| Mon 30 Sep 2002, 15:30 | | M Cubed Holdings Limited - Interim Group Results F |
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M CUBED HOLDINGS LIMITED - INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2002
m Cubed Holdings Limited
Registration number: 1998/014568/06
Share code: MCU
ISIN: ZAE000033353
Interim Group Results
for the six months ended 31 august 2002
m Cubed group interim results
Group Income Statement
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
Aug 02 Percentage 31 Aug 01 28 Feb 02
R`000 Change R`000 R`000
Net revenue 165 582 75 933 272 326
Cost of revenue (75 620) (38 910) (120 034)
Gross profit 89 962 143 37 023 152 292
Operating expenses (74 874) 212 (23 961) (88 336)
Operating profit before net
finance income 15 088 16 13 062 63 956
Net finance income 6 910 84 3 759 8 276
Profit before taxation 21 998 31 16 821 72 232
Taxation (8 050) 87 (4 299) (19 170)
Profit after taxation 13 948 11 12 522 53 062
Share of profit/(loss)
of associates 1 432 (6) 553
Attributable to outside
shareholders - 269 269
Headline earnings
attributable
to shareholders 15 380 20 12 785 53 884
Amortisation of
goodwill (10 336) (2 304) (12 640)
Costs arising from
merger - (3 000) (4 242)
Earnings attributable
to shareholders 5 044 (33) 7 481 37 002
Weighted number
of shares in
issue (`000) 750 000 375 000 562 500
Earnings per share
(cents) 0,7 2,0 6,6
Headline earnings
per share (cents) 2,1 (38) 3,4 9,6
Group Balance Sheet
Unaudited Unaudited Audited
31 Aug 02 31 Aug 01 28 Feb 02
R`000 R`000 R`000
ASSETS
Non-current assets
Fixed assets 32 729 24 054 28 706
Investments 27 056 387 20 455 486 28 024 154
Goodwill 182 812 203 462 193 148
Investment in associates 15 886 775 10 689
Loans and advances 51 468 11 056 28 741
Deferred taxation 3 236 6 760 4 786
Total non-current assets 27 342 518 20 701 593 28 290 224
Current assets 32 746 81 860 41 998
Cash and cash equivalents 47 022 45 150 62 059
Total assets 27 422 286 20 828 603 28 394 281
EQUITY AND LIABILITIES
Equity
Ordinary shareholders` funds 381 674 362 656 394 006
Outside shareholders` interest 438 448 438
382 112 363 104 394 444
Non-current liabilities
Provision for policyholder
liabilities 27 006 553 20 416 334 27 930 170
Current liabilities
Trade and other payables 25 835 37 749 49 596
Taxation 7 786 11 416 20 071
33 621 49 165 69 667
Total equity and liabilities 27 422 286 20 828 603 28 394 281
Number of shares
in issue (`000) 750 000 750 000 750 000
Net asset value per share (cents) 50,9 48,4 52,5
Net tangible asset
value per share (cents) 26,6 21,2 26,8
Unaudited Statement of Changes in owners` Equity
Non-
Share Share Distributable Distributable
capital premium reserve reserve Total
R`000 R`000 R`000 R`000 R`000
Balance at
1 March 2002 7 500 332 460 5 967 48 079 394 006
Decrease in
non-distributable
reserve - - (2 376) - (2 376)
Dividend - - - (15 000) (15 000)
Attributable earnings - - - 5 044 5 044
Balance at
31 August 2002 7 500 332 460 3 591 38 123 381 674
Group Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
31 Aug 02 31 Aug 01 28 Feb 02
R`000 R`000 R`000
Operating activities (946 505) 3 790 539 4 081 511
Life assurance business (964 690) 3 855 091 10 925 663
Other receipts/(paid)
from/(to) customers 154 063 (73 428) 233 889
Cash received from/(paid to)
customers (810 627) 3 781 663 11 159 552
Cash paid to/(received from)
suppliers (113 734) 12 699 (7 062 044)
Cash (utilised by)/generated
from operations (924 361) 3 794 362 4 097 508
Net finance income 6 910 3 759 8 276
Taxation paid (14 054) (7 582) (15 186)
Dividend paid (15 000) - (9 087)
Investing activities 931 468 (3 800 864) (4 065 888)
Fixed assets (4 865) (19 668) (11 950)
Acquisition of subsidiaries - - 2 136
Decrease/(increase)
in investments 962 825 (3 769 416) (4 023 126)
Increase in associates (3 765) (724) (8 795)
Increase in loans and advances (22 727) (11 056) (24 153)
Financing activities - - (9 039)
Expenses on share issue
Net (decrease)/increase in cash and
cash equivalents (15 037) (10 325) 6 584
Cash and cash equivalents
at beginning of period 62 059 55 475 55 475
Cash and cash equivalents
at end of period 47 022 45 150 62 059
These interim results have been prepared in accordance with Statements of
Generally Accepted Accounting Practice, as well as the South African
Companies Act of 1973 and the Long-term Insurance Act of 1998. These
accounting policies are consistent with those applied at 28 February 2002. A
full actuarial valuation is not performed at half-year.
Our interim results are not directly comparable with those of last year, as
the merger between Escher and m Cubed Capital only became effective on 1
August 2001. Thus, last year`s interim results included six months of Escher
figures, and one month of the former m Cubed Capital businesses, while the
end of year figures included 12 months of Escher and seven months of the
former m Cubed Capital businesses.
FINANCIAL COMMENTARY
Headline earnings increased by 20% to R15,4 million (31 August 2001: R12,8
million). Headline earnings per share decreased by 38% from 3,4 cents (31
August 2001) to 2,1 cents.
