| Mon 3 Jun 2002, 0:00 | | Amb Private Equity Partners Limited - Interim |
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AMB PRIVATE EQUITY PARTNERS LIMITED - Interim Results Announcement
Incorporated in the Republic of South Africa
(Registration number 1998/015329/06)
("AMB Partners" or "the company")
* RESULTS ANNOUNCEMENT for the six months ended 31 March 2002
HIGHLIGHTS
* Realised internAl rate of return of 33% on investment in Federal
Protection Services (Pty) Limited ("Federal")
* TURNAROUND OF under-performing investments
* Benefits from focus on services and telecommunications sectors
* Marginal increase in net asset value ("NAV") to R16,17 per linked
unit
* Empowerment investments comprise 60% of portfolio
INCOME STATEMENT
for the six months ended 31 March 2002
Restated
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 Sept
2002 2001 2001
(R`000) (R`000) (R`000)
Investment income 54 559 18 238 56 451
Income from associates 21 641 4 404 6 027
Operating expenses (5 898) (3 360) (10 059)
Net income from ordinary activities 70 302 19 282 52 419
Revaluation adjustment (44 478) (3 388) (27 361)
Unrealised (loss)/gain on hedging (1 036) - 4 049
Realised gain on hedging 3 451 4 304 9 557
Unrealised loss on investment
revaluation (46 893) (7 692) (40 967)
Provision against loans to associates (1 585) (5 098) (4 702)
Amortisation of goodwill in associates (1 882) (1 276) (2 553)
Distribution to Fund Manager (6 415) - -
Net income before taxation 15 942 9 520 17 803
Taxation (1 976) (1 640) (7 658)
Net income after taxation 13 966 7 880 10 145
Preference dividend - - (2 284)
Debenture interest paid (7 141) (20 350) (31 812)
Net income/(loss) attributable to
ordinary shareholders 6 825 (12 470) (23 951)
Transfer from non-distributable
reserves 34 368 7 633 40 907
Retained income/(deficit) for
period 41 193 (4 837) 16 956
Retained income/(deficit)
brought forward 7 963 (8 993) (8 993)
Retained income/(accumulated deficit)
- end of period 49 156 (13 830) 7 963
Headline earnings/(loss)
per share (cents) 16,8 21,5 (41,1)
Earnings/(loss) per share (cents) 13,1 23,9 (46,0)
Debenture interest per
linked unit (cents) 13,7 39,1 61,2
Number of linked units in issue
at end of period 51 912 856 52 075 256 51 912 856
Weighted average number of linked
units in issue during period 51 912 856 52 133 117 52 079 268
Reconciliation of headline earnings
Earnings/(deficit) attributable
to ordinary shareholders 6 825 (12 470) (23 951)
Add: amortisation of goodwill 1 882 1 276 2 553
Headline earnings/(loss) 8 707 (11 194) (21 398)
BALANCE SHEET
at 31 March 2002
Restated
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 2001
(R`000) (R`000) (R`000)
Assets
Investments 552 658 641 736 586 602
Current assets 335 257 226 717 297 316
Short-term loans 9 549 12 031 5 255
Accounts receivable 4 541 18 367 15 666
Deferred tax 1 120 - -
Cash 320 047 196 319 276 395
Total assets 887 915 868 453 883 918
Liabilities
Loan payable 27 235 - 25 662
Current liabilities 21 507 22 546 25 908
Debenture interest payable 7 198 20 384 11 527
Preference dividend payable 685 - 685
Taxation payable 4 340 1 640 5 622
Deferred tax - - 1 215
Other accounts payable 9 284 522 6 859
Total liabilities 48 742 22 546 51 570
Shareholders` funds
Ordinary share capital 5 5 5
Ordinary share premium 271 624 271 624 271 624
Non-distributable reserve 628 68 724 34 996
Convertible debentures 517 759 519 383 517 759
Retained income/(accumulated deficit) 49 156 (13 830) 7 963
Shareholders` funds 839 172 845 906 832 347
Preference share capital 1 1 1
Total shareholders` funds 839 173 845 907 832 348
Total liabilities and
shareholders` funds 887 915 868 453 883 918
Net asset value per linked unit -
including debenture interest (rands) 16,30 16,64 16,26
Net asset value per linked unit -
excluding debenture interest (rands) 16,17 16,24 16,03
CASH FLOW STATEMENT
for the six months ended 31 March 2002
Restated
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 Sept
2002 2001 2001
(R`000) (R`000) (R`000)
Cash effects of operating activities (2 207) (18 317) (7 518)
