| Wed 10 Apr 2002, 0:00 | | Corpcapital Limited - Unaudited Interim Results |
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CORPCAPITAL LIMITED
(Registration number 1983/011384/06)
(JSE Share code: CPA ISIN: ZAE 000033965)
Unaudited interim results
for the six months ended 28 February 2002
* STRONG OPERATIONAL CASH FLOW OF R108m
* HEADLINE EARNINGS PER SHARE UP 27%
* TOTAL income UP 14%
Commentary
The Group has maintained its momentum as a result of its well balanced
income streams, strong cash flows, well-managed cost base and sound balance
sheet.
In particular, the Group's banking operations faced extremely challenging
conditions in the second tier banking sector. Its conservative liquidity
policies ensured that it was able to meet all deposit obligations in every
instance. These policies supported by strong customer relationships ensured
a stable deposit base despite the uncertainties within the banking industry.
Accounting Policies
The accounting policies used in the preparation of financial statements
for the 6 months ended 28 February 2002 comply with Statements of Generally
Accepted Accounting Practice and are consistent with those applied in the
previous year. Pro Forma comparatives illustrate the effect of change in
classification of certain investments.
Accounting Treatment of Investments
These results reflect the first reported trading period of the Group
following the merger of Corpgro, Corpcapital and Corpcapital Bank, approved
by shareholders on 1 October 2001. Prior to the merger Corpgro consolidated
or equity accounted its investments whilst Corpcapital and Corpcapital Bank
accounted for their investments at fair value. The Group has adopted
consistent principles for the classification and accounting treatment of
investments, recognising the differing characteristics of each investment.
This removes as much subjectivity as possible in the recognition of income.
Investments in subsidiaries, associates or joint ventures where the Group
has control or exercises significant influence and its investment is not
intended to be temporary, are consolidated or equity accounted in terms of
AC132 or AC110. All other investments are accounted for at fair value.
As a result the valuation of investments is more conservative, the quality
of earnings is improved and reporting is more transparent.
The Group's audit committee has approved the adoption of this treatment. For
ease of comparison it has been adopted from 1 September 2001 and pro forma
comparatives have been shown.
The effect of consistent classification and accounting treatment of
investments is that certain investments which were previously accounted for
at fair value are now equity accounted. As a result the Group's attributable
share of the income of those investments, realised profit on the sale of
investments and any unrealised impairments in the value of the investments
are reflected in the income statement.
The balance sheet reflects, as appropriate, the consolidated net asset
value (for consolidated investments) or the opening carrying value plus
retained earnings less goodwill written off (for associates) or the fair
value of the investment (for short term investments). Any translation gain
or loss arising in respect of the net asset value of a foreign investment is
taken directly to reserves and shown in the statement of changes in equity.
Share Trust
Following the merger the share trusts are now effectively controlled by
the Group. Accordingly the trusts have been consolidated with effect from 1
September 2001. At 28 February 2002 the trust held 52 million shares (11.8%)
in Corpcapital Ltd which is treated as treasury stock.
Results
Headline earnings per share grew by 27.4% on a pro forma basis. Total
income grew by 13.9%. Overheads relating to our core activities were well
controlled, growing by 6%. The remaining increase in overheads arises from M
Factors and Infinex which were not consolidated in the comparative period.
The Group's cost to income ratio now stands at 35%.
Exceptional items comprise negative goodwill adjustments arising on the
merger and the Group's share of associates' exceptional items.
Annuity and fee income comprised 77% of total income for the period as
against 51% shown in the previous comparative reporting period. Realised
income comprises 91% of total income for the period as against 65% for the
previous comparable reporting period.
The balance sheet reflects ordinary shareholders funds of R1.3 billion
which equates to a net asset value of 299 cents per share. The annualised
return on equity is 20%. The balance sheet remains significantly
undergeared.
Cash flows were strong, with the Group generating R108 million from
operations.
Divisional Performance
Investment Banking remains a major contributor to Group results.
