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NCS
NCS
NCS - Nictus Limited - Abridged report relating to the audited financial
results for the year ended 31 March 2011 and details of the notice of annual
general meeting
NICTUS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1981/001858/06)
JSE Share code: NCS
NSX Share code: NCT
ISIN Code NA0009123481
("Nictus" or "the company")
ABRIDGED REPORT RELATING TO THE AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED
31 MARCH 2011 AND DETAILS OF THE NOTICE OF ANNUAL GENERAL MEETING
ABRIDGED SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31 MARCH 2011
Audited Audited
2011 2010
R`000 R`000
Revenue 494 109 384 587
Cost of sales (401 407) (301 497)
Gross profit 92 702 83 090
Other operating income 10 793 3 758
Administrative expenses (46 502) (41 547)
Other operating expenses (66 979) (60 008)
Investment income from operations 27 828 26 606
Operating profit 17 842 11 899
Investment income 6 722 5 071
Finance expenses (5 090) (5 229)
Profit before taxation 19 474 11 741
Taxation (3 991) (1 661)
Profit for the year 15 483 10 080
Other comprehensive income:
Gains on property revaluation - 16 358
Taxation related to components of other - (2 929)
comprehensive income
Other comprehensive income for the year net of - 13 249
taxation
Total comprehensive income 15 483 23 509
Profit attributable to:
Equity holders of the parent 15 483 10 080
Non-controlling interest - -
Total comprehensive income attributable to:
Equity holders of the parent 15 483 23 509
Non-controlling interest - -
Profit for the year 15 483 23 509
Basic earnings per share (cents) 28.97 18.96
Diluted earnings per share (cents) 28.97 18.86
ABRIDGED SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION AS AT 31
MARCH 2011
Audited Audited
2011 2010
R`000 R`000
Assets
Non-current assets
Investment property 17 840 16 217
Property, plant and equipment 89 378 73 109
Goodwill 1 647 1 647
Intangible assets 544 435
Investments 38 296 31 036
Loans and receivables 252 184 242 037
Deferred tax asset 13 391 14 535
Current assets
Inventories 64 088 45 887
Trade and other receivables 178 164 128 199
Cash and cash equivalents 280 522 255 434
Current tax assets 4 84
Total assets 936 058 808 620
Equity
Share capital 26 722 26 589
Revaluation reserve 30 431 30 431
Contingency reserve 17 083 21 282
Retained earnings 37 198 20 856
Non-current liabilities
Interest bearing loans and borrowings 11 748 11 936
Deferred tax liability 14 131 11 309
Current liabilities
Bank overdraft 7 189 17 452
Interest bearing loans and borrowings 42 835 45 142
Insurance contract liabilities 690 216 574 148
Trade and other payables 58 189 49 018
Current tax liabilities 316 457
Total equity and liabilities 936 058 808 620
ABRIDGED SUMMARISED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH
2011
Audited Audited
2011 2010
R`000 R`000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 19 474 11 741
Adjustment for:
Investment income from operations received (10 516) (9 850)
Dividend income (17 312) (16 756)
Investment income (6 722) (5 071)
Finance expenses 5 090 5 229
Depreciation of property, plant and equipment 1 949 1 924
Amortisation of intangible asset 354 267
Loss on disposal of property, plant and 81 50
equipment
Fair value adjustment on property, plant and (138) -
equipment
Revaluation of investment property (1 623) (2 120)
Profit on transfer of property, plant and - (38)
equipment
Working capital changes:
Increase in inventories (18 201) (5 192)
Decrease /(Increase) in trade and other (49 965) 2 303
receivables
Increase in insurance contract liabilities 116 068 161 017
Increase in trade and other payables 9 171 9 142
Cash generated by operations 47 710 152 646
Investment income from operations received 10 516 9 850
Finance expenses (5 090) (5 229)
Dividend income 17 312 16 756
Taxation paid (86) (2 689)
Net cash flow from operating activities 70 362 171 334
CASH FLOWS FROM INVESTING ACTIVITIES
Expansion of property, plant and equipment (18 767) (3 709)
Proceeds from disposal of property, plant and 606 268
equipment
Acquisition of investment property - (14 097)
Purchases of intangible assets (463) (186)
Investment income received 6 722 5 071
Proceeds from disposal of investments - -
Acquisition of investments (7 260) (10 366)
Loans and receivables advanced (10 147) (55 494)
Net cash flow from investing activities (29 309) (78 513)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) / increase in interest bearing (2 495) (15 139)
