| Tue 12 Feb 2002, 0:00 | | Decillion Limited - Audited Results |
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DECILLION LIMITED
("Decillion")
Share code: DEC ISIN: ZAE000017612
ANNOUNCEMENT OF AUDITED RESULTS
For the 12 months ended 31 December 2001
HIGHLIGHTS
* Fully diluted NAV per share up by 35 % to 209.6 cents (2000: 155.1 cents)
* Assets under management now R 1.2bn (2000: R 181m)
* Headline earnings per share of 39.6 cents (2000: 40.5 cents)
* Offshore earnings increased to 25% of group earnings (2000: 8%)
INCOME STATEMENT
Audited Audited
12 Months to 12 Months to
31 Dec 01 31 Dec 00
R000's R000's
Revenue 447,657 456,206
Operating expenses (370,687) (369,809)
Operating income 76,970 86,397
Net interest income 5,666 14,030
Net income before discontinued
operations 82,636 100,427
Discontinued operations and disposals (4,445) 3,375
Net income before goodwill and tax 78,191 103,802
Goodwill (9,938) (5,512)
Net income before tax 68,253 98,290
Taxation (7,814) (22,542)
Net income after tax 60,439 75,748
Attributable to outside shareholders (4,452) (3,380)
Attributable income 55,987 72,368
Headline earnings 70,370 74,505
Amortisation of goodwill (9,938) (5,512)
Discontinued operations and
disposals (4,445) 3,375
Net weighted number of shares in
issue 177,911 169,260
Basic earnings per share (cents) 31.5 42.8
Net fully diluted weighted number
of shares 177,911 183,906
Diluted earnings per share (cents) 31.5 39.4
Fully diluted headline earnings
per share (cents) 39.6 40.5
SEGMENTAL INFORMATION
Contribution by division
Audited Audited
12 Months to 12 Months to
31 Dec 01 31 Dec 00
R000's R000's
Treasury services 32,224 45,897
Funds management 23,298 26,307
Broking services 21,448 14,193
Interest 5,666 14,030
Net income before discontinued
operations 82,636 100,427
Contribution by nature of revenue
Audited Audited
12 Months to 12 Months to
31 Dec 01 31 Dec 00
R000's R000's
Proprietary returns 36,330 37,950
Advisory fees 7,226 31,595
Management fees 11,966 2,659
Broking 21,448 14,193
Interest 5,666 14,030
Net income before discontinued
operations 82,636 100,427
Geographical Contribution
Audited Audited
12 Months to 12 Months to
31 Dec 01 31 Dec 00
R000's R000's
Offshore 20,274 8,330
Onshore 62,362 92,097
Net income before discontinued
operations 82,636 100,427
Divisional analysis
Revenues Contribution Operating margin
Treasury services 122,258 32,224 26.4%
Funds management 55,423 23,298 42.0%
Broking 269,976 21,448 7.9%
Interest - 5,666 N/a
Total 447,657 82,636 18.5%
BALANCE SHEET
Audited Audited
31 Dec 01 31 Dec 00
R000's R000's
ASSETS
Non-current assets 429,040 273,404
Investments 326,088 189,633
Fixed assets 13,668 15,678
Intangible assets 89,284 68,093
Current Assets 466,006 229,102
Cash 123,935 123,375
Tradeable securities (net) 43,468 -
Accounts receivable 297,778 105,727
Taxation 825 -
895,046 502,506
LIABILITIES AND EQUITY
Non-current liabilities 120,537 53,606
Long-term liability 109,853 46,396
Deferred taxation 10,684 7,210
Current liabilities 401,267 157,802
Accounts payable 401,267 123,005
Tradeable securities (net) - 8,988
Taxation - 25,809
Capital and reserves
Share capital 1,745 1,730
Share premium 163,010 167,417
Non-distributable reserves 34,512 (3,058)
Distributable reserves 166,615 125,009
Total shareholders funds 365,882 291,098
Outside shareholders'
interest 7,360 -
373,242 291,098
895,046 502,506
Net actual number of shares 174,521 173,042
Net asset value per share 209.6 168.2
Tangible net asset value
per share 158.5 128.9
Net fully diluted number
of shares in issue 174,521 187,688
Fully diluted net asset
value per share 209.6 155.1
CASH FLOW INFORMATION
Audited Audited
12 Months to 12 Months to
31 Dec 01 31 Dec 00
R000's R000's
Operating income before interest 76,970 86,397
Elimination of non-cash items 3,261 8,224
Increase in working capital 33,755 34,959
Cashflows from operating
activities 113,986 129,580
Net interest received 5,666 14,030
Dividends paid (10,745) -
Taxation paid (30,974) (13,282)
Net cash inflow from operating
activities 77,933 130,328
Cashflows from investing activities
Additions to fixed assets (4,716) (10,797)
Additions to intangibles (9,792) (34,535)
Acquisition of investments (92,124) (54,921)
Proceeds from the disposal of
subsidiaries - 16,154
Loss on discontinued operation (4,445) (12,779)
Acquisition of subsidiaries - (3,501)
