| Wed 21 Aug 2002, 0:00 | | Decillion - Unaudited Interim Results For The Six |
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Decillion - Unaudited Interim Results for the six months ended 30 June 2002
DECILLION LIMITED
(Registration number 1998/011692/06)
JSE Share code: DEC
ISIN code : ZAE000017612
ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 JUNE 2002
KEY FEATURES
Management have maintained their strategy of transforming the business into an
asset manager whilst retaining profitability in the treasury and broking
services areas.
Key features of the interim period include:
* Growing assets under management to R2,6 billion
(Dec 2001: R1,2 billion)
* An excellent performance in the Treasury Services division
* Exiting certain non-core activities
* Decreasing the Cedef fixed cost base in currency by 31% year
on year
* Increasing tangible net asset value per share to 161,1 cents
(Dec 2001: 158,5 cents)
FINANCIAL OVERVIEW
Audited
Interim Interim 12 months to
30 June 2002 30 June 2001 31 Dec 2001
R000`s % R000`s % R000`s %
Proprietary returns 14 173 59,0 9 359 19,5 28 053 33,9
Advisory fees 1 436 6,0 6 911 14,4 7 422 9,0
Treasury services 15 609 65,0 16 270 33,9 35 475 42,9
Proprietary returns 3 066 12,8 15 755 32,8 17 703 21,4
Management fees (627) (2,6) (4 489) (9,3) 2 996 3,6
Funds management 2 439 10,2 11 266 23,5 20 699 25,0
Broking services 8 168 34,0 16 828 35,1 21 448 26,0
Head office
and Investments* (2 203) (9,2) 3 626 7,5 5 014 6,1
Net income before
discontinued operations 24 013 100,0 47 990 100,0 82 636 100,0
Onshore 28 985 120,7 36 746 76,6 62 362 75,0
Offshore (4 972) (20,7) 11 244 23,4 20 274 25,0
Net income before
discontinued operations 24 013 100,0 47 990 100,0 82 636 100,0
Net income before discontinued operations and disposals decreased to R24,0
million (2001: R47,9 million). This was primarily brought about by a decreased
return on capital that was previously invested in Big Rock Fund, now deployed in
two offshore funds and an unprecedented decrease in volumes in the international
fixed income broking business during the period. Broking volumes are expected to
return to more normal levels. This trend has already been confirmed by trading
levels in the third quarter.
Tangible net asset value per share increased to 161,1 cents
(Dec 2001: 158,5 cents). The major contributing factor being the 11,9 cents
contribution from earnings, foreign currency translation losses in the non-
distributable reserve (3,9 cents) and the cash and scrip effects of the 2001
dividend (8,1 cents).
The results for the six months ended 30 June 2002 have been prepared on a
basis consistent with the accounting policies set out in the last annual
financial statements and in accordance with South African Statements of
Generally Accepted Accounting Policies.
