| Thu 29 Nov 2001, 0:00 | | Venfin Limited - Interim Report For The Six Months |
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Interim report for the six months ended 30 September 2001
- Increase in pro forma headline earnings per share +5%
- Increase in net asset value +13.7%
- Increase in net assets of R1 075 million as a result of exchange
rate adjustments
- R549 million invested during the period
CONSOLIDATED BALANCE SHEET
Unaudited Audited
30 September 31 March
2001 2000 2001
R million R million R million
ASSETS
Non-current assets
Property, plant and equipment 1 1 1
Goodwill and patents 122 106 132
Investments - Associated companies 5 212 3 952 4 263
Investments - Other 1 500 1 484 1 435
6 835 5 543 5 831
Current assets 1 201 1 065 1 246
Cash and cash equivalents 1 168 366 1 003
Other current assets 33 699 243
Total assets 8 036 6 608 7 077
EQUITY AND LIABILITIES
Capital and reserves
Interest of own members 7 997 6 568 7 031
Current liabilities 39 40 46
Interest-bearing 3 4 5
Interest-free 36 36 41
Total equity and liabilities 8 036 6 608 7 077
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Six months ended Year ended
30 September 31 March
2001 2000 2001
R million R million R million
Opening balance 7 031 3 999 3 999
Adjustment relating to redemption of
British American Tobacco Plc
preference shares - 2 337 2 337
Net profit (32) 167 443
For the period (32) 209 443
Prior year adjustment - (42) -
Exchange rate adjustments 1 075 65 235
Change in reserves of associated
companies (77) - 17
Interest of own members 7 997 6 568 7 031
ABRIDGED CASH FLOW STATEMENT
Unaudited Audited
Six months ended Year ended
30 September 31 March
2001 2000 2001
R million R million R million
Net cash inflow from operating
activities 256 16 604
Investing activities (88) (341) (294)
Net increase/(decrease) in cash and
cash equivalents 168 (325) 310
Cash and cash equivalents at the
beginning of the period 997 687 687
Cash and cash equivalents at the end
of the period 1 165 362 997
CONSOLIDATED INCOME STATEMENT
Unaudited Audited
Six months ended Year ended
30 September 31 March
2001 2000 2001
Company and Associated
its subsidiaries companies Total Total Total
R million R million R million R million R million
Revenue 94 94 56 126
Operating profit before
depreciation 52 52 25 73
Depreciation * * * (1)
Finance costs (14) (14) * (6)
Operating profit 38 38 25 66
Amortisation of goodwill (3) (11) (14) (15) (25)
Impairment of goodwill (22) (22)
Impairment of investments (64) (159) (223)
Equity adjustment:
Share of net profit before
taxation of associated
companies 276 276 296 685
Exceptional items (24) 6 (18) (69) (123)
Profit before taxation (75) 112 37 237 603
Taxation (13) (56) (69) (70) (160)
NET PROFIT/(LOSS) (88) 56 (32) 167 443
Reconciliation of headline
earnings:
BASIC EARNINGS - net profit/
(loss) (88) 56 (32) 167 443
Plus/(minus) - attributable
to own members:
- Exceptional items 24 (8) 16 69 118
- Amortisation of
goodwill 3 11 14 15 25
- Impairment of goodwill
and investments 86 159 245 - -
HEADLINE EARNINGS 25 218 243 251 586
Reconciliation of pro forma
headline earnings:
Headline earnings -
reported 25 218 243 251 586
Minus - adjustments relating
to e-tv - (24) (24) (42) (77)
Pro forma headline
earnings 25 194 219 209 509
*Amounts smaller than R500 000
EARNINGS PER SHARE
HEADLINE EARNINGS (cents) 4.8 41.8 46.6 48.1 112.3
- Diluted 4.8 41.8 46.6 - -
Basic earnings (cents) (16.8) 10.7 (6.1) 32.0 84.9
- Diluted (16.8) 10.7 (6.1) - -
Pro forma HEADLINE
EARNINGS (cents) 4.8 37.2 42.0 40.0 97.5
- Diluted 4.8 37.2 42.0 - -
ADDITIONAL INFORMATION
30 September 31 March
2001 2000 2001
Shares in issue
- Ordinary shares
of 1 cent each 486 493 650 486 493 650 486 493 650
- B shares of 10 cents each 35 506 352 35 506 352 35 506 352
Total 522 000 002 522 000 002 522 000 002
- In determining the headline earnings, basic earnings and pro forma
headline earnings per share the total number of shares in issue was used.
