| Mon 5 Mar 2001, 0:00 | | Decillion Exceeds Market Expectations |
|
DECILLION LIMITED
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2000
FINANCIAL HIGHLIGHTS
Headline EPS increased 33% to 40.2 cents (1999: 30,3 cents)
35% annualised return on capital
Operating income up 46% to R84,3m (1999: R57,7m)
Shareholders' funds increased to R304m (1999: R180m)
FINANCIAL RESULTS
Decillion achieved 33% growth in headline earnings per share to 40,2 cents
(1999: 30,3 cents), establishing a five-year compound growth rate of 68%.
Profitability was underpinned by a 46% growth in operating revenue from R57,7
million in the prior year to R84,3 million for the period under review.
The Treasury Services division contributed 46,7% (1999: 43,7%) of Net Income
Before Tax. The Funds Management division and Broking Services also grew their
respective contributions in relation to the prior year.
The capital base increased to R304 million (1999: R180 million), of which R99
million (32%) of the group's capital is held offshore. Net asset value per
share increased to 170,4 cents (1999: 114,3 cents). The company achieved a 35%
return on capital.
The business now employs 220 people, of whom 137 are in front office roles.
TREASURY SERVICES
Decillion provides a total risk management solution to corporate, banking and
public sector treasuries. Our participation in the financial markets as
principal enables us to ensure efficient pricing and gives a significant
competitive advantage.
The challenge for the year has been to grow our local business and the client
base in the UK and Europe. We continue to find better ways of servicing clients
and managing resources. This was achieved by integrating deal execution,
administration outsourcing, treasury risk consulting, structured hedging
products and deal origination into a single cohesive business with one
management team.
Transactions with a total nominal value of R12,470 billion (1999: R9,897
billion) were originated during the year. Repeat clients again featured
strongly in the current year's results, contributing 65% of total turnover,
while 74% of revenue was generated from clients who make use of more than one
of our treasury services. Project management fees, administration of structured
deals and retainers have provided the business with a growing annuity revenue
base.
In addition to growing our existing target market, efforts are focused on
actively developing new market segments, such as the agricultural sector,
locally, and new regions such as Germany and Italy from our offices in London
and Nyon, Switzerland.
Our e-commerce platform, www.decillionforex.com, not only increased our client
base, but also enabled us to service more clients effectively. Internet
technology remains key to the delivery of our treasury service to a broader
target market.
FUNDS MANAGEMENT
Decillion has made a significant investment in the know-how, investment
processes and risk management methodologies required for alternative investment
products. Although current returns are dominated by the Big Rock Fund, this
body of knowledge is shared across the group. This enables us to launch new
hedge funds and to attract third-party investment into funds managed by the
group.
The Big Rock Fund has established itself as a credible South African absolute
return fund. Demand for the product is reflected both in the growth of the fund
to its current level of R200m and in the order book for funds awaiting entry.
The first foreign funds flowed via the feeder fund structure towards year-end,
and the fund has received good reports from foreign fund of fund investors to
whom it was presented.
The fund's performance over the two years since its inception has substantially
exceeded that of the All Share Index, and has been achieved within a low risk
framework. It is particularly pleasing that, in a year characterised by
extremely high volatility and numerous specific company shocks, Decillion's
process and methodologies ensured excellent and consistent returns for
investors. The investor pipeline is full and we expect a further increase in
funds under management.
An offshore fund, the Decillion Convertible Arbitrage Fund(tm), will be
launched on the Irish Stock Exchange on 31 March 2001. Decillion has seeded the
Fund with US$5 million and has secured the services of Morgan Stanley as prime
broker. A second, long/short European hedge fund will be launched in the third
quarter of 2001 after finalisation of IMRO regulatory approval. Both of these
funds capitalise on the experience gained in South Africa and the expertise
acquired with the international operations.
Decillion's private equity interests comprise an R8,8 million investment in a
closed fund established jointly with the Mineworkers Investment Company (MIC),
as well as a commitment to Treacle Venture Partners (TVP), a private equity
manager focusing on Telecommunication, Media and Technology opportunities. We
are excited about the potential returns from these investments.
The addition of a structured products investment team during 2000 has further
strengthened our Funds Management initiative, as well as complementing the
structuring skills of our Treasury Services division. This has placed Decillion
in a strong position to manage a broad spread of investment mandates, and to
benefit from the long-term growth anticipated in the alternative investment
management industry.
BROKING SERVICES
The broking operations are divided into three distinct businesses:
Back-to-back trading as principal.
Fixed commissions broking.
Exchange-traded securities.
