| Tue 4 Dec 2001, 0:00 | | Amb Holdings Limited - Group Results Announcement |
|
AMB HOLDINGS LIMITED
(Registration number 1995/003054/06)
Share code: AMB ISIN: ZAE000029682
GROUP RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2001
10% ¬ HEADLINE EARNINGS PER SHARE (HEPS) OF 140,6 CENTS
13% ¬ NET ASSET VALUE (NAV) PER SHARE OF R10,72
22% ¬ DIVIDEND PER SHARE OF 30,0 CENTS
17% ¬ TOTAL REVENUE OF R291,2 MILLION
10% ¬ ATTRIBUTABLE EARNINGS OF R163,9 MILLION
* STRONG PERFORMANCES IN ADVISORY SERVICES AND TREASURY
* ENHANCED QUALITY OF NAV
ABRIDGED CONSOLIDATED INCOME STATEMENT
Audited Audited
Year ended Year ended
30 September 30 September
2001 2000 Change
R'000 R'000 %
Total revenue 291 157 273 008 7
General and specific provision for
bad/doubtful debts 3 146 (9 186)
Insurance premiums (125) (11 858)
Net operating revenue 294 178 251 964 17
Operating expenses (124 883) (112 885) 11
Operating expenses
- abnormal restraint write-offs - (10 217)
Pre-tax associate (loss)/income (4 759) 32 924
Income before taxation 164 536 161 786 2
Taxation (4 209) (17 646)
Net income 160 327 144 140 11
Outside shareholders' interest 3 611 4 782
Net income attributable to
ordinary shareholders 163 938 148 922 10
Reconciliation of headline earnings:
Attributable earnings 163 938 148 922
Goodwill amortised 1 170 1 133
Loss on disposal of fixed assets - 151
Headline earnings 165 108 150 206
Ratios
Attributable earnings growth (%) 10 33
Total operating expenses to
total revenue (%) 43 45
Recurring operating expenses to
total revenue (%) 43 41
Weighted average
number of shares ('000) 117 445 117 415
Earnings per share (EPS) (cents) 139,6 126,8 10
Headline EPS (cents) 140,6 127,9 10
Dividend per share (cents) 30,0 24,6 22
ABRIDGED CONSOLIDATED BALANCE SHEET
Audited Audited
As at As at
30 September 30 September
2001 2000
R'000 R'000
Assets
Cash and short-term advances 689 959 850 113
Trading assets 381 420 365 812
Structured finance term advances 501 873 825 807
Investment banking term advances 236 170 145 258
Investments 355 246 347 357
Fixed and intangible assets 13 729 19 464
Deferred tax 8 077 3 486
Accounts receivable and other advances 214 852 127 115
Total assets 2 401 326 2 684 412
Shareholders' funds
Share capital and premium 700 188 807 900
Retained income 468 457 323 033
Non-distributable reserves 2 113 15 564
Ordinary shareholders' interest 1 170 758 1 146 497
Outside shareholders' interest 2 190 5 800
Total shareholders' funds 1 172 948 1 152 297
Liabilities
Debentures 192 942 164 746
Deposits 948 870 1 286 621
Accounts payable 86 566 80 748
Total liabilities 1 228 378 1 532 115
Total liabilities and
shareholders' funds 2 401 326 2 684 412
Total number of shares in issue ('000) 109 188 121 013
NAV per share (cents) 1 072 947
Return on equity (ROE) (%) 15 15
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
Year ended Year ended
30 September 30 September
2001 2000
R'000 R'000
Cash flows from operating activities (134 161) (332 592)
Cash flows from investment activities 58 306 69 269
Cash flows from financing activities (107 712) (3 015)
Net decrease in cash and
short-term equivalents (183 567) (266 338)
Cash and short-term equivalents
at beginning of year 850 113 1 116 451
Effect of exchange rate changes
on cash and short-term equivalents 23 413 -
Cash and short-term equivalents at
end of year 689 959 850 113
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS' FUNDS
Audited Audited
Year ended Year ended
30 September 30 September
2001 2000
R'000 R'000
Ordinary shareholders' funds
At the beginning of the year 1 146 497 942 644
Net increase as a result of
shares issued 2 215 87 704
Net decrease as a result of
shares repurchased (109 927) (2 718)
Net exchange rate adjustments 791 (271)
Attributable earnings for the year 163 938 148 922
Dividend (32 756) (29 784)
At the end of the year 1 170 758 1 146 497
SEGMENTAL ANALYSIS
TOTAL REVENUE BY DIVISION
Year ended Year ended
30 September 30 September
2001 2000 Change
R'000 R'000 %
Commissions and fees 49 012 29 928 64
Trading income 48 738 35 987 35
Investment income 75 833 76 702 (1)
Margin income 117 574 130 391 (10)
291 157 273 008 7
GROUP PROFILE
AMB Holdings Limited (AMB or the group) was founded in 1995 as a specialist
investment banking house with the unique difference in the South African
economy of being focused on economic empowerment and having a strong
international association. A significant portion of AMB's issued share
capital is held by leading international investment bank, Credit Suisse
First Boston (CSFB), Pamodzi Investment Holdings Limited (Pamodzi), an
established empowerment group, and AMB employees. Pamodzi, CSFB and AMB
employees have a combined shareholding of approximately 44%.
