| Wed 6 Jun 2001, 0:00 | | Mettle Limited 2001 Annual Financial Announcement |
|
METTLE LIMITED
MANAGING DIRECTOR'S REPORT
Mettle's success depends on the continuing ability of our people to generate
original, sophisticated and successful financial solutions in a variety of
disciplines. The Mettle brand stands for creativity and original thought,
allied to a firm grasp of the realities and technicalities of the markets in
which we operate. These are virtues that have underpinned our rapid growth
over the past six years, and which leave us in a strong position to continue
that growth into the future.
FINANCIAL RESULTS
Mettle's performance in the year under review continued to demonstrate the
strength of the business and the client base that we have built over the
past six years. In this time, Mettle has consistently delivered very strong
growth in earnings per share. This continued in the year under review, with
our headline earnings of R66,53-million translating into headline earnings
per share of 13,1 cents, an increase of 50,4%. Particularly pleasing was the
organic revenue growth of 31,62% and the return on equity of 39,6%. This is
one of the strongest performances in our sector, an accomplishment that the
Mettle team can justifiably be proud of.
MACRO ENVIRONMENT
Many of South Africa's smaller financial institutions have reported tough
trading conditions over the past year. We have not experienced this largely
due to our decision to concentrate on dominating a few chosen niches. Many
of our former competitors appear to have taken the decision to move away
from the areas of structured financial solutions and products in which we
specialise. They have concentrated their efforts in even more crowded
markets such as asset management, where they hope to find annuity revenue
streams.
Our business, however, remains focused on the generation and sale of
superior products. We need to remain ahead of the market in the products we
offer, and to generate the volume required to bring this expertise to book.
Our success in these critical factors has seen us gain market share over the
last year.
We have found the market in our core areas of expertise to be buoyant,
showing no signs of the slowdown as in some of the more heavily traded
sectors. The sophistication of the products we provide, together with our
increased profile and market share, have generated an ever increasing
corporate client list as well as a significant shift of our client base
towards the top 100 listed entities on the JSE.
We are now ideally positioned to capitalise on our expertise by moving
structured products into the institutional market. The products that have
been sold largely to corporates in the past will now be targeted towards the
savings industry as well, and we expect significant growth in this new
market in the year ahead.
We have been delighted with the speed with which our merger with Greenwich
has been implemented, and are happy to say the union has been bedded down
successfully.
INTERNATIONAL
The last year has seen significant growth in our international operations.
We now have a London office of substance, employing 33 professional staff,
and are opening physical offices in Zimbabwe, Namibia, Botswana and Kenya. A
small advisory presence in New York was established last year with the
acquisition of Oxbridge Inc.
While risk is covered fully in a separate report, I would like to state here
that we do not see the replication of our model in other markets as a
significant increase in the risk of our business. The risk incurred is
essentially that of operating costs and of diverting management focus from a
strong domestic market.
However we believe that the potential rewards of these markets are
substantial. We have a unique competitive advantage in the sophistication of
our products within an emerging market context. This is an unusual
combination of skills sets that we believe to have great potential in any
emerging market.
We are not in the business of building up assets in other emerging markets,
nor will we put our own balance sheet at risk. We focus on building up
revenue streams, and while this runs the risk of repatriation of profits, we
believe the returns we are showing already demonstrate the potential of
these businesses.
EMPOWERMENT
While much has changed in the business environment in recent years, the
pressing and persistent need remains for South African businesses to
contribute actively to the accelerated development of people from
disadvantaged backgrounds.
Given the high levels of skills and expertise which characterise Mettle's
staff profile, we acknowledge and embrace the long-term commitment required
to foster talented people.
Our employment equity plans therefore include both quantitative and
qualitative elements, with the aim of ensuring that Mettle is representative
of South African society within the medium term.
At shareholder level, HCI owns 32.8% of Mettle. This is one of the largest
empowerment holdings in any South African listed financial services company,
and we thank HCI for its support.
FUTURE
I said this time last year that I expected Mettle to benefit from the
looming shake-out of the smaller banking industry. We have benefited
indirectly as mentioned above by obtaining significant market share. More
directly we have concluded the Greenwich transaction and will entertain
further transactions should they underpin the values of creativity and
independence on which our success has been based.
I would like to thank the Mettle board for its support over the last year,
and our management and staff for another excellent performance. A business
such as Mettle is dependent on the spirit of the team, and with the team we
have in place I have every confidence that we will maintain our record of
excellence, innovation and superior returns into the future.