*Comparatives have been restated to be in line with the current business
divisions
Divisional analysis
Average Operating
Capital Revenues Contribution margin
Treasury services 88 428 56 208 15 609 27,8%
Funds management 155 811 26 322 2 439 9,3%
Broking services 72 466 133 905 8 168 6,1%
Head office and Investments 50 692 (1 250) (2 203) (176,2%)
367 397 215 185 24 013 11,2%
INCOME STATEMENT
six months ended 30 June 2002
Interim Interim Audited
Six months to Six months to 12 months to
30 Jun 02 30 Jun 01 31 Dec 01
R000`s R000`s R000`s
Revenue 215 185 227 660 447 657
Operating expenses (193 896) (182 472) (370 687)
Operating income 21 289 45 188 76 970
Net interest income 2 724 2 802 5 666
Net income before
discontinued operations 24 013 47 990 82 636
Discontinued operations
and disposals 2 112 - (4 445)
Net income before goodwill
and taxation 26 125 47 990 78 191
Goodwill (6 577) (3 707) (9 938)
Net income before taxation 19 548 44 283 68 253
Taxation (955) (8 545) (7 814)
Net income after taxation 18 593 35 738 60 439
Preference dividends (1 405) - -
Attributable to outside shareholders (3) (1 963) (4 452)
Attributable income 17 185 33 775 55 987
Headline earnings 21 650 37 482 70 370
Amortisation of goodwill (6 577) (3 707) (9 938)
Discontinued operations
And disposals 2 112 - (4 445)
Net weighted number of shares
in issue 177 520 174 670 177 911
Basic earnings per share (cents) 9,7 19,3 31,5
Net fully diluted weighted
number of shares 182 085 185 311 177 911
Diluted earnings per share (cents) 9,4 18,2 31,5
Fully diluted headline earnings
per share (cents) 11,9 20,2 39,6
CASH FLOW INFORMATION
six months ended 30 June 2002
Interim Interim Audited
Six months to Six months to 12 months to
30 Jun 02 30 Jun 01 31 Dec 01
R000`s R000`s R000`s
Operating income before interest 21 289 41 481 76 970
Elimination of non-cash items 3 955 5 115 326
Increase/(decrease) in
working capital 11 877 (28 669) 33 755
Cash flows from
operating activities 37 121 17 927 113 986
Net interest received 2 724 2 802 5 666
Dividends paid (3 622) (10 745) (10 745)
Taxation paid (4 246) (22 554) (30 974)
Net cash inflow/(outflow) from
operating activities 31 977 (12 570) 77 933
Cash flows from investing activities
Disposals/(additions) of fixed assets 477 (898) (4 716)
Additions to intangibles - (999) (9 792)
Disposals/(acquisition) of
Investments 51 391 (34 837) (92 124)
Loss on discontinued operation 2 112 - (4 445)
Net cash inflow/(outflow) from
investing activities 53 980 (36 734) (111 077)
Cash flows from financing activities
(Decrease)/increase in
long-term liabilities (51 181) 3 539 63 457
Treasury shares purchased (3 463) (2 098) (29 753)
Net cash (outflow)/inflow from
financing activities (54 644) 1 441 33 704
Net increase/(decrease) in cash
and cash equivalents 31 313 (47 863) 560
Cash and cash equivalents at the
beginning of the period 123 935 123 375 123 375
Cash and cash equivalents at the
end of the period 155 248 75 512 123 935
BALANCE SHEET
at 30 June 2002
Interim Interim Audited
Six months to Six months to 12 months to
30 Jun 02 30 Jun 01 31 Dec 01
R000`s R000`s R000`s
ASSETS
Non-current assets 350 887 306 758 429 040
Investments 261 949 227 238 326 088
Fixed assets 10 108 13 702 13 668
Intangible assets 78 830 65 818 89 284
Current assets 1 148 871 174 143 466 006
Cash 155 248 75 512 123 935
Tradeable securities net 3 806 3 563 43 468
Accounts receivable 989 817 95 068 297 778
Taxation - - 825
1 499 758 480 901 895 046
LIABILITIES AND EQUITY
Non-current liabilities 65 199 53 399 120 537
Long-term liability 58 672 49 935 109 853
Deferred taxation 6 527 3 464 10 684
Current liabilities 1 065 561 113 671 401 267
Accounts payable 1 065 521 98 125 401 267
Taxation 40 15 546 -
Capital and reserves
Share capital 1 801 1 740 1 745
Share premium 171 553 168 845 163 010
Non-distributable reserves 28 653 (3 281) 34 512
Distributable reserves 166 906 144 503 166 615
Total shareholders` funds 368 913 311 807 365 882
Outside shareholders` interest 85 2 024 7 360
368 998 313 831 373 242
1 499 758 480 901 895 046
Net actual number of shares 180 088 174 095 174 521
Net asset value per share 204,9 179,1 209,6
Tangible net asset value per share 161,1 141,3 158,5
Net fully diluted number of