- In determining diluted headline earnings, basic earnings and pro forma
headline earnings per share the total number of shares in issue was adjusted
for the dilutive effect of the Company's long-term share incentive scheme.
Net asset value per share (Rand)
- At book value R15.32 R12.58 R13.47
- At market value and directors'
valuation* of investments R26.31 R27.17 R25.48
(* Refer to note under Annexure B)
R million R million R million
Listed investments
Associated
- Book value 81 15 13
- Market value 213 72 107
Other
- Book value 1 248 1 130 1 197
- Market value 1 776 2 171 1 808
Unlisted investments
Associated
- Book value 5 131 3 938 4 250
- Directors' valuation* 10 318 10 551 9 934
Other
- Book value 252 353 238
- Directors' valuation* 252 353 238
(* Refer to note under Annexure B)
Dividends received
- Dividends included in operating profit 2 1 17
- Dividends of associated companies
set off against investments 2 - 66
Impairment of goodwill and investments
Provision for impairment of goodwill and
investments is in respect of Camus, iTouch,
e-Company and Fundamo, which are still
in a start-up phase, has been made to
reflect the possible risk associated with
the investments.
Exceptional items
Exceptional items of subsidiary companies
consist of the following:
- Provision against loan provided (24) (42) (77)
- Cost of restructuring - (2) (3)
- Net capital surplus on the sale of
long-term investments - 16 16
(24) (28) (64)
Share of exceptional items of
associated companies after taxation 8 (41) (54)
- Profit/(loss) on realisation of
investments 5 (35) (38)
- Investments written off and provisions 1 (12) (29)
- Tax effect 2 1 5
- Other - 5 8
Total - attributable to own members (16) (69) (118)
Annexure a
Composition of revenue and headline earnings
Revenue
R million
Effective Reporting
% interest period 30 Sept 01 30 Sept 00
Intervid 17.49 30 Jun 01 45.6 39.7
SAIL 30.00 30 Jun 01 40.0 36.9
Tracker 32.14 30 Jun 01 71.2 46.5
e-tv 26.00 30 Sept 01 161.5 83.6
Other 126.3 106.1
Vodacom 13.50 30 Sept 01 7 536.0 5 832.1
R&V 33.33 30 Sept 01
Net interest 100.00 30 Sept 01
Management fees 100.00 30 Sept 01
Corporate 100.00 30 Sept 01
Pro forma
headline earnings
R million
Effective Reporting
% interest period 30 Sept 01 30 Sept 00
Intervid 17.49 30 Jun 01 16.8 7.0
SAIL 30.00 30 Jun 01 9.4 6.4
Tracker 32.14 30 Jun 01 15.1 (29.1)
e-tv 26.00 30 Sept 01 (91.6) (160.0)
Other (32.2) (9.2)
Vodacom 13.50 30 Sept 01 965.3 684.4
R&V 33.33 30 Sept 01
Net interest 100.00 30 Sept 01
Management fees 100.00 30 Sept 01
Corporate 100.00 30 Sept 01
VenFin's share
R million
Effective Reporting
% interest period 30 Sept 01 30 Sept 00
Intervid 17.49 30 Jun 01 2.8 0.4
SAIL 30.00 30 Jun 01 2.8 0.8
Tracker 32.14 30 Jun 01 3.8 (12.5)
e-tv 26.00 30 Sept 01 (23.8) (41.6)
Other (7.2) (0.1)
(21.6) (53.0)
Vodacom 13.50 30 Sept 01 130.3 92.4
R&V 33.33 30 Sept 01 87.0 148.0
195.7 187.4
Net interest 100.00 30 Sept 01 39.0 31.9
Management fees 100.00 30 Sept 01 (12.6) (12.6)
Corporate 100.00 30 Sept 01 (3.1) 2.3
219.0 209.0
Annexure b
Composition of net asset value per share (Rand)
30 September 2001 31 March 2001 30 September 2000
Book value Valuations Book value Valuations Book value Valuations
Listed 2.73 3.81 2.40 3.67 2.23 4.30
Unlisted 2.16 12.24 2.42 12.75 3.40 15.79
R&V 8.20 8.03 6.74 7.15 6.26 6.39
Cash 2.23 2.23 1.91 1.91 0.69 0.69
Total 15.32 26.31 13.47 25.48 12.58 27.17
Market price 17.30 17.05 25.25
Note:
As in previous years, the directors' valuations of investments were done on
a conservative basis and to comply with statutory requirements and will
therefore not correspond with valuations as at 1 October 2001 for the
purpose of capital gains tax. Valuations for the purpose of capital gains
tax will be done in due course.
