| Wed 4 Jul 2001, 0:00 | | Iota Financial Services Ltd - Audited Results & Fu |
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ANNOUNCEMENT
AUDITED RESULTS FOR THE YEAR ENDED 30 APRIL 2001
GROUP PROFILE AND VISION
IOTA is an investment holding company that focuses on providing a
diversified range of financial services both domestically and offshore,
including portfolio management and stockbroking, investment and financial
planning, accounting and tax planning, property development, broking and
management, short-term insurance, employee benefits, asset-based financing
and endowment bond trading.
IOTA is focused on delivering a diverse product range to a select target
market of high net worth individuals and small to medium sized businesses.
The Group endeavours to provide maximum value to each client through the
management of business, portfolio and currency exposures and the provision
of expert advice, and where necessary customising products to meet clients'
specific requirements.
REVIEW OF RESULTS
Headline earnings reduced by 29% to R31,4 million for the year, which on a
weighted average basis is equivalent to 45,3 cents per share, 30% down on
the prior year.
The second half of the financial year witnessed a slow down in trading in
part because of the market's perception of weakness in local economic
conditions which was reflected in a lack of real growth in all key sectors
of the economy. In addition, our results were particularly impacted by
three important issues:
* Our asset-based financing division was restructured with effect from 1 May
2000 in order to eliminate any new risk to IOTA from financing with
recourse. In addition, the potential impact of old transactions was reduced
significantly by IOTA entering into the securitisation arrangement referred
to elsewhere in this report. In this process, additional provisions of
R11million were created against the receivables not securitised. These
provisions have been included in operating expenses.
* The ongoing changes in the short term insurance sector, together with the
cancellation by a broker of its intermediary agreement had a negative impact
on the results of Compass Insurance Company, resulting in an underwriting
loss. Compass was, however, still profitable overall. Significant progress
has been made in creating opportunities to replace the lost business.
* The over supply of commercial and retail property in Johannesburg, Cape
Town and Durban, curtailed property-related activities and resulted in this
division producing losses during the year.
Despite these unsatisfactory factors, our other core activities performed
creditably and in line with expectations.
Our consolidation into one facility in Johannesburg has further developed
our ability to improve our business model by serving our clients through the
seamless delivery of financial services, resulting in increased product
penetration per client.
BALANCE SHEET
IOTA remains focused on group earnings in businesses which do not require
significant capital investment. The organisation is financially fit with a
strong cash generation ability, and has a cash rich balance sheet.
During the year a securitisation arrangement was entered into to finance R40
million of the remaining debtor book of IOTA Rental in order to minimise
IOTA's exposure to financing with recourse.
Pursuant to latest accounting standards, IOTA is now reflecting the
remaining recourse business as an asset of R32 million, and the risk
attached to it as an interest bearing debt on the balance sheet itself.
Comparative figures have accordingly been restated.
The property financing of approximately R43 million in respect of the
Group's head-office was capitalised on the balance sheet and reflects the
asset and the corresponding liability under interest-bearing debt.
Net tangible asset value per share at 30 April 2001 amounted to 239 cents,
compared to approximately 260 cents at the prior year end.
DIVIDEND POLICY
As IOTA continues to evaluate investment opportunities and needs to fund
acquisitions by cash rather than script issues due to its market rating, no
dividend has been declared so as to maintain cash resources.
MARKET CONDITIONS AND SHARE BUY-BACK
World wide equity markets have been weak during the year under review and
resulted in a down-rating, inter alia, of the banks, financial services and
insurance sectors in general and small market capital shares, in particular.
This has substantially contributed to increased levels of industry
rationalisation, and this trend is forecast to further accelerate.
It has, however, also created the opportunity for companies to buy-back a
portion of their share capital in either the open market or through specific
negotiations with certain shareholder groups. During the course of the
year, IOTA has repurchased, through specific buy-backs and general buy-backs
in the open market, a total of 22,6 million shares, representing 29 % of the
shares in issue, which resulted in shares in issue reducing to 56,3 million.
In order to partly fund these share buy-backs, we decided to sell our non-
core strategic investment in DNA Supply Chain Investments Limited for a
consideration of R16,9 million.
ACQUISITIONS DURING THE FINANCIAL YEAR
We previously announced IOTA's acquisition of the financial services
activities, excluding the professional auditing practice, of Moores Rowland
Johannesburg. This expansion of our accounting based consulting services
will add further depth to our skills and expertise, and will, in due course,
produce synergistic opportunities between similar activities elsewhere in
the Group.
DIRECTORS' STATEMENT
The financial statements in respect of the year ended 30 April 2001 have
been prepared in accordance with South African Statements of Generally
Accepted Accounting Practice.
PROSPECTS AND CAUTIONARY ANNOUNCEMENT
The company's shares on the JSE Securities Exchange South Africa are trading
under a cautionary announcement, which was published on 15 June 2001. The
board is currently reviewing certain proposals, which if implemented, may
have an effect on the share price. Accordingly, shareholders are advised to
continue to exercise caution in their dealings in IOTA shares until further
notice.