Although higher than last year and despite large gross new business inflows
of R4,3 billion (31 August 2001: R1,6 billion) for the period under review,
assets under management of R43 billion (31 August 2001: R33,4 billion) and
assets under administration of R52 billion (31 August 2001: R40 billion)
remained at their year-end levels. This was as a result of the fall in
market values, both locally and internationally.
Acquisitions during the period under review included an employee benefit
business and 50% of Corporate Money Managers (Pty) Ltd, bringing m Cubed`s
ownership of this outsourced treasury business to 100%.
Portfolio Performance
The implementation of state-of-the-art multi-manager management continues to
be at the heart of m Cubed`s raison d`tre. It is relevant and pleasing to
note that performance of key portfolios has been satisfactory.
The performance balance seems to finally be shifting in favour of active
managers, with m Cubed`s active managers once again showing strong
performance relative to their respective indices, in spite of declining
markets. This has provided a significant benefit to m Cubed`s more
aggressive multi-manager investment strategies.
On a year-on-year basis, m Cubed`s most aggressive active mandates, the
Focused 75 Fund and the Focused 65 Fund were placed 1st out of 14 funds and
7th out of 32 funds in their respective categories in the Alexander Forbes
Manager Watch Survey at the end of August 2002. m Cubed`s more diversified
Equity and Balanced Unit Trusts produced relative returns of 24th out of 51
General Equity Unit Trusts and 21st out of 43, predominantly reflecting the
see-saw performance in the resource sector. Relative performance against
other multi-managers has been solid.
Operational Review
m Cubed`s major operating businesses traded at or better than expectation,
with the exception of its largest contributor, the retail division.
* Asset management
This division, which provides specialist multi- manager asset
management to institutional and private clients, performed ahead of
expectation. Subsidiary Escher UK has not yet reached critical mass but has
performed in line with expectation.
* Treasury
This division performs a treasury function for the group, and
incorporates loans to policyholders and other investment clients.
The lower than expected contributions from certain of the business
units have impacted Treasury`s performance.
* Retail investments
This division comprises custom-built solutions and national sales. It
is responsible for the distribution of the group`s range of life,
international, employee benefit, unit trust, hedge fund and alternate
investment products, via selected independent financial advisors. Gross new
business volumes of R3,1 billion were in line with expectation. New business
fee income was lower than expectation and lower than the same period last
year. This is largely attributable to the National Treasury`s non-renewal of
limited foreign investment on the offshore investment of client funds.
* Structured products
This division specialises in the design, implementation and
administration of derivative-based capital secured investment products for
the retail and institutional market. It has performed ahead of expectations
for the period, however, a major investment will not be renewed when it
matures in November 2002, which will impact on this division`s contribution
for the second half of the year.
* Specialised investments
This is a niche provider of customised financial solutions for
institutions, corporate and high net worth individuals, with a focus on
regulatory and cross-border arbitrage. This division performed slightly
behind budget.
* Administration outsourcing to third parties
This business provides local and international clients with a full
suite of administration services for unit trusts, offshore mutual funds,
wrap investment products, employee benefits, asset management portfolios and
life investment products. It performed ahead of budget.
Dividends
In line with group policy, no interim dividend has been declared.
Prospects
We refer shareholders to the Trading Update published on 9 September 2002.
On the basis of historic rules and regulations governing foreign direct
investment, m Cubed has substantial capacity available to it. However, if
these rules are not promulgated soon, m Cubed`s results for the second six
months, and the year, will obviously be negatively impacted and headline
earnings per share will be lower than last year. It is important to note
that m Cubed`s key units, especially retail Investments and asset
management, are forging ahead, and the company`s strategy of developing
employee benefits, AOS Fund Services Ltd and M3 Trustees Ltd, is on track.
For and on behalf of the board of directors
CMB Bothner JC Storey
Chairman Group managing director
27 September 2002
SEGMENTAL REPORTING
Headline earnings Net revenue
Unaudited Audited Unaudited Unaudited Audited Unaudited
Audited
6 months year ended 6 months 6 months year ended 6 months
year ended
ended 28 Feb ended ended 28 Feb ended
28 Feb
31 Aug 02 2002 31 Aug 02 31 Aug 02 2002 31 Aug 02
2002
% Annuity Annuity Upfront
Upfront
Rm Rm mix Rm Rm Rm
Rm
Asset
manage
ment 4 10 25 54 99 - -
Treasury 4 10 23 10 12 - -
Retail
invest
ments 3 19 22 52 52 8 53
Struc
tured
products 2 8 12 3 14 - -
Specia
lised
invest
ments 2 7 18 - - 9 11
Admini
stration
outsou
rcing - - - 27 28 3 3
15 54 100 146 205 20 67
Due to differing business divisions prior to the merger, comparative figures
at 31 August 2001 would have little meaning.
South African operations contributed R12 million to headline earnings, with
United Kingdom and other regions contributing the balance of R3 million.
Directors: CMB Bothner* (chairman), JC Storey (group managing director), A
Cabot-Alletzhauser (American), PJ Croeser*, MM Dawes, JF Mouton*, CA Otto*,
W Roux*, IHS Sinton*.
Alternate: RM Budge* (Scottish) (*non-executive)
Company secretary: J Steyn www.mcubed.co.za
Transfer secretaries: Computershare Investor Services Limited, Edura House,
41 Fox Street, Johannesburg, 2001.
PO Box 61051, Marshalltown, 2107.
Telephone: (011) 370-7700; Facsimile: (011) 836-0792.
Registered office: The Cube, Investment Place, 10th Road (off 2nd Avenue),
Hyde Park, 2196. PO Box 41259, Craighall, 2024.
Telephone: (011) 340-2300.
Facsimile: (011) 880-8844.
Date: 30/09/2002 02:05:35 PM Produced by the JSE SENS Department