Comments
Accounting policies
The interim report is prepared on the historical cost basis in accordance
with South African Statements of Generally Accepted Accounting Practice and
incorporates policies which have been consistently applied and correspond
with those of the previous financial report in all material respects.
Prior year adjustment
The basis on which the value of the loan to Midi TV (Proprietary) Limited (e-
tv) was estimated was changed in the second half of the previous financial
year. This was done to make a provision against the loan equal to VenFin's
attributable portion of e-tv's loss for the year to 31 March 2001 on the
same basis as if the loan had been converted into equity in Sabido
(Proprietary) Limited (Sabido), the holding company of e-tv. The comparative
figures for the six months ended 30 September 2000 have been restated to
account for this change in the basis of valuation.
Because the envisaged conversion of the loan to equity is subject to the
approval of the Independent Communication Authority of South Africa,
provision has been made for this write-off as an exceptional item against
the loan. This change in estimate has no effect on headline earnings.
Restatement of comparative figures R million Cents per share
Six months ended 30 September 2000
Exceptional items as previously reported (27) (5.17)
Valuation adjustment of loan to e-tv (42) (8.05)
Restated exceptional items (69) (13.22)
Six months ended 30 September 2001
Valuation adjustment of loan to e-tv (24) (4.60)
Pro forma headline earnings
Due to the material effect that the equity accounted results of e-tv will
have on the results of VenFin when the Independent Communication Authority
approves the conversion of the loan to equity, the pro forma headline
earnings are presented on the basis that the attributable portion of e-tv's
loss is accounted for as a loss in an associated company and not as an
exceptional item.
Financial review of investments
The headline earnings of the Group on a pro forma basis for the six months
increased by 5% from 40.0 cents to 42.0 cents per share.
The increase in earnings must be assessed taking the composition of the
Group's earnings into account. This is discussed more fully below.
Associated companies
The most important source of the Group's headline earnings for the past six
months consists of the Group's share of the net income of Vodacom Group
(Pty) Limited (Vodacom) (13.5% interest), interest received from R&V
Holdings Limited (R&V) (33.3% interest) and other cash resources.
R&V
The income of R&V consists mainly of interest earned on cash and on
the Alexander Forbes Limited bond.
The decrease in the earnings of R&V is mainly attributable to lower
interest due to lower interest rates, less cash and non-recurring income.
Vodacom
Vodacom again performed very well with a 41% increase in headline
earnings to R965.3 million and an EBITDA margin (earnings before interest,
tax, depreciation and amortisation) of 34%. The subscriber base on 30
September 2001 was as follows:
South Africa 5 657 155
Tanzania 133 635
Lesotho 30 437
5 821 227
Cash resources
The other main source of headline earnings consists of net interest received
on cash in South Africa and abroad and amounted to R39.0 million (2000:
R31.9 million) in the period under review, in spite of lower interest rates
in South Africa and the redeployment of cash into new investments.
Other investments
The other investments performed according to expectations in difficult
market conditions, with a headline loss of R21.6 million (2000: R53.0
million). The majority of these investments are still in a development phase
and will only contribute to the Group's earnings over the medium to long
term.
An analysis and detailed composition of the performance of the various
investments appears in Annexures A & B.
Exchange rate differences
Positive exchange rate differences arising on translation of offshore assets
to SA rand amounted to R1 075 million and was credited directly to reserves.
Investments
VenFin is party to shareholders' agreements in respect of almost all its
investments. These agreements regulate the important business aspects of the
investments.
VenFin is continually involved in evaluating potential investments and
acquisitions, both within South Africa and abroad. VenFin focuses on high
growth technology investments which possess proprietary intellectual
property with international potential.
A total of R548.8 million was invested during the six months, of which R53.8
million was invested in South Africa and R495.0 million abroad.
The most important changes in VenFin's investment portfolio for the period
under review were as follows:
Southern African Investments Limited (SAIL)
VenFin had an interest of 35.9% in Luna Corporation Limited (Luna) at 31
March 2001. Luna was the holding company of SAIL which is listed on the JSE
Securities Exchange South Africa. These shares were unbundled on 26
September and VenFin now holds a direct interest of 30% in SAIL.
e-tv
e-tv is the only independent free-to-air television broadcaster in South
Africa. During April 2000 VenFin granted an indirect loan of R281.8 million
to Sabido. An additional R38 million was advanced to Hosken Consolidated
Investments Limited for e-tv during the period under review. If these loans
had been converted into equity in Sabido, the holding company of e-tv,
VenFin's indirect interest in e-tv would have been 26% and would have been
accounted for as an investment in an associated company. As explained above,
the comparative figures are restated and pro forma headline earnings are
presented to account for the earnings after conversion to an associate.