Corpbuild has continued its excellent performance and strong cash flow
generation. The food equipment interests grew strongly on the back of
significant exports. The Group's investment in Clear Channel Independent
(formerly Corpcom) performed well. The balance of the investments produced
mixed results with some excellent results offset by strategic initiatives in
certain of the investments which adversely affected their short term
earnings with a view to enhancing long-term sustainable performance.
The portfolio has a carrying value of R814 million and a fair value of R871
million (note 3).
Corporate Finance continued to expand its client base, winning significant
mandates. Although its earnings for the period showed good growth, a better
second half performance is expected.
Property Asset Management and Finance activities performed well, with strong
annuity and fee earnings contributing to a good result in an increasingly
difficult market.
Specialised Finance performed well, particularly M Factors and the bank's
Specialised Finance division. Comparative figures do not include the
consolidation of Infinex and M Factors.
The Group holds provisions of R66 million against total advances of R529
million.
Trading and Arbitrage activities had a difficult six months. As announced
on 23 October 2001, the poor performance for the year ended 31 August
continued into September and October. With the introduction of a new
strategy this position was reversed in November 2001 and the activities
contributed positively for the remainder of the period. Nevertheless the
division incurred losses for the period. Equity arbitrage activities
performed satisfactorily.
Financial Products comprise Structured Products and Structured Finance.
Structured Products were affected by weakness in the retail investment
market during the period, but still achieved 14% growth in profit before
tax. An improved second half performance is expected.
Prospects
It is anticipated that tough trading conditions will continue. The Group
will concentrate its resources on areas of core competence with the aim of
delivering growth in earnings and net asset value and continuing the
improvement in the quality of earnings.
Continued focus on activities in the equity, property and debt markets
will achieve the objective of delivering acceptable real returns to all
stakeholders. The Group is well positioned to take advantage of
opportunities in the current environment.
Dividends
It is Corpcapital's policy to declare a dividend only when the financial
results for the year are released.
Directors
During the period under review we welcomed Tom Wixley as a non-executive
director and as chairman of the Group audit committee.
By order of the board.
Eric Ellerine Jeff Liebesman
Chairman CEO
Wednesday 10 April 2002
Consolidated income statement
R'000s Pro Forma
6 months 6 months 6 months Year
28 Feb 28 Feb % 28 Feb 31 Aug
2002 2001 Change 2001 2001
Interest received 91 977 48 392 86,2 48 392 149 200
Interest paid 48 904 46 082 5,8 46 082 65 359
Net interest income 43 073 2 310 2 310 83 841
Investing, trading and
fee income 145 988 125 027 16,8 222 561 461 655
Contribution from
proprietary consolidated
investments (note) 34 893 48 901 (28,7) 48 901 71 337
Equity accounted income 29 534 38 619 (23,5) 14 303 25 710
Non-interest income 210 415 212 547 (1,0) 285 765 558 702
Specific and general
provisions 7 860 2 050 283,4 2 050 12 733
Convertible loan interest 52 947 43 599 21,4 43 599 92 505
Total income 192 681 169 208 13,9 242 426 537 305
Operating expenses 70 136 50 915 37,8 50 915 149 582
Profit before taxation
and exceptional item 122 545 118 293 3,7 191 511 387 723
Goodwill (64 056) (30 958) (538) (74 948)
Exceptional items (34 947) (11 735) (10 000) 244 725
Profit after
exceptional item 23 542 75 600 (68,6) 180 973 557 500
Taxation 16 035 14 535 10,3 36 692 74 405
Ordinary operations 18 170 17 535 39 692 77 405
Exceptional items (2 135) (3 000) (3 000) (3 000)
Profit after taxation 7 507 61 065 (87,4) 144 281 483 095
Attributable to minority
shareholders 4 860 32 433 66 673 108 420
Attributable profit 2 647 28 632 (90,2) 77 608 374 675
Headline earnings
adjustment 96 868 22 056 2 422 (183 576)
Headline earnings 99 515 50 688 96,7 80 030 191 099
Headline earnings
per share (cents) 25,6 20,1 27,4 31,8 71,5
Earnings per share 0,7 11,4 (93,6) 30,8 140,2
Weighted average shares
in issue and to be issued 388 365 251 588 251 588 267 311
Note
Income from Clear Channel Independent (formerly Corpcom) in 2002 is not
disclosed under contribution from proprietary consolidated investments but
is included with investing income as the group no longer has a controlling
interest.
