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SMSP - Stimulus Investments Limited - Condensed consolidated annual financial
report for the year ended 28 February 2011
Stimulus Investments Limited
(Incorporated in the Republic of Namibia)
(Registration number 2004/482)
("Stimulus")
NSX Share code: SMSP
ISIN: NA000A0DK7D9
CONDENSED CONSOLIDATED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 28 FEBRUARY
2011
Group Company
Reviewed Audited Reviewed Audited
2011 2010 2011 2010
N$ N$ N$ N$
Revenue 33,378,279 32,070,616 7,560,325 6,547,308
Cost of sales (11,853,591) (11,698,068) - -
Gross profit 21,524,688 20,372,548 7,560,325 6,547,308
Other income 3,254,413 381,089 3,361,369 57,785
Operating (14,766,241) (15,579,447) (2,309,352) (2,376,382)
expenses
Operating profit 10,012,860 5,174,190 8,612,342 4,228,711
Investment 339,174 214,575 118,095 87,512
revenue
Fair value 7,232,429 9,668,017 8,598,080 9,668,017
adjustments
Finance costs (4,633,742) (3,893,827) (4,280,168) (3,559,699)
Profit before 12,950,721 11,162,955 13,048,349 10,424,541
taxation
Taxation (1,058,105) (220,980) (43,290) (31,760)
Profit for the 11,892,616 10,941,975 13,005,059 10,392,781
year
Other - - - -
comprehensive
income
Total 11,892,616 10,941,975 13,005,059 10,392,781
comprehensive
income
Profit
attributable to:
Owners of the 11,435,288 10,689,475 13,005,059 10,392,781
parent
Non-controlling 457,328 252,500
interest
11,892,616 10,941,975 13,005,059 10,392,781
Total comprehensive income
attributable to:
Owners of the 11,435,288 10,689,475 13,005,059 10,392,781
parent
Non-controlling 457,328 252,500 - -
interest
11,892,616 10,941,975 13,005,059 10,392,781
Condensed Consolidated Statement of Financial Position at 28 February 2011
Group Company
Reviewed Audited Reviewed Audited
2011 2010 2011 2010
Assets N$ N$ N$ N$
Non-current assets 122,276,964 119,497,653 121,858,645 115,212,097
Investment property - 2,500,000 - -
Property, plant and 14,353,976 13,870,562 - -
equipment
Intangible assets 4,765,243 5,550,243 - -
Investment in - - 8,843,325 7,477,699
subsidiary
Loan to group company - - 9,857,575 10,157,550
Investments in 97,739,758 97,576,848 97,739,758 97,576,848
unlisted equity
Loans and receivables 5,417,987 - 5,417,987 -
Current assets 31,536,063 23,020,537 24,309,649 18,143,404
Inventories 1,230,827 1,264,324 - -
Trade and other 423,295 973 205,152 -
receivables
Prepayments 334,967 133,867 334,967 -
Cash and cash 29,546,974 21,621,373 23,769,530 18,143,404
equivalents
Total assets 153,813,027 142,518,190 146,168,294 133,355,501
Equity and Liabilities
Equity 63,956,703 52,349,999 65,659,759 52,654,700
Share capital 1,000 1,000 1,000 1,000
Reserves 4,155,669 4,155,669 - -
Retained earnings 58,074,445 46,639,157 65,658,759 52,653,700
Non-controlling 1,725,589 1,554,173 - -
interest
Non-current 87,515,470 87,420,950 80,397,546 80,397,546
liabilities
Redeemable preference 80,392,000 80,392,000 80,392,000 80,392,000
shares
Secured bank loans 3,253,638 3,383,964 - -
Loan from related 3,146,972 2,821,997 5,546 5,546
parties
Deferred tax 722,860 822,989 - -
liabilities
Current liabilities 2,340,854 2,747,241 110,989 303,255
Loans from related 74,787 43,170 74,787 43,170
parties
Trade and other 2,209,108 2,469,319 25,000 228,325
payables
Current tax payable 56,959 234,752 11,202 31,760
Total equity and 153,813,027 142,518,190 146,168,294 133,355,501
liabilities
Condensed Consolidated Statement of Changes in Equity for the year ended 28
February 2011
Share Revaluation Retained Non-
controlling
capital reserve income interest
Group N$ N$ N$ N$
Balance at 1 March
2009 1,000 4,155,669 35,949,682 1,696,404
Changes in equity
Total comprehensive
income for the year - - 10,689,475 252,500
Dividends
- - - (216,670)
Changes in ownership
interest - - - (178,061)
Total changes
- - 10,689,475 (142,231)
Balance at 1 March
2010 1,000 4,155,669 46,639,157 1,554,173
Changes in equity
Total comprehensive
income for the year - - 11,435,288 457,328