Intervid Limited (Intervid RSA)
During June 2001 VenFin acquired a further 1 000 000 shares in Intervid RSA
at a cost of R6 million. At 30 September 2001, the interest was 17.49%.
FRS Financial Reporting Solutions (Proprietary) Limited (FRS)
An investment of R20 million was approved to acquire a 33.33% shareholding
in FRS. This amount becomes payable in tranches when certain milestones are
met. During July 2001 an investment of R6 million was made for an effective
18.4% interest.
FRS provides high quality financial reporting software solutions that are
compliant with International Accounting Standards and industry-specific
legislation governing financial reporting. FRS is actively involved in the
development of XBRLr (eXtensible Business Reporting Language) which is a
global initiative for the standardisation of electronic business reporting,
and is the appointed representative of the XBRLr organisation in Africa.
Certus International Societe Anonyme (Certus)
During the period under review a further loan of $2.2 million was granted to
Certus in addition to an original loan of $1.5 million. The total amount is
convertible into equity based on certain capitalisation events. An
additional 30% interest in Certus was also bought from a third party for
$1.5 million. At 30 September 2001, the equity interest was 30% and total
loans amounted to $3.7 million.
R&V
R&V made the following investment during the period under review:
Intervid International AG
RFS Holdings Limited Jersey, a wholly-owned subsidiary of R&V, funded
Intervid International during April 2001 in the sum of $50 million. The
funding was effected by way of a loan which is compulsorily convertible into
equity in Intervid International within four to six years from the date of
advance.
Subsequent to 30 September 2001
Fundamo (Proprietary) Limited (Fundamo)
Through a further investment of R2.5 million, VenFin increased its interest
in Fundamo to 34.33% after the period under review.
FRS
An additional R2 million was invested in FRS which brings VenFin's interest
to 21.3%.
Certus
Subsequent to the reporting period, Certus was acquired by GenuOne
Incorporated (GenuOne), a brand security solution provider based in Boston,
USA. VenFin's total loan of $3.7 million was converted into equity and an
additional $2.5 million has been invested in the newly merged entity. VenFin
also holds an option to invest a further $2.5 million in the merged entity,
exercisable over three years. VenFin's effective interest after the merger
in GenuOne is 21%.
Certus International is the industry standard for online intellectual
property authentication. Certus has a patent pending architecture that
authenticates Internet content and builds trust on-line for intellectual
property owners, their dealers and their consumers. Certus was developed as
a strategic tool to combat the common problems faced by brand and copyright
owners on the Internet.
GenuOne is an innovative provider of comprehensive brand security solutions
and offers a fully integrated approach to the protection of intellectual
property. Its technology and integration services maximise brand dominance
and minimise counterfeiting, product diversion, licensing/royalty fraud and
intellectual property theft in the physical world and on the Internet.
GenuOne's authentication, tracking and control technologies combined with
its integration services allow companies to monitor products throughout the
world.
Directorate
Messrs GT Ferreira and John Newbury were appointed as non-executive
directors on 28 November 2001.
Secretary
On 28 November 2001, Mrs M Lubbe was appointed as Company Secretary in place
of Mr JC Engelbrecht who has retired.
Strate
As fully explained in a circular to shareholders, dated 14 September 2001,
the listed ordinary shares of the Company were transferred to the STRATE
system on Monday, 12 November 2001.
Dividends
No dividend is proposed for the six months ended 30 September 2001.
Signed on behalf of the Board of Directors.
Johann Rupert Josua Malherbe
Chairman Chief Executive Officer/
Deputy Chairman
Stellenbosch
28 November 2001
Directors and administration
Directors
Johann Rupert* (Chairman), Josua Malherbe (Deputy Chairman/Chief Executive
Officer), Piet Beyers*, Jan Dreyer*, Jan Durand, GT Ferreira*, John Newbury*
(*Non-executive)
Secretary
Mariza Lubbe
Listing
JSE Securities Exchange South Africa Sector: Telecommunications
American depositary receipt (ADR) program
Cusip number 759905508 ADR to ordinary share 1:1
Depositary
The Bank of New York, 620 Avenue of the Americas, New York NY 10011
Business address and registered office
Quantum Street, Techno Park, Stellenbosch 7600
(PO Box 456, Stellenbosch 7599)
Transfer Secretaries
Computershare Services Limited, 41 Fox Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Rand Merchant Bank Corporate Finance