Cash effects of investing activities 45 859 (89 369) (43 016)
Cash effects of financing activities - (707) 22 217
Increase/(decrease) in cash and
cash equivalents 43 652 (108 393) (28 317)
Cash and cash equivalents
at beginning of period 276 395 304 712 304 712
Cash and cash equivalents
at end of period 320 047 196 319 276 395
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2002
Restated
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 March 31 March 30 Sept
2002 2001 2001
(R`000) (R`000) (R`000)
Shareholders` funds
At beginning of period 832 347 859 082 859 082
Repurchase of linked units - (771) (2 395)
Attributable earnings/(deficit) for
period under review 6 825 (12 470) (23 951)
Transfer to other reserves - 65 (389)
839 172 845 906 832 347
The same accounting policies and methods of computation are followed in
these results as were followed in the 2001 annual financial statements,
incorporating a change in accounting policy relating to the use of the
equity method to value investments where the company holds 20% or more of
the equity share capital. Comparative figures have been restated
accordingly.
Introduction
AMB Partners is listed in the "Private Equity Funds" sector of the JSE
Securities Exchange South Africa ("JSE") and consolidates the private equity
activities of AMB Holdings Limited ("AMB") into one entity. AMB Partners is
unique in its industry, being the only company to combine traditional
private equity and empowerment investing activities into one entity capable
of participating in a broad spectrum of investments. AMB Partners uses the
comprehensive resources of the entire AMB group to source and evaluate
unlisted investments and other high-value opportunities.
Private equity market review
The six months to 31 March 2002 have been characterised by reduced private
equity investment activity in the industry as a whole. Funds under
management (targeting private equity) have, however, increased and some of
the mandates have become more specialised, focusing on areas such as early
stage, industry-specific or empowerment investments. What has been
gratifying has been the entrance of new players into the private equity
market with a specific mandate to invest in empowerment-related
transactions. As the pioneer in this field, AMB Partners welcomes these new
entrants.
Overview of AMB Partners
No new investments were made in the period under review. However, some
movement in the portfolio took place in that small follow-on investments
were made in two existing portfolio companies, the realisation proceeds from
the sale of Federal were received and loans were repaid by two other
portfolio companies.
During this last period, continued effort was applied to enhance the
existing portfolio in the form of strategic initiatives, follow-on
investments, turnaround strategies and the pursuance of value-adding exit
opportunities. In general, the operational performance of the portfolio
companies has been pleasing and recent strategic initiatives continue to
yield rewards.
AMB Partners has had the opportunity of evaluating a number of high
profile investments. Certain of these are at a stage where an investment by
AMB Partners may be forthcoming in the short term. AMB Partners will
continue to target larger, high-profile transactions with the aim of
maintaining its position amongst the premier private equity participants in
the local market.
Linked unit price performance
Against this background, AMB Partners recorded a marginal increase in NAV
per linked unit (excluding debenture interest) to R16,17 at 31 March 2002
from the NAV at 30 September 2001 of R16,03. The past six months have been
characterised by exceedingly thin trading volumes with very few sellers
emerging, regardless of the price at which the linked units were bid. The
last traded price of R12,50 per linked unit represents a discount of
approximately 23% to NAV.
The majority of companies in the Private Equity Funds sector of the JSE
are trading below their NAV, largely due to the long lead times between
investment and appreciation of the underlying assets.