Dividends
- - - (483,340)
Changes in ownership
interest 197,428
Total changes
- - 11,435,288 171,416
Balance at 28
February 2011 1,000 4,155,669 58,074,445 1,725,589
Company
Balance at 1 March
2009 1,000 - 42,260,919 -
Changes in equity
Total comprehensive
income for the year - - 10,392,781 -
Total changes
- - 10,392,781 -
Balance at 1 March
2010 1,000 - 52,653,700 -
Changes in equity
Total comprehensive
income for the year - - 13,005,059 -
Total changes
- - 13,005,059 -
Balance at 28
February 2011 1,000 - 65,658,759 -
Condensed Consolidated Statement of Cash Flow for the year ended 28 February
2011
Group Company
Reviewed Audited Reviewed Audited
2011 2010 2011 2010
N$ N$ N$ N$
Cash generated
from operations 7,700,815 7,370,789 4,550,529 4,793,003
Interest income
339,174 214,575 118,095 87,512
Finance costs
(4,633,742) (3,893,827) (4,280,168) (3,559,699)
Tax paid
(1,335,054) (270,285) (63,848) (9,301)
Net cash from
operating 2,071,193 3,421,252 324,608 1,311,515
activities
Net cash from /
(used in) 6,106,812 (2,251,165) 5,269,901 -
investing
activities
Net cash (used in)
/ from financing (252,404) 1,740,846 31,617 (20,979)
activities
Net increase in
cash and cash
equivalents
7,925,601 2,910,933 5,626,126 1,290,536
Cash and cash
equivalents at
beginning of
the year
21,621,373 18,710,440 18,143,404 16,852,868
Cash and cash
equivalents at end
of
the year
29,546,974 21,621,373 23,769,530 18,143,404
NOTES
1. Statement of compliance
These condensed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standard (IFRS) IAS 34,
Interim Financial Reporting. The condensed consolidated financial statements
do not include all information required for full annual financial statements,
however these are available on request.
2. Financial assets through profit and loss
Investments in unlisted equities are carried at fair value with fair value
adjustments recognised in profit and loss for the year.
3. Accounting policies
The accounting policies applied by the Group in these condensed consolidated
financial statements are the same as those applied by the Group in its
consolidated financial statements as at and for the year ended 28 February
2010.
LISTED INSTRUMENTS
Stimulus has 1,236,800 preference shares in issue, which shares are listed on
the Namibian Stock Exchange. The ordinary shares of Stimulus are not listed on
any Exchange.
COMMENTARY: REVIEW OF RESULTS
Stimulus owns a majority stake in the Joe`s Beerhouse Group of Companies,
which results are incorporated in the Stimulus Group Financial Statements. In
order to provide users with a better understanding of Stimulus` results
pertaining to its private equity investments, the company`s unconsolidated
results, cashflows and financial position are presented in addition to those
of the Group.
Our forecasts that our retail-focused investments would see muted growth in
the year under review due to a belated slump in consumer demand proved correct
in a few of our underlying investments. The overall portfolio however
continued to show resilience with a portfolio growth of 7.67%.
The Board`s focus during the past year was on restructuring the portfolio and
implementing early exit strategies for certain investments. Stimulus
accordingly exited from two investments namely, Westair Maintenance (Pty) Ltd
and One Africa Television (Pty) Ltd. The proceeds from these exit transactions
will be distributed in the form of a dividend to preference shareholders as
further detailed below. The cost and fair value of Stimulus` total portfolio
investment subsequent to these transactions are as follows:
Cost - N$ Fair value - N$
Equity investments in and loans to
private Namibian companies
121,440,657
61,338,636
The fair value calculations are based on conservative valuations of the
underlying unlisted equity investments using the discounted cash flow method
of valuation, and where necessary, discounting factors have been adjusted to
take into account the current economic environment.
