| Tue 22 Oct 2002, 13:08 | | CORPCAPITAL - Audited results for the year ended 3 |
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CORPCAPITAL LIMITED
Audited results for the year ended 31 August 2002
Corpcapital has emerged from the A2 banking crisis leaner and more focused on
its core competencies.
* Liquidity and strong balance sheet maintained.
* Net asset value in excess of R1 billion.
* Excess cash generated from winding down banking activities to be
distributed to shareholders.
* Headline earnings per share from continuing operations - 56.9 cents.
Group income statement for year ending 31 August
Continuing operations
Pro Forma*
R 000`s 2002 2001 2001
Revenue 1 412 555 1 516 780 1 594 816
Profit before taxation and
exceptional items 217 929 314 221 392 256
Goodwill (202 666) 150 190 180 610
Exceptional items (9 118) (4 919) -
Profit before taxation 6 145 459 492 572 866
Taxation (68 147) 75 755 75 755
Normal (1 595) 75 755 75 755
Goodwill and exceptional items (66 552) - -
Profit after taxation 74 292 383 737 497 111
Attributable to minority shareholders 5 967 73 174 119 839
Attributable profits 68 325 310 563 377 272
Headline earnings adjustments 145 232 (165 700) (186 494)
Headline earnings 213 557 144 863 190 778
Headline earnings per share 56.9 54.2 71.4
Earnings per share 18.2 116.2 141.1
Weighted average number of shares
in issue 375 431 267 311 267 311
Discontinuing
operations
R 000`s 2001 2001
Revenue 118 970 138 820
Profit before taxation and
exceptional items (71 565) (4 533)
Goodwill (20 748) (833)
Exceptional items (39 545) (10 000)
Profit before taxation (131 858) (15 366)
Taxation 3 840 (1 350)
Normal 4 459 1 650
Goodwill and exceptional items (619) (3 000)
Profit after taxation (135 698) (14 016)
Attributable to minority shareholders 607 (11 419)
Attributable profits (136 305) (2 597)
Headline earnings adjustments 59 675 2 918
Headline earnings (76 630) 321
Headline earnings per share (20.4) 0.1
Earnings per share (36.3) (1.0)
Weighted average number of shares
in issue 375 431 267 311
Group
Pro Forma*
R 000`s 2002 2001 2001
Revenue 1 531 525 1 655 600 1 733 636
Profit before taxation and
exceptional items 146 364 309 688 387 723
Goodwill (223 414) 149 357 179 777
Exceptional items (48 663) (14 919) (10 000)
Profit before taxation (125 713) 444 126 557 500
Taxation (64 307) 74 405 74 405
Normal 2 864 77 405 77 405
Goodwill and exceptional items (67 171) (3 000) (3 000)
Profit after taxation (61 406) 369 721 483 095
Attributable to minority shareholders 6 574 61 755 108 420
Attributable profits (67 980) 307 966 374 675
Headline earnings adjustments 204 907 (162 782) (183 576)
Headline earnings 136 927 145 184 191 099
Headline earnings per share 36.5 54.3 71.5
Earnings per share (18.1) 115.2 140.2
Weighted average number of shares
in issue 375 431 267 311 267 311
Analysis of headline earnings adjustments
Pro Forma*
R 000`s 2002 2001 2001
Goodwill 223 414 (149 357) (179 777)
Goodwill amortisation 104 966 105 368 74 948
Share of associates` goodwill 13 017 - -
Impairment of goodwill 94 091 - -
Recoupment of goodwill on disposal - (41 909) (41 909)
Negative goodwill 11 340 (212 816) (212 816)
Exceptional items 48 663 14 919 10 000
Regulatory increase in provisions - 10 000 10 000
Share of associates` exceptional items 9 118 4 919 -
Losses on discontinuance of banking activities
- asset impairments and losses 28 429 - -
- closure costs 11 116 - -
Minority shareholders` share of
exceptional items - (25 344) (10 799)
Taxation on goodwill and
exceptional items (67 171) (3 000) (3 000)
Total headline earnings adjustments 204 907 (162 782) (183 576)
Analysis of continuing operations
Pro Forma*
R 000`s 2002 2001 2001
Revenue 1 412 555 1 516 780 1 594 816
Interest received 76 785 37 335 37 335
Interest paid 32 134 11 768 11 768
Net interest income 44 651 25 567 25 567
Specific and general provisions 4 402 444 444
Non interest income 284 915 400 121 478 156
Investing, trading and fee income 155 841 266 357 381 814
Equity accounted income 48 126 62 427 25 005
Contribution from proprietary
consolidated investments 80 948 71 337 71 337
Total income 325 164 425 244 503 279
Operating expenses 107 235 111 023 111 023
Profit before taxation and
exceptional items 217 929 314 221 392 256
Analysis of discontinuing operations
R 000`s 2002 2001
Revenue 118 970 138 820
Interest received 160 712 111 865