loans and borrowings
Movement in treasury shares 133 133
Dividends paid (3 340) (3 340)
Net cash flow from financing activities (5 702) (18 346)
Net movement in cash and cash equivalents 35 351 74 475
Cash and cash equivalents at beginning of year 237 982 163 507
Cash and cash equivalents at end of year 273 333 237 982
ABRIDGED SUMMARISED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31
MARCH 2011
Audited Share Revalu- Con- Retained Total
capital ation tingency earnings equity
reserve reserve
R`000 R`000 R`000 R`000 R`000
Balance at 1 26 456 17 002 16 989 18 409
April 2009 78 856
Changes in
equity
Total
comprehensive
income for the
year
Profit for the 10 080 10 080
year
Revaluation of 13 429 13 429
property
Transfer from 133 133
treasury shares
Transfer to 4 293 (4 293)
contingency
reserve
Dividend to (3 340) (3 340)
equity holders
Balance at 1 26 589 30 431 21 282 20 856
April 2010 99 158
Changes in
equity
Total
comprehensive
income for the
year
Profit for the 15 483 15 483
year
Transfer from 133 133
treasury shares
Transfer to (4 199) 4 199
contingency
reserve
Dividend to (3 340) (3 340)
equity holders
Balance at 31 26 722 30 431 17 083 37 198
March 2011 111 434
ABRIDGED SUMMARISED SEGMENTAL ANALYSIS FOR THE YEAR ENDED 31 MARCH 2011
Business Motor Furniture Insurance Head Eliminati Consolid
segment retail retail & Finance Office ons ated
2011 2011 2011 2011 2011 2011
Segment revenue
Sales of goods 357 72 684 - - 969 431 276
623
Rental income 56 793 1 063 - - 1 912
Finance income 969 6 626 28 837 - (5 910) 30 522
Management fees - - - 4 357 (4 357) -
Insurance - - 30 399 - - 30 399
premium income
Total revenue 358 80 103 60 299 4 357 (9 298) 494 109
from external 648
customers
Inter-segment 2 834 1 639 905 - (5 378) -
revenue
Total segment 361 81 742 61 204 4 357 (14 676) 494 109
revenue 482
Segment result
Operating 6 342 8 215 19 533 18 811 (28 337) 24 564
profit before
financing costs
Financing costs (2 (4 415) (485) (8 10 569 (5 090)
489) 270)
Profit before 3 853 3 800 19 048 10 541 (17 768) 19 474
taxation
Taxation (1 (2 020) (2 854) - 2 244 (3 991)
361)
Net 2 492 1 780 16 194 10 541 (15 524) 15 483
profit/(loss)
for the year
Segment assets 161 111 225 819 544 110 (266 797) 936 058
575 511
Segment 122 66 505 750 396 65 004 (180 157) 824 624
liabilities 876
Cash flows from (30 (11 360) 177 993 21 016 (86 708) 70 362
operating 579)
activities
Cash flows from 30 971 22 881 (201 597) (9 128 243 (29 309)
investing 807)
activities
Cash flows from 5 234 (4 900) 46 839 (12 (40 035) (5 702)
financing 840)
activities
Capital (1 (1 083) (1 219) (41) 23 300 19 230
expenditure 727)
Business Motor Furniture Insurance Head Eliminati Consolida
segment retail office ons ted
2010 2010 2010 2010 2010 2010
Segment
revenue
Sales of goods 244 54 310 - - - 298 395
085
Rental income 52 1 282 534 - - 1 868
Finance income 3 939 5 949 26 276 - (3 495) 32 669
Management - - - 3 351 (3 351) -
fees
Insurance - - 51 655 - - 51 655
premium income
Total revenue 248 61 541 78 465 3 351 (6 846) 384 587
from external 076
customers
Inter-segment 2 111 1 184 1 219 - (4 514) -
revenue
Total segment 250 62 725 79 684 3 351 (11 360) 384 587
revenue 187
Segment result
Operating 3 034 1 053 26 949 9 881 (23 946) 16 970
profit before
financing
costs
Financing (828) (4 416) (2 898) (8 11 375 (5 229)
costs 462)
Profit before 2 206 (3 363) 24 051 1 419 (12 572) 11 741
taxation
Taxation (296) 340 (1 391) (1 1 586 (1 661)
900)
Net 1 910 (3 023) 22 660 (481) (10 986) 10 080
profit/(loss)
for the year
Segment assets 119 92 294 728 081 112 (257 604) 794 001
119 111
Segment 84 802 61 829 667 359 79 451 (195 745) 697 696
liabilities
Cash flows 683 (7 984) 208 793 (4 (25 306) 171 334
from operating 852)
activities
Cash flows 13 717 8 883 (236 484) 43 567 91 804 (78 513)
from investing
activities
Cash flows (16 186 102 875 (39 (65 580) (18 346)
from financing 293) 534)
activities
Capital 3 144 344 219 188 - 3 895
expenditure
ACCOUNTING POLICIES
Basis of preparation
The abridged summarised consolidated annual financial statements have been
prepared in accordance with the recognition and measurement requirements of
International Financial Reporting Standards (IFRS), the AC 500 series issued
by the Accounting Policies Board and in the manner as required by the
Companies Act of South Africa, 1973. The accounting policies are consistent
with those applied in the consolidated financial statements for the year
ended 31 March 2011.