shares in issue 184 654 184 736 174 521
Fully diluted net asset value
per share 199,8 168,8 209,6
STATEMENT OF CHANGES IN EQUITY
six months ended 30 June 2002
Interim Interim Audited
Six months to Six months to 12 months to
30 Jun 02 30 Jun 01 31 Dec 01
R000`s R000`s R000`s
Share capital
Opening balance 1 745 1 730 1 730
Shares issued net of expenses 93 22 159
Treasury shares (37) (12) (144)
Closing balance 1 801 1 740 1 745
Share premium
Opening balance 163 010 167 417 167 417
Shares issued net of expenses 11 969 3 514 25 202
Treasury shares (3 426) (2 086) (29 609)
Closing balance 171 553 168 845 163 010
Non-distributable reserves
Opening balance 34 512 (3 058) (3 058)
Transfer from distributable
reserves 1 210 - 100
Changes in reserves (7 069) (223) 37 470
Closing balance 28 653 (3 281) 34 512
Distributable reserves
Opening balance 166 615 125 009 125 009
Dividends paid (3 622) (10 745) (10 745)
Share capitalisation issue (12 062) (3 536) (3 536)
Transfer to non-distributable
reserves (1 210) - (100)
Net profit for the period 17 185 33 775 55 987
Closing balance 166 906 144 503 166 615
Total equity
Opening balance 365 882 291 098 291 098
Changes in equity 3 031 20 709 74 784
Closing balance 368 913 311 807 365 882
REVIEW OF OPERATIONS
Treasury Services
The Johannesburg based Treasury Services division continued to prove its
resilience by maintaining profitability levels. The contribution was dominated
by the excellent performance of the fixed income trading team, increasing profit
from proprietary trading to R14,2 million (2001: R9,4 million). The launch of
Tetra, a new fixed income hedge fund in the second half of the year, should
provide an alternative means of growing earnings from this core activity of the
group.
The advisory activities contributed R1,4 million (2001: R6,9 million) for the
period after costs of closing the offshore treasury services division and
relocating two executives. Considering the loss of key staff at the beginning of
the year and the already low contribution of advisory services in the second
half of the 2001 financial year, this performance demonstrates Decillion1s depth
of skills and the strategic positioning in a highly competitive corporate
market. It is anticipated that profitability will improve as the lower cost base
materialises.
The public sector outsourcing unit has been restructured into a new black
empowerment group, African General Equity. Decillion retains a 40% economic
interest in this business.
Notwithstanding the slowdown being experienced in financial services we are
confident that the division is more focused, leaner and well placed to perform
profitably in the second half of the year.
Funds Management
Contribution decreased to R2,4 million against R11,3 million for the same
period during 2001. This decrease should, however, be seen against the backdrop
of several new initiatives which were started in 2001 to diversify the business
in Europe. The reduction in profitability arose primarily due to an operating
loss incurred by the Convertible Arbitrage Fund`s management division and the
relatively lower returns earned on the group capital invested in the underlying
funds. We are in the process of downsizing the cost structure of the Convertible
Arbitrage Fund`s management division and are actively seeking more assets for
the fund.
Assets under management have grown from R1,2 billion to R2,6 billion. We have
seen inflows across all our funds with the majority of new flows (R700 million)
being invested in the Mont Blanc Fund, our fund of hedge funds product launched
during March. The local management group increased assets by R350 million and
further diversified its client base.
The year 2002 will be marked as one during which financial markets have
experienced unprecedented shocks as a result of the excesses of the bull market
that ended in April 2000. This resulted in extreme volatility and large
reductions in equity indices. We are pleased that all our funds have recorded
profitable investment performances all of which ranked respectably in relation
to their peers in the industry. As such we continued to deliver on our mandates
of absolute return performance to ensure investor satisfaction.