GAVIN OCONNOR - Managing Director
AUDITED, ABRIDGED BALANCE SHEET
GROUP COMPANY
31 MARCH 31 MARCH 31 MARCH 30 JUNE
2001 2000 2001 2000
AS AT 31 MARCH 2001 R R R R
ASSETS
Non-current assets
Fixed assets 15,934,065 6,988,737 - -
Investments and
loans 67,435,689 62,805,635 585,128,788 87,819,172
Deferred tax 3,558,860 576,436 - 211,275
Current assets
Trading assets 980,937,809 726,052,229
Short term
receivables 102,984,578 112,480,240 484,168 1,742,370
Cash and cash
equivalents 248,280,961 209,311,564 1,271,000 46,509,067
Total assets 1,419,131,962 1,118,214,841 586,883,956 136,281,884
EQUITY AND LIABILITIES
Capital and reserves
Total shareholders'
funds 309,405,427 187,225,003 586,745,976 133,463,886
Non-current
liabilities
Net financial
liabilities 113,665,840 169,455,243 - -
Deferred tax 5,905,903 11,080,735 - -
Current liabilities
Short term payables 53,537,025 96,443,223 36,335 38,874
Trading liabilities 930,225,356 652,359,414 - -
Bank overdraft - - - 2,701,542
Taxation 6,392,411 1,651,223 101,645 77,582
Total equity and
liabilities 1,419,131,962 1,118,214,841 586,883,956 136,281,884
AUDITED INCOME STATEMENTS
FOR THE PERIOD
ENDED 31 MARCH 2001
REVENUE 139,692,407 106,133,542 2,185,893 9,009,349
Operating Income 110,510,884 68,119,484 - -
Net financing income 18,016,217 25,292,543 2,097,614 8,992,324
Income from
investments 11,165,306 12,721,515 88,279 17,025
Less : Operating
Expenses 72,028,859 51,549,837 6,722,973 1,224,357
Profit before
exceptional
items and taxation 67,663,548 54,583,705 (4,537,080) 7,784,992
Exceptional item
(discount on
acquisition
of legacy
Greenwich
Group Ltd) 36,196,238 - - -
Profit before
taxation 103,859,786 54,583,705 (4,537,080) 7,784,992
Taxation 3,014,699 10,086,119 312,920 2,420,670
Profit for the
period 100,845,087 44,497,586 (4,850,000) 5,364,322
Headline earnings
after tax 66,532,342 44,871,340
Headline earnings per
share (cents)
- Basic 13,10 8,71
- Diluted 12,83 8,71
Earnings per
share (cents)
- Basic 19,85 8.64
- Diluted 19,45 8,64
Dividends per
share (cents) 1,08 2,07
AUDITED, ABRIDGED CASH
FLOW STATEMENTS
FOR THE PERIOD ENDED
31 MARCH 2001
Net Cash flow
(utilised in)/
generated by
operating
activities 34,377,024 (9,565,041) 2,293,052 2,319,625
Net Cash flow
Generated by /
(utilised in)
investing
activities 87,741,894 (20,840,768) (32,959,101) (32,551,742)
Net Cash flow
generated from
financing
activities (83,149.521) 7,554,922 (11,870,476) (1,935)
Net (decrease)/
increase in cash
and cash
equivalents 38,969,397 (22,850,887) (42,536,525) (30,234,052)
Cash and cash
Equivalents 209,311,564 232,162,451 43,807,525 74,041,577
at beginning of year
Cash and cash
equivalents
at the end of year 248,280,961 209,311,564 1,271,000 43,807,525
AUDITED, ABRIDGED
STATEMENTS OF
CHANGES IN EQUITY
FOR THE PERIOD ENDED
31 MARCH 2001
Equity at beginning
of year 187,225,003 145,659,756 133,463,886 145,685,092
Change in share
Capital and share
premium 27,732,883 7,554,922 458,132,090 (6,585,528)
Vendors for
acquisition - - - 11,000,000
Change in
non-distributable
reserves (777,220) 242,452 - -
Net profit attributable
to ordinary
shareholders 100,845,087 44,497,586 (4,850,000) 5,364,322
Dividends paid/
Declared (5,620,326) (10,729,713) - -
Equity at end
of year 309,405,427 187,225,003 586,745,976 133,463,886
The accounting policies used are consistent with those used in the previous
year and those disclosed in the group's most recent annual financial
statements. The above report complies with AC127.
FINANCIAL HIGHLIGHTS
Mettle's 2001 financial year was remarkably successful across a broad front
of the group's activities. The continued growth in earnings extends the
trend begun at the birth of the group on November 1, 1995,since which time
attributable headline earnings have grown from R1.1million to R66.5 million.
Atrributable Headline Earnings per share (cents)
(SEE PRESS FOR DETAILS)
A 50.4% increase in headline earnings per share from 8.71c to 13.10 per
share.
Atrributable Headline Earnings Shareholders (R'm)
(SEE PRESS FOR DETAILS)
Headline earnings of R66.5 million were achieved solely through organic
growth and not through acquisition.
Total shareholders' funds (R'm)
An increase in shareholders' funds from R187.2 million to R309.4 million
Revenue Breakdown per division 2001
(SEE PRESS FOR DETAILS)
1. Treasury 21%
2. Corporate Finance 10%
3. Structured Products 56%
4. Net interest income 13%
Revenue Breakdown per division 2000
(SEE PRESS FOR DETAILS)
1. Treasury 11%
2. Corporate Finance 20%
3. Structured Products 45%
4. Net interest income 24%
Return on Equity (%)
(SEE PRESS FOR DETAILS)
Mettle's success is reflected in its ability to generate exceptional
earnings off a relatively small capital base. An above average return on
equity of 39,6% has been achieved during the year under review.
HEADLINE EARNINGS PER SHARE
Headline earnings per share is calculated by dividing headline earnings
after tax by the weighted average number of shares in issue during the year.
WEIGHTED AVERAGE NUMBER OF SHARES
The basic earnings per share is based on a weighted average of shares of 507
951 460 (2000: 515 216 705) ordinary shares and the diluted earning per
share on a weighted average of 518 371 702 (2000: 515 216 705) ordinary
shares.
FINAL DIVIDEND NO 1
Notice is hereby given that a final dividend of R0.0122 per ordinary share
will be declared to all shareholders registered in the books of the company
at the close of business on June 22nd 2001. The dividend will be payable on
or about July 13th 2001.