RELATED PARTIES
The company has related party relationships with its subsidiaries, fellow
subsidiaries, associates and with its directors and executive officers.
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS:
Profit for the year 19 474 11 741
Loss on disposal of property, plant and equipment 81 50
net of insurance proceeds
Taxation (3 991) (1 661)
Headline earnings 15 564 10 130
Headline earnings per share (cents) 29.12 19.05
2011 2010
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL R`000 R`000
Short-term employee benefits 10 800 5 512
TRANSACTIONS WITH RELATED PARTIES
PREMIUMS RECEIVED 2 245 2 833
RESPONSIBILITY FOR CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Accounting policies have been applied consistently with those of prior year.
The annual consolidated financial statements for the year ended 31 March 2011
have been audited by KPMG Inc., and their unqualified audit opinion is
available for inspection at the registered office of the company.
CHAIRMAN`S REPORT
OVERVIEW
It is a pleasure to report on the exceptional performance achieved during the
2011 financial year.
The Group`s primary performance goal is to optimize shareholders value by
maximizing the return on the Groups` equity value per share.
The twelve month period since our last annual report has been a very exciting
time for the Nictus Group with the following milestone achievements:
Surpassing of the previous years` record performance to reach a profit
attributable to shareholders of more than R 15 million.
Reaching our goal of almost R 1 billion assets under management.
Accepting total responsibility for General Motors in Namibia.
Opening a furniture outlet in Soweto in South Africa.
The Furniture and Motor Segments showed a 30% and 44 % growth in revenue
respectively, which is remarkable when compared to similar industries in
South Africa and Namibia. 54% of the growth in the Motor segment came from
the increased market share through the GM Agencies in Namibia. In the past
year, Auas Motors became one of the sixth biggest accounts of GM in Southern
Africa. The past year`s upgrading of our Furniture outlets,
the opening of the first outlet in Soweto and the sound management of
specially the debtors book have eventually culminated in this performance of
the furniture segment.
The Insurance and Finance segment maintained its profitability in line with
the consolidation that took place in this industry during the past year.
Corporate Guarantee Namibia has grown its insurance fund to the largest of
similar companies in Namibia. Corporate Guarantee South Africa established a
sure footing in South Africa, with its performance and strengthening its
structure. The appointment of further capable senior staff and opening an
office in Cape Town will enhance the growth potential.
The dedication and exceptional performance, of the Group Chief Executive,
executive directors, management and staff, are summarized by the following:
Revenue increased by 28% to R 494 million;
Profit before taxation for the year increased by R 7,7 million to R 19,4
million;
Return on equity of 13.9% was achieved;
The Group`s asset base increased by 16%;
The cash position of the Group improved by 15% to R 273 million;
The equity of the Group grew by R 12 million to R111 million; and
The net asset value per share increased by 12% to 208.51 cents.
Nictus has reached a stage where the Group`s success is no longer dependent
on one or two persons, but on a solid asset base and the remarkable team of
executive directors and top management, which lead from the front.
THE FUTURE VIEW
The growth and performance of the Nictus Group in the past 3 years, the size
of the asset base and insurance funds have propelled the Group through a
ransition phase to a higher level.
The South African Financial Services Board`s (FSB) application of the new
Solvency Assessment and Management model, for future implementation, will
necessitate demanding changes in the Nictus Annual Report capital
requirements and reporting by Insurance companies.
The afore-said, the two different economies we operate in as well as several
other factors, which are not foreseen for Namibia have already necessitated
the Board of Directors to discuss different strategies around future capital
requirements, possible structural changes and different management approaches
to take us into the future. As in the past, we are committed to approach all
changes and growth within the capabilities, and with consideration given to
sustainability, of the Group.
