| Fri 1 Jun 2001, 0:00 | | Amb Private Equity Partners Limited - Interim Resu |
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AMB PRIVATE EQUITY PARTNERS LIMITED
(Registration number 1998/015329/06)
("AMB Partners")
Interim results
for the six months ended 31 March 2001
Salient features
* 2% decrease in net asset value * R149 million cash deployed in
from R16,38 to R15,98 per linked unit four investments
* 36% increase in linked unit price from * Net cash of R196 million
R8,10 to R11,00 per linked unit available for deployment
Income statement
for the six months ended 31 March 2001
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2001 2000 2000
R'000 R'000 R'000
Investment income 28 502 32 004 56 204
Realised loss on disposal of investment (9 216) - -
Operating expenses (3 360) (2 678) (7 327)
Profit from ordinary activities 15 926 29 326 48 877
Unrealised (loss)/gain on revaluation
of investments (15 607) 78 667 65 748
Profit before taxation 319 107 993 114 625
Taxation (1 287) - -
(Loss)/profit after taxation (968) 107 993 114 625
Debenture interest paid (20 350) (22 420) (43 003)
(Loss)/earnings attributable to
ordinary shareholders (21 318) 85 573 71 622
Transfer from/(to)
non-distributable reserves 15 549 (67 989) (55 069)
(Deficit)/retained income
for the period (5 769) 17 584 16 553
Retained income/(deficit)
brought forward 6 395 (10 158) (10 158)
Retained income - end of period 626 7 426 6 395
Headline (loss)/earnings
per share (cents) (40,89) 156,39 133,59
(Loss)/earnings per share (cents) (40,89) 156,39 133,59
Debenture interest
per linked unit (cents) 39,1 42,2 82,5
Weighted average number of linked
units in issue during the period 52 133 117 54 718 729 53 615 686
Balance sheet
at 31 March 2001
Unaudited Unaudited Audited
31 March 31 March 30 September
2001 2000 2000
R'000 R'000 R'000
Assets
Investments 627 814 447 191 510 709
Current assets 226 620 452 731 365 226
Accounts receivable 18 269 3 027 10 103
Short-term loans 12 031 - -
Bridging loan - - 50 411
Cash 196 320 449 704 304 712
Total assets 854 434 899 922 875 935
Liabilities
Current liabilities 22 193 22 908 21 670
Debenture interest payable 20 384 22 461 20 620
Taxation payable 1 287 - -
Other accounts payable 522 447 1 050
Total liabilities 22 193 22 908 21 670
Shareholders' funds
Ordinary share capital 5 5 5
Ordinary share premium 271 624 271 624 271 624
Non-distributable reserves 40 602 68 099 56 086
Debentures 519 383 529 859 520 154
Retained income 626 7 426 6 395
Shareholders' funds 832 240 877 013 854 264
Preference share capital 1 1 1
Total shareholders' funds 832 241 877 014 854 265
Total liabilities and
shareholders' funds 854 434 899 922 875 935
R R R
Undiluted net asset value
per linked unit 16,37 16,93 16,78
Fully diluted net asset value
per linked unit 15,98 16,51 16,38
Cash flow statement
for the six months ended 31 March 2001
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2001 2000 2000
R'000 R'000 R'000
Cash effects of operating activities (16 167) (3 742) (14 650)
Cash effects of investing activities (91 518) 2 939 (122 320)
Cash effects of financing activities (707) (16 404) (25 229)
Decrease in cash and cash equivalents (108 392) (17 207) (162 199)
Cash and cash equivalents
at beginning of period 304 712 466 911 466 911
Cash and cash equivalents
at end of period 196 320 449 704 304 712
Condensed statement
of changes in shareholders' funds
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 September
2001 2000 2000
R'000 R'000 R'000
Ordinary shareholders' funds
At beginning of period 854 264 807 871 807 871
Repurchase of debentures (771) (16 540) (26 246)
Attributable earnings for period
under review (21 318) 85 573 71 622
Increase in non-distributable
reserves - linked unit buy-back 65 109 1 017
832 240 877 013 854 264
The same accounting policies and methods of computation are applied in these
interim results as were followed in the 2000 annual financial statements.
superior returns through focused business partnerships
Commentary
Industry and economic overview
The past six months continued to be characterised by difficult macro-
economic conditions and a lack of real growth in the primary and secondary
industries. The impact of surplus capacity in most manufacturing sectors,
together with increased competition from cheap imports, has compounded the
challenges facing many local businesses. These difficult trading conditions
have resulted in increased uncertainty and higher risk when investing in
equity opportunities in the South African market.
Against this domestic economic environment, the global economic slowdown and
its impact on equity prices dispelled original anticipations of a soft
landing in the United States. Locally listed equity prices generally, and
small and mid-capitalisation stocks specifically, have been extremely
volatile due to uncertainties over the sustainability of the business models
and concerns over the level of corporate governance in these companies. As a
result, despite the low equity prices, private equity activity generally has
not achieved the levels which may have been anticipated.
Review of results
Results for the six months to 31 March 2001 have largely been affected by
volatility in the local listed equity market, particularly in the technology
and telecommunication sectors. In this regard, AMB Partners was adversely
affected by the declines in the share price of both Dimension Data Holdings
plc (Didata) and M-Cell Limited
(M-Cell) of 28% and 51%, respectively. The negative effect of Didata and M-
Cell was to some extent cushioned by positive performances in other
portfolio companies, resulting in a slight decline in the net asset value
(NAV) per linked unit of AMB Partners from R16,38 per linked unit at 30
September 2000 to R15,98 per linked unit at 31 March 2001. The debentures
are currently yielding a return of approximately 7,55% per annum on the
listed linked unit price.