Portfolio review
At 31 March 2002, AMB Partners` investment portfolio was made up as follows:
Funds
invested at cost
(including Percentage
accrued of Accounting
interest) total Valuation1
(R`000) (R`000)
Leveraged Equity Fund 183 870 32,6 197 069
Empowerment Equity Fund 92 333 16,4 78 603
Structured Equity Fund 241 092 42,8 250 646
Emerging Equity Fund 46 329 8,2 26 340
563 624 100,0 552 658
Percentage Percentage Percentage
of Directors` of
total Valuation2 total
(R`000)
Leveraged Equity Fund 35,7 215 617 37,7
Empowerment Equity Fund 14,2 78 603 13,8
Structured Equity Fund 45,4 250 646 43,8
Emerging Equity Fund 4,7 26 721 4,7
100,0 571 587 100,0
Notes:
1. Accounted for using generally accepted accounting practice with all
investments in which AMB Partners has an equity stake greater than 20% being
equity accounted.
2. Directors` valuation using valuation principles recommended by the
South African Venture Capital and Private Equity Association.
The operating performance of the portfolio companies in the Leveraged
Equity Fund continues to be encouraging. Stuttafords Stores (Pty) Limited
("Stuttafords") continues to trade impressively and well ahead of forecast.
The performance of Waco International Limited ("Waco") in the period under
review was below budget. While operating earnings were marginally lower than
earnings for the prior year, favourable currency movements compensated for
the weaker performance of some businesses.
Under-performers in the period included the United Kingdom subsidiary, the
United States subsidiary and one of the Australian subsidiaries. Repayment
of long-term debt is nevertheless on schedule. Following the resignation of
Mike Smithyman (for personal reasons), Royden Vice was appointed group Chief
Executive Officer ("CEO") of Waco in February 2002. Mr Vice was formerly CEO
of Industrial Special Products with BoC Group plc and chairman of both
African Oxygen Limited and Afrox Healthcare Limited. His extensive local and
international business experience is expected to benefit Waco going forward.
Certain of the smaller investments in the Leveraged Equity Fund have
performed satisfactorily, with actual results being ahead of budget. Apart
from an upward revaluation of Stuttafords, there were no major movements in
the directors` valuations of the portfolio companies. The revaluation of
Stuttafords is primarily due to the impact that the repayment of loans and
the build-up of cash has had on the equity value of the investment.
The valuation of the Empowerment Equity Fund showed a decline in the
review period, due to a decline in value of the three portfolio companies,
namely Siphumelele Investments Limited ("Siphumelele"), Nozala Investments
(Pty) Limited ("Nozala") and Kensani Consortium (Pty) Limited ("Kensani").
From a trading perspective, Siphumelele`s underlying portfolio companies had
mixed performances. Siphumelele is still pursuing its desired focus on the
services sector and continued efforts are being made to rationalise
Siphumelele`s portfolio. Nozala`s decline in value was somewhat offset by
the increase in value of its investment in Kumba Resources Limited. Nozala
continues to experience healthy deal flow and AMB Partners will continue to
work closely with the management team to assist in the attractive
structuring of investment opportunities. With respect to Kensani, AMB
Partners is working with the board to review various restructuring
initiatives, which are expected to reach fruition before the end of the 2002
financial year.
The valuation of the Structured Equity Fund showed little change from the
position at 30 September 2001. Declines in value of the special purpose
vehicles ("SPV`s") invested in Comparex Africa (Pty) Limited offset marginal
increases in the values of spv`s invested in M-Cell Limited and Telkom SA
Limited ("Telkom"). AMB Partners will continue with its policy of actively
hedging this portfolio.
In the period under review, the valuation of the Emerging Equity Fund,
excluding minor follow-on investments, showed a decline. Efforts to
responsibly realise the smaller investments in this portfolio are
continuing, with a realistic time frame for completion of this process still
being the end of the current financial year.
Results
Results for the past six months demonstrate AMB Partners` ability to
preserve value (through appropriate hedging strategies) and to create value
for investors (through optimal management of the portfolio).
