| Tue 21 May 2002, 0:00 | | Wiphold - Audited Results For The Year Ended |
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WIPHOLD - AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2002
WIPHOLD
Women Investment Portfolio Holdings
(Incorporated in the Republic of South Africa)
(Registration number 1996/001291/06)
JSE Share code: WPH ISIN: ZAE000017752
("WIPHOLD" or "the group")
AUDITED RESULTS for the year ended 28 February 2002
GROUP INCOME STATEMENTS
2002 2001
R`000 R`000
Fee income 12 871 29 028
Net gains from disposal and revaluation of
investment securities 25 823 32 077
Write-up (down) in value of loans 1 375 (6 149)
Net income (loss) from bond broking
and trading activities 1 814 (785)
Income from operations 41 883 54 171
Net interest received 21 437 22 078
Dividends received 17 727 24 535
Other income (loss) (5) 120
Staff costs (29 219) (30 202)
Depreciation (1 781) (982)
Other operating expenses (19 292) (16 307)
Profit before amortisation and exceptional item 30 750 53 413
Amortisation of intangibles (21 660) (16 718)
Write-down in value of associate (3 840) (2 597)
Profit before taxation 5 250 34 098
Taxation (3) (2 308)
Profit after taxation 5 247 31 790
Net income (loss) from associates
and joint ventures 1 457 (966)
Minority shareholder`s share of losses 1 284 -
Net profit for the year 7 988 30 824
Earnings per share (cents):
Basic 6,4 24,3
Headline (18,9) 4,9
GROUP BALANCE SHEETS
2002 2001
R`000 R`000
ASSETS
Non-current assets
Intangible assets 55 910 52 857
Fixed assets 4 779 5 568
Deferred tax assets 3 533 3 873
Associate companies and joint ventures 39 118 18 113
Investment securities 197 262 645 108
Loans 22 740 20 879
323 342 746 398
Current assets
Trading securities 1 659 12 057
Trade and other receivables 20 252 37 501
Cash and cash equivalents 320 456 189 516
Taxation receivable 549 -
342 916 239 074
666 258 985 472
EQUITY AND LIABILITIES
Equity and reverves
Issued capital 557 119 557 119
Reserves 94 108 171 267
651 227 728 386
Minority interest 740 181 600
Non-current liabilities
Borrowings 8 527 1 774
Investment securities - 28 650
8 527 30 424
Current liabilities
Trading securities - 12 761
Trade and other payables 5 764 26 126
Taxation payable - 6 175
5 764 45 062
666 258 985 472
GROUP STATEMENTS OF CHANGES IN EQUITY
Share Share Revaluation Accumulated
capital premium reserve profit/(loss) Total
R`000 R`000 R`000 R`000 R`000
Balance at
29 Feb 2000 - 660 282 186 588 (736) 846 134
Net profit
for the year 30 824 30 824
Preference
dividend paid (1 916) (1 916)
WIPHOLD shares
acquired by
subsidiary
company (26 178) (26 178)
Issue of B
ordinary shares 6 208 6 208
Cash
distribution (83 193) (83 193)
Surplus on
revaluation
of investments 4 887 4 887
Transfer from
revaluation
reserve on
disposal of
investment (48 380) (48 380)
Balance at
28 Feb 2001 - 557 119 143 095 28 172 728 386
Net profit
for the year 7 988 7 988
Preference
dividend paid (3 629) (3 629)
Deficit on
revaluation of
investments (33 739) (33 739)
Transfer from
revaluation
reserve on
disposal of
investments (47 779) (47 779)
Balance at
28 Feb 2002 - 557 119 61 577 32 531 651 227
GROUP CASH FLOW STATEMENTS
2002 2001
R`000 R`000
Cash flow from operations (2 337) 4 415
Cash flow from investing activities 122 750 70 538
Cash flow from financing activities 10 527 (76 988)
Net increase (decrease) in cash 130 940 (2 035)
Cash at beginning of year 189 516 191 551
Cash at end of year 320 456 189 516
INTRODUCTION
Performance
While the results for the group in the second half of the financial year
have improved over those of the first six months, conditions have remained
challenging. The market for all financial advisory businesses remains
competitive - the low level of transaction activity has had a dramatic
negative impact on the sector as a whole. WIPHOLD has been affected more
acutely as currently it has no strategic shareholder or alliance to provide
a gateway to deals. Although Wipcapital managed to increase its fees earned
from R3 million in the first half of the year to R10 million in the second
half, the level of fees is not adequate.