The combination of a partnership with an international investment bank
and sound empowerment credentials sets AMB apart in a highly competitive
market. Today, the group provides its local and international clients with
corporate finance, public sector advisory, private equity, structured
finance, retirement fund administration, asset management and financial
markets trading and advisory services.
AMB has local operations domiciled in Johannesburg and Cape Town as well
as international operations domiciled in the Republic of Ireland and
Mauritius.
From a base of four people six years ago, the group now employs 144
people.
RESULTS COMMENTARY
Income statement
The year to 30 September 2001 was characterised by a global economic
downturn, slow growth in the local economy, a rapidly depreciating currency
and volatile capital markets. These macro-economic issues were exacerbated
by continued liquidity pressures on some A2-rated banks, resulting in a
heightened level of consolidation in the industry, further corporate
failures and a reduction in the number of competitors operating as regulated
institutions.
Against this background, AMB achieved commendable growth in attributable
earnings and HEPS for the year to 30 September 2001 of 10%. This is the
sixth consecutive year of earnings growth. Management is particularly
pleased with the performance of the advisory services and treasury trading
activities, which increased revenues by 64% and 35% respectively. The
performance of the private equity and investment banking activities was
consistent with the prior year, with growth being tempered by the lack of
contribution from AMB Private Equity Partners Limited (AMB Partners).
However, AMB Partners managed to preserve the NAV of the portfolio, which
was a satisfactory performance bearing in mind the portfolio's exposure to
technology-related investments. Operating expenses in the review period were
in line with the increase in the number of employees recruited to launch new
initiatives.
Balance sheet
AMB materially increased and improved the quality of its NAV as a result of
a focused strategy of reducing long-term structured finance assets and
implementing a share buy-back programme. This resulted in enhanced liquidity
in the latter half of the review period, positioning AMB to take advantage
of attractive investment opportunities. AMB also bought back a total of 12
967 286 AMB shares in the review period at an average price of R8,48.
Accordingly, at the end of the review period, AMB's NAV per share had risen
to R10,72.
Risk management resources and structures were again strengthened during
the year to counter volatile markets. The robust nature of our risk
management structures is reflected in the fact that there was no need to
raise specific or general provisions for doubtful debt in the review period.
ACHIEVEMENTS FOR 2001
Strategic
We have been advised by CSFB that negotiations regarding the disposal of its
equity in AMB to Pamodzi are nearing completion. This will lift Pamodzi's
shareholding in AMB to approximately 19%, which is significant progress
towards achieving Pamodzi's stated goal of acquiring a 25% shareholding in
AMB.
Advisory services
Revenues from this activity are classified as commissions and fees in AMB's
income statement.
The sustainability of AMB's advisory services model is reflected in the
increased contribution of commissions and fees to total revenues. The public
finance division recorded another successful year, securing high-profile
advisory and capital-raising mandates. The corporate finance division
performed well, given the relatively low levels of new equity issues, merger
and acquisition activity and investment activity.
AMB International (AMBI), the group's business focused on advisory
activities in sub-Saharan Africa, had a relatively successful first year.
AMBI secured key advisory mandates in the mining and telecommunications
sectors.
Private equity and investment banking
Revenues from these activities (revaluation profits and gains on
investment realisations) are classified as investment income in AMB's income
statement.