Net cash outflow from investing
activities (111,077) (100,379)
Cashflows from financing activities
Increase in long-term liabilities 63,457 46,396
Treasury shares purchased (29,753) (13,177)
Proceeds from issue of share
capital - 4,864
Net cash inflow from financing
activities 33,704 38,083
Net increase in cash and cash
equivalents 560 68,032
Cash and cash equivalents
at the beginning of the year 123,375 55,343
Cash and cash equivalents at
the end of the year 123,935 123,375
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 Months to 12 Months to
31 Dec 01 31 Dec 00
R000's R000's
Share capital
Opening balance 1,730 1,575
Shares issued net of expenses 159 210
Treasury shares (144) (55)
Closing balance 1,745 1,730
Share premium
Opening balance 167,417 120,789
Shares issued net of expenses 25,202 59,750
Treasury shares (29,609) (13,122)
Closing balance 163,010 167,417
Non-distributable reserves
Opening balance (3,058) (2,770)
Transfer from distributable
reserves 100 -
Changes in reserves 37,470 (288)
Closing balance 34,512 (3,058)
Distributable reserves
Opening balance 125,009 52,641
Dividends paid (10,745) -
Share capitalisation issue (3,536) -
Transfer to non-distributable
reserves (100) -
Net profit for the period 55,987 72,368
Closing balance 166,615 125,009
Vendors for shares
Opening balance - 7,785
Cedef acquisition - (7,785)
Closing balance - -
Total equity
Opening balance 291,098 180,020
Changes in equity 74,784 111,078
Closing balance 365,882 291,098
FINANCIAL REVIEW
The Board is particularly pleased in announcing annual headline earnings of
39.6 cents (2000: 40.5 cents) in a year where much effort was concentrated
on building businesses for the future. The international operations
increased their contribution to net income before discontinued operations by
143% and contributed 25% (2000: 8%) during the year. Broking contributed 26%
(2000: 14%) of net income before discontinued operations. The contribution
made by management fees earned increased by 350% as funds under management
grew from R 181m at the beginning of the year to R1.2bn. Return on capital
of 18% (2000: 35%).
Discontinued operations arose from the closure of two business units in
Switzerland. Staff costs during the notice period following the closure
decision accounted for the majority of the R 4.4m cost.
Fully diluted net asset value per share increased by 35% to 209.6 cents
(2000: 155.1 cents). Translation differences, which accounted for 21.5
cents thereof, were recognised directly in the non-distributable reserve
that increased to R 34.5m (2000: R -3 m).
Investments increased primarily as a result of the application of funds into
two hedge fund products and the strategic holding (15%) that the group has
in Harcourt Investment Consulting AG. The increase in intangibles reflects
goodwill arising on acquisition of business units settled during the year.
Accounts receivable and accounts payable primarily include unsettled
Eurobond transactions due for delivery over the bond settlement period.
The financial statements have been prepared in accordance with Generally
Accepted Accounting Practice. The share purchase trust has been consolidated
resulting in the recognition of treasury shares to the extent of the trust
shareholdings. Save for this change in accounting policy the accounting
policies used in preparing these statements are consistent with those of the
previous financial year.
REVIEW OF OPERATIONS
Treasury Services
The division contributed R 32.2m (2000: R45.9m) for the year. This showed a
recovery in the second half, which produced R 19m (H1: R13.2m), as volatile
interest rates and currency markets encouraged corporate treasurers to
reconsider financing and hedging strategies. The lower component of
advisory fee income identified in the segmental analysis, R7.2m (2000:
R31.6m), was due to a lower level of corporate activity in the structured
product environment during the year. Proprietary returns from fixed income
arbitrage held up well and the volatile market enabled this unit to make a
healthy contribution to the profitability of the division.
The risk advisory and treasury outsourcing services continued to grow its
client base. A joint venture with Pamue Investments in Namibia contributed
to profitability and Decillion now offers treasury management services to
both public and private sector clients.