The recovery of the motor trade in South Africa, and the after effects of the
tsunami in Japan, are bound to have a negative impact on availability of
stock of new vehicles and spares. The supply issues from Japan, with respect
to Isuzu vehicles and spares, may fortunately only be for a short period
during the year. However, the fairly free supply of vehicles experienced
during the downturn in South Africa may be reversed in future due to
continued demand. This could be more significant to the performance of this
segment than the anticipated rise in the interest rate during the coming
year.
With the cautious recovery in the South African economy and the continued
strength of the Namibian economy, we do not expect that the envisaged 1% rise
in interest rates during the coming year will have an effect on our Furniture
segment. The good debt management and low write-off in our debtors book also
allow us to upscale our risk profile in this regard, which will further
offset a possible rise in the interest rate in the coming year.
The anticipated rise in the interest rates and the performance of stock
markets will however have a positive impact on the bottom line of the
Insurance and Finance segment.
We will need to remain vigilant to what changes in the world and regional
economies to capture the benefit or to take the necessary corrective actions
where necessary.
DIRECTORATE
I have been on the board of one of the affiliated Nictus Companies since
1985, and on the Holding Company`s board since 1989. I have been Chairman of
the Board for the past 7 years, and the Board has acceded to my request to
hand over to the younger generation after the Annual General Meeting in
August 2011. I will however remain on the board for the foreseeable future.
We announced in the previous report that the board will be strengthened on
the 15th of June 2010 with the appointment of a further independent non-
executive director. We welcome Prof Johan Willemse who is a well-known
economist.
CORPORATE GOVERNANCE
This report complies with the Johannesburg Securities Exchange and Namibian
Stock Exchange requirements and reflects the various International Financial
Reporting Standards. The Board also remains committed to all aspects of
Corporate Governance, and to managing the Group in a transparent and
accountable manner.
APPRECIATION
With the end of my tenure as Chairman of the Group at the Annual General
Meeting in August 2011, I wish to thank the Board and all involved in Nictus
for their constant and loyal support. The journey during the past years was
exciting and full of challenges and successes, which would not have been
achieved without the perseverance, vision and dedication of my fellow Board
members and management team.
I wish the incoming Chairman all the success as we enter the next and
exciting era of the Group. He will have my full support for the time I will
still be on the Board.
What we achieved during this year and in the past was only through the Grace
of God Almighty.
JL Olivier
Chairman: Nictus Group
GROUP CHIEF EXECUTIVE`S REPORT
Overview
The explanation of the word sustainability in my dictionary is the following:
"sustainability is the capacity to endure." The Nictus Group proved its
endurance through its results, not only over the past year, but also
during the five years since 2006.
The South African economy recovered to such an extent during the year under
review that we maintained our profitability in both the furniture and
insurance
segments. Disposable income increased positively and the indicees on the
Johannesburg Securities Exchange performed in favour of our investments.
The Namibian economy showed a strong recovery,especially in the mining
sector. It was also an outstanding rainy season with the best rainfall in 108
years. The Namibian economy is to a large extent dependent on the agriculture
sector and the sector is benefitting tremendously from the good rain.
Both economies are under pressure to increase interest rates for various
reasons. With the unemployment rate very high and increasing in Namibia, the
government will be very reluctant to increase interest rates.
The Group has performed exceptionally well in all areas during the preceding
years, taking into account the difficult economic circumstances.
Segmental performance
The Group strategy is closely linked to the vision of the Group.
Strategically it is important to grow the segments in such a manner that each
segment contributes equally to profitability. In addition, where a segment is
represented in both South Africa and Namibia, the ideal is that the
operations from each country contribute equally to the segment contribution
of the Group`s
profitability.
We are satisfied with the performance of all the segments under the
circumstances during the year under review.
Organisational profile
The extent of our operations is set out on the geographical spread.
Furniture retail segment
The segment operates in South Africa and Namibia with four outlets in each
country.
Revenue in the furniture segment increased satisfactorily by 30%. Operating
profit increased by 680%, due to increased focus and effective marketing
campaigns resulting in a higher throughput during the year.
We expect sustainable growth in revenue and operating profit for the coming
year in this segment.
Motor retail segment
The vehicle segment only operates in Namibia, and distributes Chevrolet, Opel
and Isuzu products, which are General Motors brands.