Strategy
Management recognises that a significant improvement is required to
satisfy shareholders. Business development initiatives and efforts to
acquire or establish strategic alliances with organisations that will
provide a source of deal flow and/ or deliver annuity earnings, are taking
precedence. The group continues to dispose of its non-core assets.
To date, the group has focused primarily on its advisory business with the
intention of rapidly generating low risk earnings. The funds management
business has switched focus to seeking acquisitions that are cash generative
and will yield annuity income over the medium and long term. The group has
acquired a 40% stake in Futuregrowth Asset Management (Pty) Ltd
("Futuregrowth").
In July 2001 the group acquired a 25% share of Phaphama (Pty) Ltd
("Phaphama"). The investment in Phaphama is considered strategic to the
development of a possible alliance, between New Africa Capital Limited and
WIPHOLD.
In line with management`s previous commitment to return funds to
shareholders should no suitable acquisition have materialised by April 2002,
the board of WIPHOLD has proposed to distribute the proceeds received from
its holding in Alexander Forbes Limited ("Forbes") and to unbundle the
remaining Forbes shares.
COMPOSITION OF NET ASSETS
2002 2001
R`000 R`000
Listed investments 131 455 283 054
Unlisted investments 65 807 150 030
Loans 20 608 20 874
Cash and cash equivalents 320 456 189 516
Investments in joint ventures and
associate companies 39 118 18 113
Other net assets 73 783 66 794
Net assets 651 227 728 386
PORTFOLIO REVIEW
Following the authority given by shareholders on 17 July 2001, WIPHOLD has
disposed of 7 014 877 Forbes shares at an average price of R15,81 per share.
The remaining shares in Forbes are valued at the ruling market price of
R14,15 at 28 February 2002 (2001: R18,10).
No value was attributed to WIPHOLD on the maturity of the Induserv
leveraged investment structure that housed one of the group`s interests in
Bidvest. The Bidvest shares resulting from the Holdbid leveraged investment
structure were disposed of during the year and the group no longer retains
any investment in Bidvest. Investments in WIPAM and preference shares were
realised for their carrying values of R9,5 million and R100 million
respectively. The short positions, taken to hedge the WIPHOLD shares
repurchased by the group, were closed out as the Forbes investment was wound-
down and the group disposed of its Bidvest stake.
The group made a cash investment of R35 million to acquire a 25% stake in
Phaphama. In terms of pre-existing commitments WIPHOLD made additional
investments in the Brait Technology and Innovation Fund I and in Afrisun
Leisure Investments. During the year the Wipprivate Equity fund ("WPE") made
three investments.
The group`s unlisted investments in Infrastructure Finance Corporation and
Ericsson were re-valued above their original costs to R28,4 million and
R19,3 million respectively.
Three unlisted investments were written-down to their fair values.
Following unsuccessful efforts to dispose of its investment in Rubico
Holdings, the group has decided to carry the investment at R nil. WIPHOLD`s
investment in Braitec has been written down to mirror the group`s valuation
of the Braitec Fund`s own holding in Rubico Holdings. A recent valuation of
Afrisun Leisure reflected the slower than expected progress in the gaming
industry and resulted in a slight write down in its carrying value.
INVESTMENT RETURNS
2002 2001 Percentage
cps cps change
WIPHOLD net asset value ("NAV") 520 582 (10,7)
WIPHOLD share price 300 355 (15,5)
JSE Financial Index (18,3)
The major cause of the decline in NAV was the net decrease in the value of
the listed and unlisted investments.
FINANCIAL REVIEW
The group`s net profit for the year fell to R8,0 million from R30,8
million for the previous year. The fall can be attributed to significantly
lower fees, the write-down in the value of certain unlisted investments,
lower investment income and an increased expense relating to the
amortisation of intangibles. Costs have remained steady in comparison with
last year and staff related costs are marginally lower.
A gain of R50,0 million (of which R47,8 million was released from the
revaluation reserve) was recognised in income following the disposal of the
Forbes and Bidvest stakes. This gain was offset by the R24,2 million write-
down in value of the group`s investments in Rubico Holdings, Braitec and
Afrisun Leisure.
Dividend income fell following the disposal of the preference shares in
October 2001. Although the year-end cash balance is substantially higher
than that at the end of the previous year, much of the cash was received
close to the end of the year. Lower yields on cash balances in the current
year and the utilisation of cash to fund the Phaphama acquisition, for
investments by the private equity fund, to close out the short positions
hedging the WIPHOLD share buy back and to fund the operations have combined
to leave interest income in line with that of the previous year.