AMB's investment banking activities were boosted by the disposal of its
stake in AMB-DLJ Securities (Pty) Limited to CSFB in January 2001. In terms
of the disposal agreement, CSFB will continue to provide AMB with access to
local and international research, participation at industry conferences and
international training opportunities for AMB employees.
AMB Partners invested R145 million in four transactions during the year,
the most notable being the R120 million investment participation in the
financing consortium for Ucingo Investments (Pty) Limited, an empowerment
group which acquired a 3% stake in Telkom SA Limited. AMB Partners benefited
from a focus on the services sector, in particular security services, and
recorded a 237% annualised return on its investment in Sentry Group Limited,
which was acquired by a foreign security group. A combination of concluding
select investment opportunities and applying suitable hedging strategies
largely offset the negative impact of the downrating of technology stocks in
the portfolio. Management anticipate positive growth in the valuation of the
AMB Partners portfolio in the 2002 financial year.
Management are pleased that the discount to NAV at which the linked units
are trading on the JSE Securities Exchange South Africa has improved
dramatically. Management, however, are continuing to review options to fully
eradicate the discount to NAV. For more information on AMB Partners,
shareholders are referred to the results announcement published by AMB
Partners on 27 November 2001.
Treasury
Revenues from this activity are classified as trading income in AMB's income
statement.
The treasury operations had a very successful year and achieved an
increase in revenues of 35%, notwithstanding the maintainance of a
conservative risk profile. All desks contributed positively to results. The
money market desk increased its funding lines during the year by
approximately R400 million, representing approximately 30 new clients. AMB's
treasury agency activities focused on integrating their services with other
areas of the bank to exploit synergies in terms of debt origination, funding
structures and hedging activities. AMB's market neutral equity hedge fund
was successfully integrated into treasury and expanded its areas of activity
and continued to grow its profitability. A new business unit focusing on
structured products was formed in the past financial year and this is
expected to make a positive contribution to results for the 2002 financial
year.
Banking and structured finance
Revenues from these activities are classified as margin income in AMB's
income statement.
In response to tight liquidity constraints during the year and as a
result of focusing on improving its deployment of capital to improve ROE and
enhance NAV per share, AMB embarked on a programme to reduce its exposure to
long-term structured finance assets. During the period under review, AMB
successfully concentrated on syndicating long-term assets without recourse.
Accordingly, AMB has materially improved the liquidity position of the group
and enhanced the quality of its NAV per share.
AMB can significantly improve the performance of its banking activities
by focusing on improving the balance sheet gearing level. Accordingly, AMB
is concentrating on raising term funding to reduce the level of shareholder
capital invested in long-term structured finance assets.
Earnings benefitted from a release from general bad debt reserves, as a
result of the reduction in credit risk arising from the significant decline
in long-term structured finance assets.
International
AMB Capital (Ireland) Limited (AMB Ireland) engages in proprietary investing
and trading activities from its headquarters in Dublin.
During the year, AMB Ireland continued to focus on strengthening its
capital base by seeking low risk high-yield opportunities. In the new
financial year, AMB Ireland will continue to take advantage of select
opportunities, and to expand its resource base and its financing and trading
capabilities.
Retirement fund administration
During the review period, the business plan of the group's retirement
fund administration business, Ten50Six Holdings Limited (TFS), was rolled
out, thereby establishing its presence in this market. Results for the
review period are in line with budget and TFS is expected to break-even
towards the end of the 2002 financial year.
New initiatives
During the year, and in line with the group's objective of organic growth,
AMB established a structured products team, asset management operations and
a dedicated foreign exchange business.
The structured products team of seasoned professionals will extend the
range of treasury services with innovative and sophisticated products and
services.
The asset management business, a joint venture with leading asset
management company Foord Asset Management (Pty) Limited, will focus on
securing public and private sector mandates, capitalising on AMB's strong
empowerment credentials. An experienced team will be recruited over time and
it is expected that the successful launch of this business will enhance
AMB's service offering and deliver a meaningful annuity revenue base in
time.
The newly established foreign exchange unit focuses on addressing the
foreign exchange requirements of import and export-based companies looking
for more aggressive rates, innovative approaches to managing currency
volatility as well as an added value approach to service.