Back-to-back trading in corporate bonds, asset swaps, convertibles, and other
debt securities is now managed as an extension of the Treasury Services
division. Execution and portfolio advisory services are extended to banks and
asset managers. Decillion enjoys a particularly good profile with trading banks
in London and Switzerland, as well as with end-users in Germany, Italy and
France. A concerted marketing drive in Europe has broadened our services to
include the structuring and deal origination advice previously offered only to
the South African client base.
The fixed commissions earned from broking interest rate swaps, FRA's and
forward contracts were dominated by emerging markets such as South Africa and
Eastern Europe and from retail clients in Europe. Management efforts have been
focused on improving the cost to income ratio while seeking out partners with
whom to share technology platforms and clients. A strategic joint venture has
been entered into with Prebon Yamane that will reinforce Cedef's leading
position in emerging markets and will facilitate the further expansion of our
international broking operations.
Through membership of Safex and the JSE and access to London market-makers,
Decillion has established a well-respected presence broking derivative and
physical equity products. The increased broking revenue, together with a number
of successful advisory mandates, resulted in this division making a substantial
contribution to the earnings of the division.
Strategic alliances and partnerships
Alliances and partnerships remain a key ingredient for growth, both locally and
abroad. These include:
The Group of 31 Limited, the risk management practice which we operate with
KPMG, extended its client base to include certain Israeli and European banks.
During the year MIC elected to convert its share holding in Decillion Capital
into additional Decillion shares and now holds 9% of the issued share capital
of the group. As a business partner, MIC plays an important role both
strategically and on a number of operational fronts.
Harcourt Investment Consulting AG is a Zurich-based fund of hedge funds
manager, that provides specialised advice to institutional and qualified
private investors on alternative investments. Decillion has entered into a
joint venture with Harcourt to service asset managers and institutions with
alternative investment products.
Prebon Marshall Yamane is our joint venture partner for fixed commission
broking activities in the fixed income market. Prebon has 2 000 professionals
in 29 leading financial centres and has extensive global resources. An
investment in an e-commerce platform, Kinetic, and a strong presence in
emerging market bonds, complement our fixed income derivatives team.
DIRECTORS
Decillion is delighted to announce the appointment of Paul Nkuna and Francois
Spruyt as non-executive directors of the group. Mark Barnes resigned during the
period.
DIVIDENDS
The directors have resolved to award a capitalisation issue of ordinary shares
to shareholders registered in the books of the company at the close of business
on
9 April 2001. The number of capitalisation shares to be awarded per share will
be determined on the basis of 8,0 cents per share divided by the weighted
average share price for Decillion shares during the five business days ending
at the close of business on 30 April 2001. Shareholders may elect instead to
receive a cash dividend for each Decillion share of 8,0 cents per share.
Documentation dealing with the capitalisation issue and the cash election will
be sent to shareholders on 9 April 2001. Capitalisation shares and cash
dividend cheques will be posted to shareholders on 7 May 2001.
PROSPECTS
The focus for the year will be to grow both locally and abroad, the client base
for treasury services and the funds under management. We believe that Decillion
is sufficiently differentiated and has several new initiatives that complement
and expand on its currently successful business model. The Board is therefore
confident, in the absence of any unforeseen circumstances, of continued
financial success.
By order of the Board
CONSOLIDATED INCOME STATEMENT FOR 12 MONTHS ENDED 31 DECEMBER 2000
12 Months to 12 Months to
31 December 31 December
2000 1999
R000's R000's
Operating Income 84,260 57,653
Net financing income 14,031 12,400
Net income before taxation 98,291 70,053
Taxation (22,542) (16,978)
Net income after taxation 75,749 53,075
Attributable to outside shareholders (3,381) (2,315)
Attributable to ordinary shareholders 72,368 50,760
Headline earnings 74,505 50,760
Discontinued earnings and disposals 3,375 -
Amortisation of goodwill (5,512) -
Fully diluted headline EPS 40.2 30.3
Earnings per share 42.4 33.3
Fully diluted EPS 39.0 30.0
Weighted shares in issue 170,682 152,541
Fully diluted weighted shares in issue 185,328 167,525
SEGMENTAL ANALYSIS
12 Months to 12 Months to
31 December 31 December %
2000 1999 Change
Treasury Services 45,897 30,639 50%
Funds Management 23,994 18,969 26%
Broking Services 10,994 8,045 37%
Interest 14,031 12,400 13%
Discontinued operations 3,375 - 0%
98,291 70,053 40%
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2000
Audited Audited
31 December 31 December
2000 1999
R000's R000's
ASSETS
Non current assets