In the year under review operations were expanded to Northern Namibia, where
the Group opened a new dealership in Otjiwarongo. The Otjiwarongo dealership
also has a branch in Oshakati, and both operate profitably. We also acquired
the General Motors dealership in Walvis Bay with a branch in Swakopmund.
Revenue in the motor segment increased by 44%, mainly due to the opening and
takeover of dealerships. Operating profit increased by 109%, due to higher
throughput during the year as well as additional profits from the acquired
dealerships.
We expect a more moderate performance in this segment during the coming
financial year.
Insurance and finance segment
The insurance and finance segment operates in South Africa and Namibia. The
Group`s insurance product is unique as we provide innovative risk management
solutions as an alternative to conventional insurance. Our focus is to build
sound relationships with our clients. Our products and services are developed
and structured to meet our clients` specific needs.
The optimisation process in the insurance segment went as expected, which
creates a good foundation for growth. Lower interest rates impacted
negatively on this segment, and we had a decrease of 23% in premium income
and 28% in
operating profit.
We appointed more staff and opened an office in Cape Town. Our customer base
in South Africa and Namibia is still expanding. The South African subsidiary
is still building momentum. Training of the staff is a priority in order to
maintain sustainability.
We expect to maintain moderate growth in this segment during the coming year.
Growth strategy
Strategically the Group`s objectives remain unchanged, and we will strive to
increase sales and profits from profit centres. The Group is driving customer
acquisition and retention, and will maintain the quality of all debtors`
books. Product sourcing will be expanded as we aim to optimise diversity of
our product offering as a competitive advantage. Gains in growth will however
be matched to our ability to develop capacity.
Human capital
Focus on human resource management is paying off. Management monitor the
development of human capital in the Group on an ongoing basis. Competition
for skilled and experienced people is fierce in the operating environment,
but
the Group was able to secure the services of more highly skilled people
within its various segments. The Group has a policy of preserving its human
capital and growth of human resources must be matched by prudence in
allocation for
remuneration.
Corporate governance
Nictus Limited is committed to the highest standard of corporate governance.
In our opinion, good corporate governance cannot be dictated only by set
rules and regulations. Information, provided to management, that is relevant,
transparent, timely and accurate will serve in the best interest of the
Group. This will ultimately benefit all relevant stakeholders.
Good corporate governance is driven from board level and applied throughout
the Group. The responsibility for ensuring compliance with good corporate
governance is entrusted to the management in charge of each segment.
Outlook
Trading conditions are expected to remain difficult, while external factors
such as oil prices and food inflation affect our target markets. However, we
have an experienced and focused management team that is committed to maintain
sustainability of our whole Group. Brand loyalty plays an increasingly
important role in tough times, and the Group has a portfolio of well
established brands with a loyal customer base.
Appreciation
I would like to express my gratitude to the dedication and contribution of
our Board, our management and staff, in achieving the excellent results. I
would like to thank our suppliers and manufacturers, our business partners,
the investment and financial community and the media for their support.
We are committed to serving our customers and thank them for the loyalty they
continue to show towards our brands.
N.C. Tromp
Group Chief Executive
DECLARATION OF ORDINARY DIVIDEND
The board has declared a final dividend of 9.5 cents per share to ordinary
shareholders of the Company for the year ended 31 March 2011.
The salient dates of this dividend are:
Last day to trade "cum" the dividend Friday, 15 July 2011
Shares commence trading "ex" the dividend from the
commencement of business on Monday, 18 July 2011
Record date Friday, 22 July 2011
Payment date Monday, 25 July 2011
Share certificates may not be dematerialised or rematerialised between Monday
18 July 2011 and Friday 22 July 2011 both days inclusive.
Shareholders are furthermore advised that a 10% non-resident shareholder`s
tax on the declared dividend will be applicable to all shareholders with
addresses outside of Namibia.
By order of the board
ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING
As the annual report for the year ended 31 March 2011 ("the annual report")
was posted to shareholders within 3 months of Nictus`s year end, this
announcement is not required to appear in the press and will not be sent to
shareholders.
The annual report contains a notice convening the annual general meeting of
Nictus shareholders for the year ended 31 March 2011 ("the AGM"). The AGM
will be held in the boardroom at the Nictus Building, corner of Pretoria and
Dover Street, Randburg, Gauteng on Monday 24th of August 2011 at 15h00.
J L Olivier
Chairman
30 June 2011
Date: 30/06/2011 09:00:01 Produced by the JSE SENS Department.
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