Treasury Services remains the highest contributor to group profitability,
having contributed 39.0% (2000: 45.7%) of net income before discontinued
operations. This continued dominance of both the group's results and of the
corporate treasury environment is in no small part due to an ongoing
strategy to adapt services to industry specific market places. Decillion
has become a respected service provider to the agricultural sector, offering
commodity based finance and hedging solutions to the co-operative and
milling industries. The division has also increased activity in the
property market and travel industry where clients face interest rate and
currency exposures.
Funds Management
Decillion's fund management division came of age during the year, having
grown assets under management from R181m at the beginning of the year to
R1.2bn by year-end. This growth in assets has considerably changed the
revenue mix and profit forecasting capabilities of the division and the
group. Whereas Decillion previously relied on proprietary investment in its
hedge fund products to generate divisional revenue, management fees are set
to create an increasingly reliable income stream for the group. The
division produced operating profit of R23.3m (2000: R 26.3m) during the
year.
Decillion successfully launched two new hedge funds during the year. The
Decillion Convertible Arbitrage Fund was listed on the Irish Stock Exchange
on 1 May 2001 and did particularly well to outperform relevant market
indices over the period, earning a nomination as a Eurohedge new fund of the
year. The Odyssey Fund, managed by the group's IMRO registered London
office, launched in October, ended the year with $11m under management.
Decillion is actively looking to create new products, and is using the
considerable experience that it has gained internationally to attract and
incentivise new trading teams.
The primary product remains Big Rock Capital, which produced excellent
returns for the year. In addition to the fund assets of R 500m, the
management team has secured further mandates, which raised the total assets
under their management to R800m.
Structured investment products contributed to the profitability of the
division, having implemented deals with a nominal value of some R1.2bn. The
transaction pipeline looks promising for the year ahead.
Decillion Partners, a joint venture with Harcourt Investment Consulting AG
(Zurich), has launched its first multi-manager hedge fund product during the
year and already has CHF 29m of assets under mandate for investors.
Broking Services
The contribution of the Broking division increased by 52% to R21.4m (2000:
R14.1m), mainly due to a substantial increase in the contribution by the
internationally based broking operations.
The fixed-commission swap broking activities have been centralised in Nyon,
Switzerland, and have positioned Cedef as one of the leading brokers of
interest rate derivatives on the continent. We believe that the move
creates a level of differentiation that will see the inter-dealer service
remaining a key provider of liquidity - particularly to the Euro orientated
banking market.
Back-to-back trading in the credit driven, corporate paper and asset swap
markets improved towards year-end as investors returned their attentions to
a market that had been abnormally quiet for some 18 months. Operations in
London and Switzerland are well placed to participate in these markets and
offer a ready distribution base for the emerging South African credit
market. Decillion is using its international banking and credit relations
to play an increasing role in the packaging and distribution of these bonds
to retail clients.
DIRECTORS
Two non-executive directors joined the Board during the year under review.
Sindi Zilwa, the Executive Chairperson of Nkonki Sizwe Ntsaluba Inc, and a
leading accountant, has strengthened the workings of both our Board and the
Audit Committee since her appointment. Professor Nicholas Morgan, Vice
Principal Academic of Technikon SA is expected to play a pivotal role in the
group's commitment to transformation and the education of underprivileged
South Africans.
DIVIDENDS
The Board of directors has approved a capitalisation award with an option to
receive a cash dividend of 6 cents (2000: 8 cents) per share.
Terms of the capitalisation award will be forwarded to shareholders by way
of circular and announced in the press.
PROSPECTS
Globally, alternative investment management is a growing industry and
Decillion is well positioned to reap the rewards of our considerable
investment over the past three years into this strategy. In South Africa,
Decillion is considered to be the market leader in alternative investment
management. Furthermore, the Board is confident that Treasury Services and
Broking will continue to make a solid contribution to group results. The
Board is therefore excited by the future prospects and positioning of the
group.
By order of the Board
Directors: AJN Smit (managing), TJ Davis, MG Kotze, JF Marais*, U Meyer, P
Moodley, Prof NI Morgan*, AP Nkuna*, GH Smale, WF Spruyt*, SV Zilwa*
(*non-executive)
Transfer secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg 2001
Registered office: 26 Sturdee Avenue, Rosebank 2196
Telephone: 011 328 1000 Fax: 011 442 4456 Company Secretary e-mail:
laurindad@decillion.net
Company registration: Decillion Limited (98/11692/06) Results on internet:
http://www.decillion.net