Interest paid 124 693 53 591
Net interest income 36 019 58 274
Specific and general provisions 34 333 12 289
Convertible loan interest 112 339 92 505
Non interest income 82 952 80 547
Investing, trading and fee income 83 380 79 842
Equity accounted income (428) 705
Total income (27 701) 34 027
Operating expenses 43 864 38 560
Profit before tax and exceptional items (71 565) (4 533)
Segmental information Total Operating Profit
R 000`s income expenses before tax
2002
Continuing operations 325 164 107 235 217 929
Investment banking & private equity 131 297 26 375 104 922
- Corpcom 18 060 - 18 060
- other investment banking 113 237 26 375 86 862
Corporate finance 27 557 19 392 8 165
Property 72 517 13 335 59 182
Hedge funds & arbitrage 28 407 10 738 17 669
Financial products 15 007 13 093 1 914
Funding & support 50 379 24 302 26 077
Discontinuing operations (27 701) 43 864 (71 565)
297 463 151 099 146 364
2001 Pro forma*
Continuing operations 425 244 111 023 314 221
Investment banking & private equity 222 989 30 675 192 314
- Corpcom 173 233 - 173 233
- other investment banking 49 756 30 675 19 081
Corporate finance 38 215 20 880 17 335
Property 68 226 12 342 55 884
Hedge funds & arbitrage 4 485 3 717 768
Financial products 33 460 12 000 21 460
Funding & support 57 869 31 409 26 460
Discontinuing operations 34 026 38 559 (4 533)
459 270 149 582 309 688
Sources of income - continuing operations Pro Forma*
R 000`s 2002 2001 2001
Annuity & fee income 243 833 274 728 237 306
Investing & trading 85 733 150 960 266 417
Total income before bad debt
provisions 329 566 425 688 503 723
Bad debt provisions 4 402 444 444
Total income of continuing operations 325 164 425 244 503 279
Group balance sheet as at 31 August
R 000`s 2002 2001
Assets
Corpcapital 2 501 531 4 537 808
Cash and cash equivalents 454 427 435 911
Liquid assets 7 354 185 986
Trading assets 172 706 1 597 475
Advances and other accounts 331 001 755 801
Financial products assets 311 543 203 859
Investments 331 763 656 146
Preference shares 616 221 522 729
Associates 212 857 128 694
Deferred taxation 21 500 -
Property, plant, equipment and intangibles 42 159 51 207
Proprietary consolidated investments 480 953 422 781
Cash and cash equivalents 35 884 36 389
Trade debtors and other accounts 184 334 178 324
Inventories 214 198 167 397
Associates and joint ventures 1 673 3 984
Property, plant, equipment and intangibles 44 864 36 687
2 982 484 4 960 589
Equity
Share capital & premium 598 341 598 341
Retained earnings & reserves 638 690 759 538
Ordinary shareholders` equity 1 237 031 1 357 879
Treasury shares held (229 812) -
Minority shareholders` interest 9 930 6 862
Total shareholders` equity 1 017 149 1 364 741
Compulsorily convertible loan 304 114 304 114
Total capital employed 1 321 263 1 668 855
Policyholders` interests in Corpcapital Life
Investments, interest bearing securities
& deposits 1 697 825 1 576 141
Life fund 1 697 825 1 576 141
Liabilities
Corpcapital 1 420 946 3 088 908
Long term debt 241 080 152 846
Deferred taxation 37 466 109 014
Convertible loan interest 339 806 219 845
Financial products liabilities 289 649 161 930
Deposits and short term debt 300 861 824 556
Trading liabilities 138 994 1 445 051
Creditors, provisions and taxation 73 090 175 666
Proprietary consolidated investments 240 275 202 826
Interest bearing debt 33 735 38 511
Trade creditors and provisions 197 234 157 281
Taxation 9 306 7 034
2 982 484 4 960 589
Notes to balance sheet
R 000`s 2002 2001
Investments
Property investments 129 966 -
Proprietary investments 201 797 656 146
Associates 212 856 128 694
- net asset value 107 631 128 694
- goodwill 105 225 -
Proprietary consolidated investments 240 678 219 955
- assets 480 953 422 781
- liabilities (240 275) (202 826)
Portfolio at carrying value 785 297 1 004 795
Portfolio at fair value 879 816 1 004 795
Contingent liabilities 62 170 193 393
Net asset value per share (cents) 289 308
Total shares in issue excluding treasury stock 348 241 440 265
Total shares in issue including treasury stock 440 265 440 265
Consolidated statement of changes in equity
R 000`s 2002 2001
Ordinary shareholders` equity at beginning of year 1 357 879 578 245
Attributable profits/(losses) (67 980) 374 675
Dividend (52 832) (26 417)
Treasury shares bought back in current year (65 750) -
Share issues - 433 956
Changes in holding of consolidated entities (164 062) (3 428)