Empowerment
AMB aims to ultimately demonstrate its empowerment credentials through a
combination of factors, being its shareholder base, the composition of its
board, the composition of senior management and staff and its procurement
policies. From a shareholding perspective, an estimated 40% of AMB's equity
is now held by empowerment shareholders, including Pamodzi. In addition, AMB
can count in its shareholder base 25 000 previously disadvantaged
individuals. AMB's board of directors also has a representative racial mix,
as does its executive directorship base, comprising six individuals, 50% of
whom are black and 50% of whom are white - this is unique in the South
African merchant banking industry. AMB's professional staff is 37% black and
63% white, significantly above the average for the local merchant banking
industry. Furthermore, AMB has corporatised certain of its divisions to
ensure that black management and professionals in these divisions have a
direct equity stake in their operations. AMB is currently reviewing its
procurement policies to ensure that preference is given to contractors from
previously disadvantaged backgrounds.
Ratings
The group maintained its short-term A2 and long-term BBB+ ratings awarded by
the highly respected international rating agency, Fitch Southern Africa. AMB
is one of the few mid-sized banking groups in South Africa to have achieved
this long-term rating, reflecting the quality of its credit and risk
management policies and the financial soundness of its business model.
STRATE
AMB was transferred to the STRATE environment on 3 September 2001. Trading
for electronic settlement commenced on 25 September 2001, with electronic
settlement taking place on 2 October 2001. Existing share certificates
ceased to be good for delivery for transactions entered into on or after 25
September 2001.
DIVIDEND
An ordinary dividend of 30,0 cents per share has now been declared for the
year ended 30 September 2001. This dividend represents an increase of 22%
over the dividend paid out for the year ended 30 September 2000 and is
conservatively covered by earnings 4,7 times. The dividend will be paid on
21 January 2002 to all AMB shareholders recorded in the register of the
company as at the close of business on Friday, 18 January 2002. The last
date to trade cum dividend will be 11 January 2002 and trading will commence
ex-dividend from 14 January 2002. Share certificates may not be
dematerialised or rematerialised between Monday 7 January 2002 and Friday 18
January 2002, both days inclusive. Going forward, AMB intends to continue
with a policy of declaring an annual dividend.
THE YEAR AHEAD
In light of the current economic environment, AMB's focus in the near term
will be to improve the balance sheet gearing, use surplus liquidity to buy-
back its own shares and redeploy funds to private equity and other
investment banking activities. From a risk management perspective, AMB will
maintain its stringent approach to credit and liquidity risk.
In terms of AMB's shareholding, a key challenge in the year ahead will be
the conclusion of negotiations between CSFB and Pamodzi and the enhancement
of Pamodzi's stake in AMB.
Since inception, AMB has consistently grown its earnings, successfully
meeting the challenge of changing markets. However, the tough local and
global economic outlook for 2002 makes it impractical to reliably forecast
growth rates in our areas of activity and accordingly AMB could experience
volatile earnings if current market conditions persist. In the year ahead we
expect a slow market in advisory services which could possibly be offset by
good performances in areas such as investment banking and financial markets
trading.
AMB is committed to the future of South Africa and the greater African
continent and is proud to be at the forefront of key national imperatives
such as the transformation of the ownership of the South African economy.
The AMB hallmark symbolises quality service and integrity in dealing with
clients.
On behalf of the board
DAVE WINCKLER PETER VUNDLA ROB DOW
Chairman Executive Chief Executive
Deputy Chairman Officer
4 December 2001
Registered address
9th Floor, The Forum, 2 Maude Street, Sandton, South Africa
PO Box 786833, Sandton, 2146, South Africa
Tel: (+2711) 302-2000
Transfer secretaries
Mercantile Registrars Limited, 8th floor, 11 Diagonal Street,
Johannesburg, 2001, South Africa
PO Box 1053, Johannesburg, 2000, South Africa
EXECUTIVE DIRECTORS:
Rob Dow, Zenzo Lusengo, Owen Maubane, Andrew Sprague, Chris Vosloo, Peter
Vundla
NON-EXECUTIVE DIRECTORS:
Dr Danisa Baloyi, John Chalsty*, Dr Azar Jammine, Akhter Moosa, Jim
Myers*, Robin Rumboll*, Dave Winckler
*Non South African
COMPANY SECRETARY:
Liezl Byliefeldt
www.amb.co.za
--------------------------------------------------------------------------------