Headline earnings adjustments
R'000s Pro Forma
6 months 6 months 6 months Year
28 Feb 28 Feb 28 Feb 31 Aug
2002 2001 2001 2001
Goodwill 64 056 30 958 538 74 948
Goodwill amortised 31 652 30 958 538 74 948
Impairment 32 404 - - -
Exceptional items 34 947 11 735 10 000 (244 725)
Regulatory increase in
provisions after tax - 10 000 10 000 10 000
Recoupment of goodwill
on disposal - - - (41 909)
Share of associates
exceptional items 8 978 1 735
Negative goodwill 25 969 - - (212 816)
Taxation (2 135) (3 000) (3 000) (3 000)
Outside shareholders share
of exceptional items - (17 637) (5 116) (10 798)
Total 96 868 22 056 2 422 (183 576)
Segmental analysis
R'000s Total Operating Profit
2002 Income expenses before tax
Investment banking 83 943 7 971 75 972
Corporate finance 14 618 9 947 4 671
Property asset management & finance 24 286 6 898 17 388
Treasury & trading (1 029) 9 560 (10 589)
Financial products 11 519 5 993 5 526
Specialised finance 52 784 19 208 33 576
Capital & support services 6 560 10 559 (3 999)
Total group 192 681 70 136 122 545
R'000s Total Operating Profit
Pro Forma 2001 Income expenses before tax
Investment banking 78 053 7 890 70 163
Corporate finance 11 529 8 602 2 927
Property asset management & finance 20 832 5 609 15 223
Treasury & trading 25 879 7 139 18 740
Financial products 10 834 6 000 4 834
Specialised finance 8 722 2 621 6 101
Capital & support services 13 359 13 054 305
Total group 169 208 50 915 118 293
Realised & unrealised income
R'000s Pro Forma
6 months 6 months 6 months Year
28 Feb 28 Feb 28 Feb 31 Aug
2002 2001 2001 2001
Realised income 182 072 183 018 159 300 376 605
Unrealised investing income 18 469 (11 760) 85 176 173 433
Total income before provisions 200 541 171 258 244 476 550 038
Consolidated balance sheet & notes
R'000s 6 months 6 months Year
28 Feb 28 Feb 31 Aug
2002 2001 2001
Assets
Cash and short-term funds 411 322 273 124 435 911
Liquid & trading assets 1 495 450 2 024 129 1 863 854
Assets of proprietary consolidated
investments 421 602 654 612 422 781
Investments (note 1) 380 944 629 372 817 464
Preference shares 567 144 481 098 522 729
Advances 461 929 268 171 526 911
Debtors & other accounts 74 783 74 221 228 890
Investment in associated companies
(note 2) 491 444 243 775 128 694
Intangible assets 23 654 1 687 6 809
Property & equipment 43 599 42 683 44 398
4 371 872 4 692 872 4 998 440
Equity
Share capital & premium 598 341 164 385 598 341
Retained earnings & reserves 716 885 466 408 759 538
Ordinary shareholders' equity 1 315 226 630 793 1 357 879
Less treasury shares held
in share trust (169 476)
Minority shareholders' interest 11 631 686 671 6 861
Total shareholders' equity 1 157 381 1 317 464 1 364 740
Policyholder's interests in
Corpcapital Life
Investments, interest bearing
securities & term deposits 1 752 844 - 1 654 958
Life fund 1 752 844 - 1 654 958
Liabilities
Compulsory convertible loan 304 114 304 114 304 114
Long-term interest bearing debt 69 771 117 952 77 008
Deferred taxation 113 688 87 437 109 014