FOR AND ON BEHALF OF THE BOARD
P E B REYNOLDS M R GAHAGAN
Chairman Chief Executive Officer
SPONSOR
PRICEWATERHOUSECOOPERS
4 July 2001
IOTA FINANCIAL SERVICES LIMITED
PROFIT ANNOUNCEMENT FOR THE YEAR ENDED 30 APRIL 2001
INCOME STATEMENT
R'000 2001 2000 % change
Revenue
Turnover 227,841 203,799
Interest received 19,329 12,680
Dividends received 2,418 4,294
Surplus on 6,213 7,230
disposal of
investment
255,801 228,003
Expenditure
Net claims (76,168) (64,967)
incurred
Operating expenses (135 837) (100,129)
(212,005) (165,096)
Operating profit 43,796 62,907
Unrealised loss on (1,087) (6,230)
trading securities
Interest paid (6,916) (3,129)
Equity accounted - 886
earnings
Profit before 35,793 54,434
taxation
Taxation (9,265) (12,425)
Earnings 26,528 42,009 (37)
attributable to
ordinary
shareholders
Headline earnings 31,409 44,393 (29)
STATISTICS
Number of shares
in issue (000's)
- in issue: net 56,272 56,760
of treasury shares
held
- weighted 69,343 68,387
Earnings per share 38.3 61.4
(cents)
Headline earnings 45.3 64.9 (30)
per share (cents)
Headline earnings
reconciliation
Earnings 26,528 42,009
attributable to
ordinary
shareholders
Amortisation of 5,732 2,021
goodwill
(Profit) / loss on
disposal of
goodwill,
property,
equipment and
vehicles, net of (851) 363
taxation
Headline earnings 31,409 44,393 (29)
BALANCE SHEET
R'000 2001 2000
ASSETS
Property, 53,723 7,422
equipment and
vehicles
Immovable property 44,364 2,471
Equipment and 9,359 4,951
vehicles
Intangible assets 16,869 7,092
Investments and 5,298 30,420
loans
Finance agreement 18,866 54,111
debtors
Other current 244,806 185,720
assets
Debtors 228,745 153,157
Short term portion 16,061 32,563
of finance
agreement debtors
Cash and cash 107,854 98,234
equivalents
447,416 382,999
EQUITY AND
LIABILITIES
Shareholders' 151,385 154,576
funds
Interest bearing 103,754 96,995
debt
Finance leases 43,975 109
Discounted finance 32,825 67,111
liabilities
Other 26,954 29,775
Interest free 192,277 131,428
liabilities
447,416 382,999
Net tangible asset 239.0 259.8
value per share
(cents)
Net asset value 269.0 272.3
per share (cents)
STATEMENT OF CHANGES IN EQUITY
R'000 2001 2000
Shareholders' 154,576 183,321
funds at beginning
of year
Reduction in - (56,552)
shares to be
issued
Shares (16,000) 16,000
(cancelled)/issued to
the share incentive
scheme
Share issue - (21)
expenses
Unbundling of - (30,675)
investment in
Mercantile Lisbon Bank
Holdings Limited
Share buy-back (13,225) -
Earnings 26,528 42,009
attributable for
the year
Other movements (494) 494
Shareholders' 151,385 154,576
funds at end of
year
ABRIDGED CASH FLOW STATEMENT
R'000 2001 2000
Cash operating 35,922 25,878
profit
Dividends received 2,418 4,294
Net interest 12,413 9,551
received
Taxation paid (14,421) (18,498)
Cash generated 36,332 21,225
from operating
activities
Cash utilised in 31,821 (39,315)
investment
activities
Cash effects of
financing
activities:
Share buy-back (23,399) -
Other (35,134) 26,882
Net cash inflow 9,620 8,792
Cash and cash 98,234 89,442
equivalents at
beginning of year
Cash and cash 107,854 98,234
equivalents at end
of year
NOTES
1.
Accounting policies
The principal accounting policies used in the current year are
consistent with those of the previous year other than the
recognition of discounted asset based financing (with recourse)
now brought on to the balance sheet.
Comparatives in the balance sheet have accordingly been re-stated.
2
Additional information
Capital expenditure:
New corporate headquarters 41,893 -
Other 8,136 1,855
3
Contingent liabilities
Surety for overdrafts in 1,075 500
subsidiaries
Sureties for bond liabilities in
property owning companies held
for resale 7,949 -
The arbitrator's ruling against one of IOTA's subsidiaries
relating to a dispute pertaining to an alleged breach of a
broker's intermediary agreement has been challenged in the High
Court and judgement has been reserved.
No provision has been created in this regard as IOTA and its
professional advisors believe that no such breach has taken place
and no liability will arise.