The increase in the cost of amortisation of intangible assets is caused
principally by the goodwill arising on the acquisition of Phaphama. The
value of Phaphama (accounted for as an associate) was written-down to
reflect the decline in value of Phaphama`s underlying listed investments
since WIPHOLD`s acquisition.
Operating costs include a provision of R1,5 million against a deposit
with Regal Bank which went into curatorship in June 2001.
OPERATIONAL REVIEW
Specialised Funds Management
In current markets and without a track record in fund management it is
preferable for Wipcapital to acquire profitable fund management businesses
rather than create them.
A highlight is Wipcapital`s acquisition of 40% of Futuregrowth for R20
million. Terms of the deal give Wipcapital the option to take control after
the second anniversary of the deal. Futuregrowth is the largest empowerment
profiled specialist asset manager with assets in excess of R27 billion under
management. The focus will be on developing the Futuregrowth business and
attaining synergies with Wipcapital`s advisory business. It is expected that
the company`s investment in Futuregrowth will provide annuity earnings for
the group.
WPE has invested in three companies this year and all are performing in
line with forecasts. The deal pipeline remains healthy.
Advisory
Fees from the advisory business have been disappointing. Continued low
levels of activity in the various markets in which Wipcapital operates,
changes to the regulatory environment and not having ready access to a
balance sheet or strategic shareholder/ alliance are factors that have
contributed to a performance which, although significantly better in the
second six months, is still not adequate.
A Structured Products division was established earlier in the year to
complement the advisory services offered by Corporate Finance, Debt Products
and Structured Markets. The focus of the new division is to service and
provide product to the entire retirement fund industry.
Niche services
Legae Securities (Pty) Ltd`s ("Legae") efficient deal execution
capability, wider research offering and willingness to train young black
stock brokers has led to the addition of several new institutional clients
this year. Legae has also benefited from a growing recognition in the market
for a need to support empowerment initiatives in the brokerage sector. Legae
has contributed positively to revenues this year.
Wip Treasury Solutions ("WIPTS") offers the full spectrum of treasury
risk management services. WIPTS draws its client base from top corporates,
parastatals and multi-nationals.
MANAGEMENT
Gloria Tomatoe Serobe and Andile Nyhonyha have been appointed as Chief
Executive Officer and head of Corporate Finance respectively. These are
strong additions to the group`s skills base and black individuals now head
up the majority of departments in the Wipcapital group.
Kobus Viljoen heads up special projects within Wipcapital and Graeme
Stephens is responsible for the group`s strategic development.
Nomhle Canca, one of the founders of WIPHOLD and the head of Wipprivate
Equity, was dismissed by Wipcapital on 18 February 2002 for breaching her
obligations to her employer and fiduciary duties as a director. An
independent senior counsel dismissed an appeal by Ms Canca. Following her
dismissal from Wipcapital, Ms Canca resigned as a director of WIPHOLD and
from the boards of all its related companies. In view of the pivotal role
that Ms Canca played in the conception and realisation of WIPHOLD,
Wipcapital and the empowerment of women, this unhappy chapter is highly
regrettable. The respective boards of directors of WIPHOLD and Wipcapital
were determined to and did uphold the highest standards of corporate
governance and principled action.
EMPOWERMENT AND SOCIAL RESPONSIBILITY
WIPHOLD continues to provide empowerment at a shareholder level, at an
employee level and at a procurement level. At a shareholder level, the
WIPHOLD Investment Trust ("the Trust"), whose beneficiaries are all women,
has voting control over WIPHOLD. At an employee level, the WIPHOLD group`s
professional staff composition is 51% black and 36% female. Finally, the
WIPHOLD group has an aggressive procurement policy whereby it actively seeks
out empowerment suppliers.
This year the WIPHOLD Investment Trust has made significant financial
contributions to assist women and children in the areas of HIV/ Aids, women
abuse and education.
ACCOUNTING POLICIES
The group financial statements are prepared on the historical cost basis
in accordance with South African Statements of Generally Accepted Accounting
Practice ("GAAP"). The bases of preparation of the financial statements are
consistent with those applied in the group`s audited financial statements
for the year ended 28 February 2001.