The balance sheet at 31 March 2002 reflects total investments of R552,7
million and cash resources available for future transactions of R334,1
million. The income statement for the six months ended 31 March 2002
reflects investment income of R54,6 million, which comprises a gain on
realisation of investments (Federal), interest earned on uninvested capital
and income from investments. The expenses for the six months to
31 March 2002 showed an increase compared with the same period in the 2001
financial year largely as a result of the interest on the loan from BoE Bank
Limited (relating to the refinancing of a portion of the SPV investment in
Telkom) and increased management fees (in view of the greater market
capitalisation of AMB Partners). Debenture interest of
R7,1 million has been declared payable to unitholders for the six-month
period ended 31 March 2002.
The item "Distribution to Fund Manager" relates to the capital
participation by the Fund Manager of AMB Partners following the successful
realisation of the Federal investment.
It should be noted that AMB Partners continues to follow a conservative
approach in valuing its unlisted investments, due to the challenging macro-
economic conditions facing companies in South Africa and the higher risks
associated with small and medium capitalisation companies.
Changes to Board of Directors
Following his resignation as CEO of AMB, Rob Dow also tendered his
resignation as Chairman of AMB Partners. The board of AMB Partners expresses
its gratitude to Mr Dow for his leadership and contribution to AMB Partners
in the past three years. The board of AMB Partners is pleased to announce
that Zenzo Lusengo (formerly Joint Managing Director) has been appointed
Chairman of AMB Partners with effect from 28 May 2002.
In addition, William Moutloatse, a representative of the Transnet Pension
Fund, was appointed as a non-executive director with effect from 15 February
2002.
Prospects
Deal flow in the private equity market continues to be acceptable and AMB
Partners is currently pursuing a number of attractive opportunities. In
addition, opportunities in the small and medium capitalisation listed equity
market are still apparent and AMB Partners is active in this area.
AMB Partners will continue to invest in the current market, despite
perceived low valuation and interest rate levels. AMB Partners will,
however, continue to adopt a cautious approach, concentrating on
high-value opportunities in private equity and select empowerment
transactions and targeting larger companies which can clearly demonstrate a
business model that can weather subdued economic conditions. AMB Partners is
confident this approach should generate positive returns to linked
unitholders over the medium to long term. AMB Partners remains well-
positioned to capitalise on investment opportunities that will arise from
renewed economic activity in the remainder of the financial year and to
assist empowerment groups to participate in opportunities in both the public
and private sectors.
Withdrawal of cautionary announcement
Linked unitholders are referred to the cautionary announcement last
renewed by AMB Partners on 11 April 2002, and are advised that as the board
of AMB Partners has, at this point in time, ceased to examine restructuring
initiatives, caution is no longer required.
Declaration of debenture interest and last date to trade
Notice is hereby given regarding debenture interest payable by the Company
to linked unitholders for the period 1 October 2001 to 31 March 2002. The
Company advises that the last date to trade in order to be eligible for the
interest payment, will be on Thursday, 20 June 2002. Linked units will trade
ex-entitlement from Friday, 21 June 2002, and the record date will therefore
be Thursday, 27 June 2002. The amount of interest payable is 13,7 cents per
linked unit and the payment date will be Friday, 28 June 2002. Linked unit
certificates may not be dematerialised or rematerialised between Thursday,
13 June 2002 and Thursday, 27 June 2002, both dates inclusive.
In respect of certificated unitholders, cheques dated 28 June 2002 will be
posted on or about 21 June 2002.
On behalf of the board
ZENZO LUSENGO ANDREW SPRAGUE
Chairman Managing Director
31 May 2002
Registered address:
8th Floor, The Forum, Corner Maude and Fifth Streets,
Sandton, South Africa
PO Box 786833, Sandton, 2146, South Africa
Tel: (011) 303-2900 Website: www.ambpartners.co.za
Transfer secretaries:
Computershare Investor Services Limited, 8th Floor,
11 Diagonal Street, Johannesburg, 2001
(PO Box 1053, Johannesburg, 2000)
Sponsor
African Merchant Bank Limited
Registered Bank
Registration number: 1996/016470/06
Register to receive shareholder circulars online:
www.ambpartners.co.za
JSE Share code: APP ISIN: ZAE000026936