Translation gains/(losses) and other changes (36) 848
1 007 219 1 357 879
Consolidated cash flow statement
R 000`s 2002 2001
Cash generated from operations 122 457 205 890
Taxation and dividends paid (79 503) (83 943)
Reduction in net banking assets (91 057) 64 649
Investing activities 75 431 (61 058)
Shares bought back (65 750) -
Movement in proprietary consolidated investments (20 723) (120 597)
Financing activities 77 661 (29 578)
Net movement in cash & cash equivalents 18 516 (24 637)
Opening cash & equivalents 435 911 460 548
Closing cash & equivalents 454 427 435 911
COMMENTARY
On 8 May 2002 Corpcapital announced its intention to discontinue its deposit
taking and related activities and its intention to relinquish its banking
licence and focus on its core competencies. The events leading up to this
announcement and flowing as a consequence from it had a material impact on the
operations of the Group and the 2002 financial results.
The Group entered the year seeking to build assets funded by a stable and
growing deposit book. While this strategy was flourishing in the early part of
the financial year it was thwarted by the small banking crisis at the beginning
of the calendar year. As a result the Group was forced into a defensive strategy
to preserve capital and liquidity ahead of profitability.
Once the decision to relinquish the banking licence was taken, specialised
finance and treasury divisions which relied on deposit taking activities were
discontinued. Continuing activities, funded out of capital, are investment
banking & private equity, corporate finance, property asset management &
consulting, hedge funds & arbitrage and financial products.
Group results and balance sheet
The financial statements have been prepared using the investment classification
adopted on the merger of the Group and implemented in the interim results.
Details under "accounting treatment of investments" below.
Headline earnings per share from continuing operations of 56.9 cents was
slightly ahead of the 2001 pro forma HEPS of 54.2 cents per share. While the
overall result is disappointing, it reflects both difficult trading conditions,
and the allocation of group resources and executive time to the protection of
shareholder value at the expense of growth.
Headline losses of 20.4 cents per share were incurred in discontinued
operations. In addition, closure costs of R11.1 million and asset impairments
and losses of R28.4 million on discontinuance of banking activities were
incurred.
Following the merger, the group share trusts are controlled entities and
accordingly were consolidated with effect from 1 September 2001. At 31 August,
the trust held 63.5 million shares (14%) in Corpcapital Limited which are
treated as treasury stock.
The closing balance sheet reflects the simplification of the Group`s business
and the move away from banking activities. After consolidation of treasury
shares (R229.8 million), Group net asset value is in excess of R1 billion. Net
asset value per share of 289 cents was, inter alia, impacted by the effects of
equity accounting certain investments. After a rigorous review of all asset
values, impaired goodwill relating primarily to certain technology holdings was
written off.
The Group remains highly liquid. Its cash position has been enhanced by the
winding down of the banking activities.
DIVISIONAL RESULTS
Continuing operations
Investment banking & private equity, property asset management & consulting and
hedge funds & arbitrage performed particularly well.
Returns from investment banking & private equity were affected by the sale of
Corpcom towards the end of financial 2001. Proceeds from the sale of Corpcom
were used to provide Group liquidity and therefore could not be deployed
profitably. The Group`s remaining interest in Clear Channel Independent returned
R18.1 million on a residual investment of R132 million. Last year`s contribution
from Corpcom (now Clear Channel Independent) of R173.2 million included
consolidated profit before tax of R35.7 million and profits on disposal of
R137.5 million. Corpbuild and Macadams had an exceptional year, growing headline
earnings by 57% and over 100% respectively, taking advantage of buoyant trading
conditions and favourable export conditions.
Excellent equity accounted contributions were made by Forza and certain unlisted
private equity holdings.