Convertible loan interest 272 792 170 939 219 845
Deposits & other interest bearing
accounts (note 4) 1 035 383 826 728 1 100 175
Repurchase agreements & short positions 1 089 443 1 450 047 1 445 051
Liabilities of proprietary consolidated
investments 195 909 388 583 202 826
Creditors, taxation & provisions 133 391 29 608 175 666
4 371 872 4 692 872 4 998 440
Notes
1. Investments 380 944 629 372 817 464
Proprietary investments (including
Clear Channel Independent -
formerly Corpcom) 219 626 629 372 656 146
Other investments 161 318 - 161 318
2. Investment in associated companies 491 444 243 775 128 694
Redefine Income Fund 122 807 243 775 128 694
Proprietary investments 368 637 - -
3. Proprietary investments 813 956 895 401 876 101
Investments 219 626 629 372 656 146
Investment in associated companies 368 637 - -
Proprietary consolidated investments
Assets 421 602 654 612 422 781
Liabilities (195 909) (388 583) (202 826)
Portfolio at fair value 870 906 895 401 876 101
4. Deposits and other interest
bearing accounts 1 035 383 826 728 1 100 175
Fixed and notice deposits 536 667 357 015 390 895
Demand deposits 470 612 469 713 684 076
Other liabilities 28 104 - 25 204
5. Contingent Liabilities 80 947 158 234 193 393
6. Net asset value per share (cents) 299 250 308
7. Total shares in issue
including treasury stock 440 265 251 588 440 265
Sources of income
R'000s Pro Forma
6 months 6 months 6 months Year
28 Feb 28 Feb 28 Feb 31 Aug
2002 2001 2001 2001
Annuity and fee income 155 364 148 975 125 257 294 278
Investing and trading income 45 177 22 283 119 219 255 760
Total income before provisions 200 541 171 258 244 476 550 038
Consolidated statement of changes in equity
R'000s 6 months 6 months Year
28 Feb 28 Feb 31 Aug
2002 2001 2001
Ordinary shareholder's equity
at beginning of period 1 357 879 578 245 578 245
Attributable profit 2 647 77 608 374 675
Dividend (52 832) (26 417) (26 417)
Share issues - - 433 956
Changes in holding in subsidiaries - 1 357 (3 428)
Translation gains / (losses)
and other changes 7 532 - 848
1 315 226 630 793 1 357 879
Consolidated cash flow statement
R'000s 6 months 6 months Year
28 Feb 28 Feb 31 Aug
2002 2001 2001
Cash generated from operations 108 281 39 320 205 890
Taxation and dividends paid (65 120) (60 393) (83 943)
Financial services activities (83 899) (104 647) (159 054)
Investing activities 32 423 (62 925) (61 058)
Movement in proprietary
consolidated investments (16 274) 1 221 73 528
Net movement in cash & short-term funds (24 589) (187 424) (24 637)
Opening cash & short-term funds 435 911 460 548 460 548
Closing cash & short-term funds 411 322 273 124 435 911
CORPCAPITAL LIMITED (1983/011384/06)
2 ARNOLD ROAD ROSEBANK JOHANNESBURG 2196
PO BOX 471917 PARKLANDS 2121
SOUTH AFRICA
TELEPHONE +27 11 283 0000
TELEFAX +27 11 283 0088
EMAIL info@corpcapital.com
INTERNET ADDRESS www.corpcapital.com
DIRECTORS
E ELLERINE* (CHAIRMAN) J M LIEBESMAN (CEO) M H SACKS (MD)
N J FRANGOS* E GROLMAN B KALKHOVEN G B LIEBMANN N N LAZARUS
W H TRENGOVE* T A WIXLEY* (* NON-EXECUTIVE)