Fixed assets 15,678 9,915
Intangible assets 84,838 19,437
Other investments 186,065 56,773
286,581 86,125
Current assets
Bank and cash 123,375 98,473
Accounts receivable 105,727 78,503
Tradeable securities 4,138 48,691
233,240 225,667
519,821 311,792
EQUITY AND LIABILITIES
Share capital and reserves 304,275 180,020
Outside shareholders - 24,282
Total shareholders funds 304,275 204,302
Non-current liabilities
Long term liabilities 46,396 -
Deferred taxation 7,210 9,661
53,606 9,661
Current liabilities
Accounts payable 123,005 83,730
Provision for taxation 25,809 14,099
Tradeable securities 13,126 -
161,940 97,829
519,821 311,792
Actual number of shares 178,523 157,492
Net asset value per share 170.4 114.3
Fully diluted number of shares in issue 193,169 174,011
Fully diluted net asset value per share 157.5 103.5
STATEMENT OF CHANGES IN
ORDINARY SHAREHOLDERS' FUNDS
31 December 31 December
2000 1999
R000's R000's
Opening balances 180,020 255,288
Less: goodwill on formation - (190,440)
Equity at the beginning of the year 180,020 64,848
Changes in share capital and share
premium
Issue of shares (net of expenses) 59,960 75,920
Goodwill on acquisition of subsidiaries
written off - (16,327)
Changes in retained income
Net profit for the period 72,368 50,760
Changes in vendors for shares
Shares to be issued to vendors
of CEDEF (7,785) 7,785
Changes in reserves
NDR arising on conversion of foreign
Subsidiaries (288) (2,966)
Equity at end of year 304,275 180,020
CONSOLIDATED CASHFLOW STATEMENT
FOR 12 MONTHS ENDED 31 DECEMBER 2000
31 December 31 December
2000 1999
R000's R000's
Cash generated from operations 168,487 13,913
Cash flows from investing activities (241,893) (56,256)
Cash flows from financing activities 98,308 93,579
Net increase/(decrease) in cash
Equivalents 24,902 51,236
Cash and cash equivalents at
beginning of year 98,473 47,237
Cash and cash equivalents at
end of year 123,375 98,473
DECILLION EXCEEDS MARKET EXPECTATIONS
Tuesday 6 March 2001 - Undaunted by the severe down-rating in small to
mid-sized capitalisation shares, which precluded opportunities to raise capital
for growth through acquisitions, listed financial services group Decillion
Limited ("Decillion") has elected to take on the challenge of the international
market, and has made great strides.
The group's results for the year ended 31 December 2000, announced today,
reveal 33% growth in headline earnings per share to 40,2 cents, underpinned by
a 46% growth in operating revenue to R84,3 million (1999: R57,7 million). The
announcement also includes news of two strategic international alliances forged
during the review period. Joint venture partnerships have been formed with
Harcourt Investment Consulting AG - a Zurich-based firm that provides
specialised advice to institutional and qualified private investors on
alternative investments; and
Prebon Marshall Yamane - a specialist in fixed commission broking activities in
the fixed income market whose strong presence in emerging market bonds
complements Decillion's fixed income derivatives activities.
Decillion Managing Director Alwyn Smit, says, "Since my arrival in Switzerland
during July last year, we have successfully bedded down our first international
acquisition, Cedef, and forged these significant alliances. Cedef has also
begun to realise its potential to serve as a resource base for growing our
treasury services division internationally."
Smit is one of two members of Decillion's executive management to move abroad
in the past year. He says that those who have not relocated travel extensively
between South Africa, Switzerland and London - thereby maximising
cross-pollination opportunities, leveraging the knowledge base and creating
additional revenue streams.
Importantly, Decillion's international expansion strategy has been underscored
by an uncanny ability to refocus the group's resources in order to address
changing client needs in an efficient and appropriate manner. An ongoing quest
to improve client service is interpreted through a continual reshaping of the
business, which this year resulted in the group's diverse activities being
integrated into a single cohesive operation. Indeed, this evolutionary process
has provided ample opportunity for individual growth within Decillion - a
factor which is vital in a business that depends heavily on talent and skills.
The net result is reflected in the extraordinary year-on-year organic growth
achieved across the group.
"I believe that the success of our international ventures and our extremely
pleasing financial performance this year confirm Decillion's ability to adapt
to market circumstances," says Smit. "Given the unsuitability of the market for
raising capital to fund an acquisition trail, we have focused on organic growth
and structured the business with a view to enhancing our services and competing
effectively.
"This said, I know that the organic growth we have achieved is more certain and
stable. By comparison, many South African groups that have expanded
internationally through acquisitions have experienced substantial problems and
have not enjoyed the anticipated rewards. As I see it, our entrepreneurial
approach and long-term strategic thinking have stood us in good stead thus far
and should continue to do so in the future."
ENDS