During July Decillion purchased all the shares it did not own in Stone Asset
Management from staff and other shareholders. The business will be structured
into a number of divisions with separate investment teams, each managing a
number of products. We have identified a number of opportunities to grow the
business in terms of product mix, investor base and total assets.
Internationally, for the balance of the year the focus will be on investment
performance for all our products to serve as a base for asset growth in the
future.
Given the uncertain outlook for equity financial markets, we believe that our
investment management style will serve investors well and that together with new
initiatives, management remain confident of growth in the business for the
balance of this year.
Broking Services
The process of restructuring and reducing the cost base of our international
broking business continued during the period under review and fixed costs in
foreign currency decreased by 31% from 2001. The major point of saving has been
from consolidating the swap broking division in Switzerland rather than running
a second front in the United Kingdom. The international credit crisis and the
holiday effects brought on by the World Cup during June led to a decrease in
foreign currency revenues of 33,3% compared to 2001 which has offset the cost
savings in the short term. The international broking division contributed R3,5
million (2001: R13,6 million). The local broking
business increased its contribution to R4,5 million (2001: R3,3 million) as a
result of larger volumes in the local markets.
The reduction in the cost base and ever-increasing experience in running an
international broking business have placed us in a good position to improve
margins once volume and sentiment returns to the fixed income markets.
Head Office and Investments
Head office consists of costs incurred at the centre, which cannot be
directly attributed to the operating divisions. Investments include gains and
losses on the private equity portfolio, interest on capital not invested in
operating divisions and other non-core operations.
The R2,2 million expense (2001: R3,6 million profit) is attributable mainly to a
loss that arose on the realisation of a private equity investment of R1,2
million compared to gains of R3,9 million in 2001. In 2001 this segment also
included a profit of R0,6 million made by Decillion Solutions, the group1s
remaining software services business. This business was sold for a R2,1 million
net profit which has been accounted for in discontinued operations and disposals
in 2002. Management intend to continue to exit remaining non core investments.
BOARD OF DIRECTORS
Our commitment to compliance with the King Report and the continual need to
aspire to a board that is efficient and recognisable has led to certain changes
to the board of directors.
It was resolved to reduce the number of executive directors from six to three.
The three executive directors will be Alwyn Smit, Uys Meyer and Trevor Davis. We
would like to take this opportunity to thank the unselfish commitment of Preba
Moodley, Graham Smale and M G Kotze to this process of business building and for
their contribution since 1999. They shall remain on the group executive
committee going forward.
Furthermore Francois Marais has accepted the mantle of Group Chairman from which
position he shall continue to grow the stature of the board.
DIVIDENDS
Decillion paid a dividend of 6,0 cents per share on 16 April 2002. In terms of
the dividend announcement, shareholders were able to choose between a
capitalisation award and a cash distribution. Shareholders elected to receive
R3,6 million in cash with a further 9 295 454 shares being distributed in terms
of the capitalisation award. No interim dividend is proposed.
PROSPECTS
The group strength lies in its diverse product range and in a strategy which
preserves balance sheet value through investment in non directional fund
products. We remain confident that the strategy will provide for long term
growth and sustained profitability. Decillion is well positioned to capitalise
on the groundwork that was done during the period and management is expecting an
improvement in the second half of the year.
By order of the Board
Directors: J F Marais (Chairman), A J N Smit (CEO), T J Davis, U Meyer,
N I Morgan*, A P Nkuna*, W F Spruyt*, S V Zilwa*
(*non-executive)
Transfer secretaries: Computershare Investor Services Limited,
11 Diagonal Street, Johannesburg 2001
Registered office: 26 Sturdee Avenue, Rosebank 2196
Tel: +27 11 328 1000
Fax: +27 11 442 4456
Company secretary: Laurinda da Camara
Company registration: Decillion Limited
(Registration number 1998/011692/06)
Share code DEC
ISIN ZAE000017612
Results on internet: http://www.decillion.net
Date: 21/08/2002 05:04:00 PM Produced by the JSE SENS Department