The Group`s technology investments, including Aqua, Cytech and the technology
operations of OneLogix performed poorly in line with the decline in the
industry. The impaired portion of goodwill that related to those investments was
written off.
Property asset management & consulting continued to generate strong annuity and
fee income. Assets under management and joint management grew to R5.4 billion.
The Group`s holding in Redefine reduced below 20% due to a decrease in the
holding to 50 million units and an increased number of units in issue in
Redefine. Redefine is therefore no longer an associate of the Group and is
treated as an investment from July 2002.
Hedge funds & arbitrage took advantage of volatile markets and a disciplined
approach to achieve an exceptional return on capital.
Corporate finance performed in line with subdued market conditions. The client
base continued to grow and some important mandates were won.
Financial products was affected by the nervousness in the retail investor market
post September 11. In addition, weak markets and uncertainty over asset swaps
led to a decreased appetite for the Group`s specialised structured products.
Post year-end, the retail financial product team was assumed by Peregrine
through an agreement which will see Peregrine and the employees manage and
administer the Group`s existing products and promote the completion of its work
in progress.
Discontinuing operations and deposit taking activities
The Group`s decision to cease deposit taking activities and relinquish its
banking licence necessitated the discontinuance of all deposit taking reliant
and related businesses. Strict liquidity management exercised during the
realisation of assets and repayment of depositors impacted upon earnings of
discontinuing and certain continuing operations.
Of the total losses, before tax, from discontinuing activities of R71.6 million,
R52 million was attributable to the treasury division. All positions have now
been settled and all deposits due have been repaid. The balance of the losses
were primarily in specialised finance activities where sharply increased
provisioning (R27 million) from microlending activities undermined a good
performance from Merchant Factors which was sold during the period.
Banking licence
The Group is far advanced with the process of relinquishing its banking licence.
It is anticipated that this process will be completed by the end of the year.
Taxation
The tax charge has been affected by assessed losses utilised and the reversal of
deferred tax on the adoption of a consistent basis of accounting for investments
as discussed below. The Group`s tax rate should return to historical levels in
future periods. The tax on exceptional items is largely due to the reversal of
deferred tax raised under fair value accounting.
Share buybacks
During the year the group used R65.8 million of cash resources to buy back 39.8
million shares at an average purchase price of 164 cents. The shares are held as
treasury stock.
Accounting treatment of investments
These results reflect the first year-end results 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 treatment was introduced in
the interim results to February 2002.
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, subjectivity is
removed from income recognition, the quality of earnings is improved and
reporting is more transparent.
This accounting treatment has been adopted from 1 September 2001 and for ease of
comparison 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 is reflected in the income statement and unrealised
gains in the value of these investments previously included are not brought to
account.
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). In terms of AC110, goodwill must be
raised on the difference between the net asset value of an associate and its
cost, and amortised through the income statement over its estimated useful life.
The Group amortises technology investments over three years and the remaining
investments are amortised over periods between five and 10 years. Any
translation gain or loss arising in respect of the net asset value of a foreign
associate or subsidiary is taken directly to reserves and shown in the statement
of changes in equity.
Prospects
Corpcapital is cognisant that its core competence and historic success lies in
its continuing activities. It is anticipated that difficult market conditions
will continue. This demands rigorous discipline to establish a lean platform
appropriate to current circumstances, capable of enhancing the performance and
value of existing assets and seizing opportunities as they arise. By these
means, our aim is to return to levels of real growth and returns on equity that
meet shareholders` expectations within a reasonable time frame.
Special distribution
As a result of terminating its banking activities, the Group has realised cash
in excess of its working capital and planned investment requirements. The Board
has resolved to distribute the excess cash to shareholders This is consistent
with the Group`s commitment to deliver value to its shareholders and to create a
lean platform focused on its proven core competence.
The amount of the special distribution, its timing and the means by which it
will be effected will be announced shortly. The special distribution will exceed
12.5 cents per share which would otherwise have been approved by the Board as an
ordinary dividend.
Eric Ellerine Jeff Liebesman
Chairman CEO
Tuesday 22 October 2002
Note:
Accounting Policies
The accounting policies used in the preparation of the financial statements for
the year ended 31 August 2002 comply with South African 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.
Audit opinion
The financial statements have been audited by Fisher Hoffman PKF (Jhb) Inc. and
their unqualified audit opinion is available for inspection at the registered
office of Corpcapital Limited.
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
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) (Share
code - CPA ISIN code - ZAE 000033965)
www.corpcapital.com
Date: 22/10/2002 08:00:00 AM Produced by the JSE SENS Department
