).
The returns earned on the debentures for the six months ended 30 June 2010
are as follows:
Audited
Unaudited Unaudited
6 months 6 months Year
to to ended
30 June 30 June 31 Dec
2010 2009 2009
Income 3.0% 5.7% 12.2%
Capital -1.5% -1.6% 4.0%
Total return * 1.5% 4.1% 16.2%
Benchmark (CPI + 10% per annum) ** 7.4% 9.2% 16.3%
* Calculated with reference to monthly net attributable asset values per
debenture
** Lagged one month
Net distributable profit for the period decreased to R34.0 million from
R66.1 million for the comparative period in 2009. The main reasons for
this decline were much lower dividends and interest received (see
commentary below) and the unusually high base of dividends received last
year. There were also lower average cash holdings during the current
period.
Realised trading losses increased by R4.8 million to R5.3 million during
the period, while realised capital profits rose by R6 million to R10.1
million. Operating expenses increased due to higher scrip borrowing
charges and investment management fees increased on higher average
portfolio values. The revaluation of investments was a negative R25.8
million.
The lower distributable profit for the period caused a decline in the
interim interest distribution to 21.0 cents per debenture (30 June 2009:
39.0 cents per debenture).
COMMENTARY
Equity prices around the world experienced high volatility in the first
half of 2010. All equity indices produced negative returns for the six
months, after a positive first quarter. The MSCI World Index declined
12.5% in US dollars in the second quarter, while the FTSE/JSE All Share
Index fell 8% in the second quarter and 4% over the six months. The
average monthly price change over the period was three times higher than
normal.
Bond yields declined slightly over the six months. The SA All Bond Index
returned 5.5% in the first half of 2010 compared to a cash yield of 3.5%,
as short-term rates declined. SA listed property was the best performing
asset class for the six months with a return of 10.5%. The rand
depreciated 3.5% against the US dollar, but gained 12% against the euro.
Average annual dividends paid on the FTSE/JSE All Share Index are 27% less
than a year ago, while short-term interest rates have declined 500 basis
points in the past 18 months.
Lower share prices, lower dividends and lower interest rates have all
contributed to the low return earned by debentures in the first half of
2010. The investment focus moved to capital preservation in the second
quarter, as markets declined.
The risk diversification provided by actively managing the portfolio`s
asset allocation was again helpful in preserving capital, with a positive
contribution from equities more than offsetting the negative contribution
from the short SA bond position. Good equity selection boosted the
contribution from SA equities to +3% for the six months. Foreign securities
also performed well in their base currencies and maintained their rand
values in aggregate, despite inconsistent currency movements.
The current asset allocation at effective economic exposures is set out
below:
Domestic Foreign Total
30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2010 2009 2010 2009 2010 2009
Equities 35% 53% 27% 24% 62% 77%
Listed property 6% 9% 6% 0% 12% 9%
Government bonds -50% -46% 0% 0% -50% -46%
Corporate debt 12% 12% 14% 12% 26% 24%
Commodities 0% 0% 2% 2% 2% 2%
Cash and money market 43% 26% 5% 8% 48% 34%
46% 54% 54% 46% 100% 100%
Domestic equity exposure has been significantly reduced from six months ago
and cash holdings have been increased. The possibility of a double dip
recession remains, as previous economic stimulatory measures are reduced
and as some governments are forced to adopt strict austerity plans for
their economies, both of which lead us to be cautious on investment
prospects for the next six months.
While short-term interest rates are unlikely to rise in the next six
months, we do expect increased dividends from the investment portfolio
which should help to preserve the final distribution at year-end.
INTEREST PAYMENT AND ELECTION
Notice is hereby given that a debenture interest payment (number 46) of
21.0 cents per debenture in respect of the six months ended 30 June 2010 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 Thursday, 5 August 2010
Debentures trade ex-interest Friday, 6 August 2010
Record date Friday, 13 August 2010
Payment date Monday, 16 August 2010
No debenture certificates may be dematerialised or rematerialised between
Friday, 6 August 2010 and Friday, 13 August 2010, both days inclusive.
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, 13 August 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, 13 August 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 Thursday, 5 August 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 30 June
2010 of 702.5 cents. Accordingly, the ratio is 2.989 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 Friday, 06 August
2010. An adjustment to the number of debentures listed will be made on or
about Tuesday, 17 August 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 by registered post
to certificated debenture holders and the accounts updated and/or credited
by CSDPs or brokers of dematerialised debenture holders on or about Monday,
16 August 2010.
Signed on behalf of the board
MO HODGES D FOORD
19 July 2010
Directors: MO HODGES* (Chairman), D FOORD*, JC GREYLING, JC VAN DER HORST,
JC VAN NIEKERK * British
Company secretary: PE CLUER
www.foordcompass.co.za
Date: 19/07/2010 17:35:01 Produced by the JSE SENS Department.
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