WPE has made investments in which the fund has either significant influence
or, in one instance, joint control. The group in turn has joint control of
the WPE fund. In accordance with GAAP the investments over which the group
has significant influence and/or joint control are accounted for using the
equity method.
SHARE CAPITAL
The share capital of WIPHOLD is structured to comprise A and B ordinary
and C deferred shares to ensure that the voting control of WIPHOLD vests
with the Trust. Should a beneficiary of the Trust die, "B" shares,
equivalent to the deceased`s effective interest in the "A" shares held by
the Trust, are issued to her estate. Those "A" shares are simultaneously
cancelled and 99 "C" shares are issued for each cancelled "A" share. All
issued "A" and "C" shares are held by the Trust. During the year 31 025 "A"
shares were cancelled, and 31 025 "B" and 3 071 475 "C" shares were issued.
No further "B" ordinary shares were repurchased by the group during the
year. The group holds a total of 9 739 144 "B" shares. This represents 7,8%
of the total "B" ordinary shares in issue. In the group financial statements
the repurchased WIPHOLD shares are treated as treasury shares and are set-
off against share premium as required by GAAP.
COMMITMENTS AND CONTINGENT LIABILITIES
In terms of an agreement between Wipcapital and The Standard Bank of South
Africa Ltd ("SBSA"), Wipcapital has guaranteed cheque marking and overdraft
facilities for Legae with SBSA to the amount of R23 000 000.
The group has the following investment commitments which will be funded from
the group`s existing cash resources and may become due within one year:
2002 2001
R`000 R`000
Brait Technology and Innovation Fund I 674 2 422
Afrisun Leisure Investments (Pty) Ltd 3 780 6 467
Futuregrowth Asset Management (Pty) Ltd 20 000 -
The group has entered into property rental agreements which commit it to the
following rentals:
Within one year 3 159 2 846
Thereafter 14 806 18 981
Based on the performance of Wipcapital since its inception, the minimum
return which was anticipated when Wipcapital was set up, will not eventuate
by 1 September 2002. As a result it has been agreed that WIPHOLD will
acquire the outside shareholder`s interest in Wipcapital from Thembekile for
R20 000 (being the par value of the shares concerned) and Wipcapital will
become a wholly-owned subsidiary of WIPHOLD. WIPHOLD and Wipcapital are
currently exploring alternative mechanisms to incentivise Wipcapital staff
and align the interests of staff with the objectives of the group.
EARNINGS PER SHARE AND DIVIDENDS
Earnings per share of 6,4 cents (2001: 24,3 cents) and the headline loss
per share of 18,9 cents (2001: earnings of 4,9 cents) are calculated on a
weighted average number of shares in issue for the year of 125 193 000
shares (2001: 126 793 000 shares).
No dividends have been declared.
SEGMENT INFORMATION
Investments Advisory Funds Other Consolidated
2002
Net profit (loss) 37 897 (10 570) (4 064) (15 275) 7 988
2001
Net profit (loss) 26 005 7 343 - (2 524) 30 824
THE WAY FORWARD
The financial services market remains challenging and WIPHOLD is seeking
to develop partnerships and alliances that will contribute towards the
creation of a critical mass that will ensure that its founding objectives
can be achieved, while rewarding investors appropriately.
The directors are committed to reversing the discount in the share price
and the proposed cash distribution and unbundling are evidence of this
commitment. The group will use its remaining cash to pursue opportunities
that provide deal flow for its advisory divisions and annuity income for the
group. In the interim the group remains well placed to maximise current
opportunities and exploit any upturn in its markets.
WIPHOLD will consider attractive prospects outside of the financial
services arena if appropriate funding structures can be put in place and
WIPHOLD can have operational involvement.
For and on behalf of the Board
Dolly Mokgatle (Chairman)
Louisa Mojela (Chief Executive Officer)
Johannesburg
21 May 2001
BOARD OF DIRECTORS
Executive : Louisa Mojela (Chief Executive Officer)
Non-executive: Dolly Mokgatle (Chairman), Charmaine Mabuza,
Nomsa Mazwai, Fazila Montsi, Gloria Tomatoe Serobe,
Sindi Zilwa
AUDITORS
Deloitte & Touche
COMPANY SECRETARY
Nexia Levitt Kirson
REGISTERED ADDRESS: 61 Central Street, Houghton, 2198
Postnet Suite 169, Private Bag X2600, Houghton 2041
Telephone: (011) 715 3600 Fax: (011) 715 3612
www.wiphold.com