The holders of Stimulus` listed preference shares are entitled to 80% of all
cash returns realised in the company provided that the preference
shareholders earn at least the prescribed hurdle rate on their subscription
value. To date, even though the unrealised returns comfortably exceed the
hurdle rate of return, the realised returns of the portfolio are below the
hurdle rate and as such all current realised returns are distributed to the
preference shareholders. Based on the most recent director valuations of the
portfolio, the net asset value as at 28 February 2011 ascribable to each
preference share is 10,267 cents per share. Following the payment of the
dividend detailed below, this value will reduce to 9,051 cents per share.
RISK MANAGEMENT AND REGULATORY ENVIRONMENT
Risk management is a key ingredient in the successful management of the
portfolio and we will continue to review and update our post deal risk
management processes on an ongoing basis.
The promulgation of the new Companies Act and the Competition Commission
have both changed the legislative environment in which private equity
companies operate. The continued uncertainty regarding Regulation 28 of the
Pensions Fund Act makes it difficult to raise capital in the Namibian
market. This has been exacerbated by the release of the Draft Regulation 29.
We believe that the unique experience of Stimulus as the oldest private
equity fund in Namibia will stand us in good stead in our continued
deliberations, together with other industry players, with Namfisa in the
formulation of a workable and sensible regulation which does not undermine
the unlisted asset class that regulation 28 purports to stimulate.
PROSPECTS
The 2011 calendar year commenced on a positive note and we expect value
growth in all our investment companies for the 2012 financial year.
Maintaining a positive growth rate will remain a key focus point going
forward. The portfolio further remains well positioned through its
participation in various market leaders in Namibia.
Stimulus is now in its seventh year of operation and represents a well
balanced and mature portfolio. Over the ensuing years, our focus will
gradually shift to the realisation of the inherent value of the portfolio.
DIVIDEND DECLARATION
The Directors have resolved that an amount of N$15,039,488 (2010:
N$4,279,328) be declared as a final dividend to the preference shareholders,
which translates into a dividend of 1,216 cents per preference share (2010:
346 cents per preference share). The current dividend amount comprises two
components: N$5,503,760 (445 cents per share) represents the total realised
after-tax cashflow profits of Stimulus Investments Limited, after adjusting
for fair value gains and outstanding receivables, while the remaining
N$9,535,728 (771 cents per share) comprises the realised capital portion in
respect of individual investments exited. The salient details of the
dividend are:
Last day to trade: Friday, 17 June2011
Securities start trading ex-dividend: Monday, 20 June 2011
Last day to register: Friday, 24 June 2011
Payment date: Friday, 08 July 2011
Note: Payments will be made electronically to the bank account details as
provided to Transfer Secretaries (Pty) Ltd. Holders who have changed banking
details are advised to inform Transfer Secretaries (Pty) Ltd accordingly.
AUDITORS REVIEW OPINION
The condensed financial statements for the period ended 28 February 2011
were reviewed by SGA Chartered Accountants & Auditors. The unqualified
review opinion is available for inspection at the Company`s registered
office.
ACKNOWLEDGEMENTS
Stimulus is Namibia`s leading private equity investment company and has
managed to build a reputable and recognised track-record in this highly
specialised field. We would like to thank our investors for their continued
support, input and trust. We would furthermore like to thank the management
and staff of our underlying investment companies for the strong growth
reflected in the portfolio which is indicative of their hard work and
commitment to their respective businesses. Finally, we thank our directors
for their guidance and stewardship throughout the year.
Peter Koep Monica Kalondo
Independent, Non-Executive Chairman Managing Director
Windhoek
30 May 2011
Registered office
24 Orban Street
Klein Windhoek
Windhoek
Namibia
Sponsor
IJG Securities (Pty) Ltd
Member of the NSX
100 Robert Mugabe Avenue
P O Box 186, Windhoek, Namibia
Registration No. 95/505
Date: 31/05/2011 07:05:01 Produced by the JSE SENS Department.
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