The net assets of AMB Partners comprise investments of R627,8 million and
net current assets of R204,4 million, giving a total NAV of R832,2 million.
The cash of R196,3 million, equating to R3,77 per linked unit, positions AMB
Partners well to participate meaningfully in significant transactions in the
short term, but highlights the need for additional capital in the longer
term.
Investment income of R28,5 million for the six month period comprises
interest generated on uninvested cash and interest earned and dividends
received from underlying investee companies. The realised loss on disposal
of investment relates to the disposal of the interest in Billboard Holdings
Limited. Operating expenses of R3,4 million relate to the management fee and
to listing, marketing and statutory expenses. The unrealised loss on
revaluation of investments of R15,6 million relates to the mark-to-market
valuation of the underlying investments in AMB Partners' portfolio and is
largely attributable to declines in Didata and M-Cell. These listed
investments are valued based on the 30-day volume-weighted average share
price at 31 March 2001. Unlisted investments continue to be carried at cost
if held for less than two years, or otherwise at directors' valuation,
unless there has been a permanent diminution in the value of the
investments. Interest paid in the sum of R20,4 million represents debenture
interest payable to debenture holders and equates to approximately 39 cents
per linked unit for the six month period. The headline loss per share of 41
cents largely reflects the unrealised loss on the revaluation of the listed
investments in the portfolio.
Portfolio overview
During the period under review, AMB Partners made two new investments and
two smaller follow-on investments. The first new investment related to the
participation of the Ucingo Investments (Pty) Limited (Ucingo) consortium in
the acquisition of an equity interest in Telkom (SA) Limited (Telkom). AMB
Partners provided approximately R120 million to the financing consortium
which funded the acquisition by Ucingo of 3% of Telkom. Despite the poor
performance of telecommunication stocks internationally, AMB Partners
remains cautiously optimistic about the successful listing of Telkom and the
potential for this investment. The second transaction involved AMB Partners
acquiring a significant minority interest in Sentry Group Limited (Sentry).
Subsequent to year-end, ADT Fire and Security plc (ADT), a subsidiary of
Tyco International Limited, has made an offer to acquire the entire business
of Sentry. Consequently, AMB Partners is likely to be forced to disinvest
from this investment if the ADT transaction is successful.
Within the existing portfolio, notable performances were achieved by ASC
Holdings (Pty) Limited, which successfully merged its existing operations
with those of Federal Guarding while significantly growing market share
through securing new contracts, thereby achieving organic growth in
earnings. Equally commendable was Stuttafords Stores (Pty) Limited's
performance, particularly against the backdrop of difficult retail trading
conditions. This company managed to generate significant cash flow, which
enabled it to reduce a large component of its senior debt obligations that
were raised to finance the transaction.
Of disappointment, however, was the significant decline in the value of
Didata and M-Cell. The fall in these share prices contributed to the decline
in the performance of the portfolio. Hedging strategies were put in place at
various stages during the review period, but the extreme volatility in the
market resulted in an overall net decline being experienced on these
investments. AMB Partners does, however, believe that these shares hold
potential value for AMB Partners over the medium- term, which is supported
by the upward movement of these companies' share prices subsequent to 31
March 2001.
Listing and linked unit price performance
During the current reporting period, AMB Partners' linked units have traded
between a high of R11,00 per linked unit and a low of R8,10 per linked unit.
The linked unit price at 31 March 2001 of R11,00 represented an increase of
36% over the linked unit price of R8,10 at 30 September 2000. The linked
units are still, however, trading at an approximate 31% discount to the
underlying NAV of R15,98 per linked unit.
Linked unit buy-back
Linked unitholders approved the implementation of a linked unit buy-back at
the linked unitholders annual general meeting held on 14 February 2001. Due
to the significant discount at which AMB Partners trades to its underlying
NAV, AMB Partners will continue to acquire linked units in the market at
current price levels, which should result in an increase in the NAV to the
remaining linked unitholders. During the six months to 31 March 2001, AMB
Partners acquired 77 100 linked units in the market at a total consideration
of R706 676, which equates to an average cost of approximately R9,17 per
linked unit.
Dividend policy
Due to the long-term nature of private equity investing, it is not
anticipated that a dividend will be paid until the underlying portfolio is
more mature.
Prospects
AMB Partners will continue to adopt a cautious approach to investing in the
current market, despite perceived low valuation and interest rate levels,
and will continue to concentrate on high-value opportunities in private
equity and leveraged transactions, targeting larger companies which can
clearly demonstrate a business model that will weather subdued economic
conditions. AMB Partners is confident this approach should generate positive
returns to linked unitholders over the medium-to-long-term. However, to
effectively achieve these objectives, adequate capital resources are
essential to underwrite targeted transactions. In this regard, AMB Partners
believes the surplus cash capital of approximately R196 million is
insufficient to satisfy the funding requirements of transactions it is
currently targeting. Consequently, a restructuring, incorporating a further
capital raising, will in all likelihood be required in the near future.
In conclusion, AMB Partners is concerned about the impact of the global
economic slowdown, the adverse macro-economic conditions and the volatile
equity markets on equity investing activities for the rest of the year.
Despite this, AMB Partners is confident that its positioning and disciplined
investment approach should allow it to identify and conclude successful
transactions over the medium-term.
On behalf of the Board
1 June 2001
ROB DOW ANDREW SPRAGUE ZENZO LUSENGO
Chairman Joint Managing Directors
Registered address
8th Floor, The Forum, corner Maude and Fifth Streets, Sandton, South Africa
PO Box 786833, Sandton, 2146, South Africa
Tel: (+2711) 303-2900
Transfer secretaries
Mercantile Registrars Limited,
10th Floor, 11 Diagonal Street, Johannesburg, 2001
to register to receive shareholder circulars online, go to:
www.ambpartners.co.za
