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Arcay Group Limited - Unaudited Interim Results For The Six Months Ended 30
Release Date: 25/11/2002 07:30:11 Code(s): ARC
ARCAY GROUP LIMITED - UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2002
ARCAY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1991/003944/06)
Share code: ARC ISIN: ZAE000022406
Debenture code: ARCD ISIN: ZAE000022398
("Arcay Group" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2002, WITHDRAWAL
OF RESTUCTURING CAUTIONARY ANNOUNCEMENT, PROPOSED OFFER TO ARCAY SHAREHOLDERS TO
REPURCHASE THEIR ARCAY SHARES, VOLUNTARY DELISTING OF ARCAY GROUP AND CAUTIONARY
ANNOUNCEMENT
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
as at 30 Sept 2002 30 Sept 2001 31 Mar 2002
R`000 R`000 R`000
ASSETS
Non-current assets 87 656 170 594 139 120
Property 52 415 61 658 61 548
Plant and equipment 4 732 8 048 6 703
Intangible assets 2 075 5 523 3 150
Investments - listed 3 617 16 313 14 665
Investments - unlisted 11 431 12 625 10 924
Deferred tax 2 514 4 784 2 513
Loans receivable and
prepayments 10 872 61 643 39 617
Current assets 16 773 42 164 51 209
Work in progress 1 084 1 154 3 014
Trade and other
receivables 15 024 35 727 43 445
Bank balances 665 5 283 4 750
Total assets 104 429 212 758 190 329
EQUITY AND LIABILITIES
Capital and reserves 54 780 104 880 87 368
Non-current liabilities 14 824 47 014 40 650
Debentures - 23 470 20 936
Interest bearing
borrowings 14 469 20 688 19 170
Shareholders` loans 355 2 856 544
Current liabilities 34 824 60 864 62 311
Trade and other
payables 10 721 56 431 56 548
Debentures 20 936 - -
Taxation 1 137 580 1 060
Shareholders for
dividend - 2 288 -
Bank overdraft 2 030 1 565 4 703
Total equity and
liabilities 104 429 212 758 190 329
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
for the period ended 30 Sept 2002 30 Sept 2001 31 Mar 2002
R`000 R`000 R`000
Trading
Interest received 1 749 6 095 10 886
Interest paid - (2 386) (4 178)
Net interest turn 1 749 3 709 6 708
Operating revenue 14 051 13 054 27 601
Operating costs (19 001) (19 317) (41 146)
Operating loss before
taxation
and finance costs (3 201) (2 554) (6 837)
Finance costs (2 539) (2 407) (6 695)
Operating loss
before taxation (5 740) (4 961) (13 532)
Taxation 63 1 699 (993)
Trading loss after
taxation (5 677) (3 262) (14 525)
Non-Trading
Non-trading loss before
taxation (26 911) (12 696) (18 738)
Amortisation of goodwill
on acquisition
of subsidiaries (654) (4 499) (10 861)
Discount on redemption of
debentures - - 846
Impairment - external
loans (4 038) - -
Impairment - investment
properties (9 000) - -
Impairment - loans to
associates (2 274) - -
Loss on disposal of
investments (3 661) - -
Restructuring costs (1 931) - -
Revaluation of
investments (5 353) (8 197) (8 723)
Taxation - - (359)
Non-trading loss after
taxation (26 911) (12 696) (19 097)
Attributable
Net loss for the period (32 588) (15 958) (33 622)
Minorities share
of profit (1 407) (524) (2 248)
Attributable loss
for the period (33 995) (16 482) (35 870)
Supplementary information
Number of shares in issue
at end of period (`000) 60 138 60 136 60 138
Basic weighted average number of
shares in issue (`000) 60 138 60 077 60 103
Loss per ordinary
share (cents) (56.5) (27.4) (59.7)
Adjusted for :
Revaluation of
investments (cents) 8.9 13.6 14.5
Intangible assets
written off (cents) 1.0 7.5 18.1
Impairment - investment
properties (cents) 15.0 - -
Loss on disposal of
investments (cents) 6.1 - -
Profit on disposal of
fixed assets (cents) - - (0.1)
Restructuring
costs (cents) 3.2 - -
Taxation (cents) - - 0.6
Headline loss per ordinary
share (cents) (25.5) (6.3) (26.6)
Dividends per ordinary
share (cents) - 9.0 9.0
Attributable tangible
net asset value
per share (cents) 17.2 96.2 72.0
Capital expenditure
for the period (R`000) 228 2 844 4 053
Depreciation of tangible
fixed assets (R`000) 2 332 1 652 3 974
Operating lease
commitments (R`000) 1 218 773 1 803
Contingent liabilities
Guarantee of loans and banking
facilities to
third parties (R`000) 783 2 782 783
CONSOLIDATED CASH FLOW STATEMENT
Net cash flow from
operating activities (8 907) 1 994 (30 233)
Net cash flow from investing
activities 2 534 (30 581) (33 525)
Net cash flow from
financing
activities 4 960 (34 685) (7 865)
Decrease in cash
and cash
equivalents (1 413) (63 272) (71 623)
Cash and cash equivalents
at the beginning
of the period 48 66 990 71 671
Cash and cash
equivalents
at the end of
the period (1 365) 3 718 48
STATEMENT OF CHANGES IN EQUITY
Share Share Minority Accumulated Total
capital premium shareholders` profit/(loss)
interest
R`000 R`000 R`000 R`000 R`000
Balance at
01 April 2001
119 917 2 805 36 184 (32 849) 126 057
Net loss for
the period - - - (16 482) (16 482)
Shares issued
to the
vendors of
Roxburgh 355 (55) - - 300
Dividends - - - (5 396) (5 396)
Minority
shareholders`
interest - - 524 - 524
Other 1 (124) - - (123)
Balance at
30 September 2001
120 273 2 626 36 708 (54 727) 104 880
Net loss for
the period - - - (19 388) (19 388)
Minority shareholders`
interest - - 1 724 - 1 724
Other 3 149 - - 152
Balance at
31 March 2002 120 276 2 775 38 432 (74 115) 87 368
Net loss for the
period - - - (33 995) (33 995)
Minority shareholders`
interest - - 1 407 - 1 407
Balance at
30 September 2002
120 276 2 775 39 839 (108 110) 54 780
COMMENTARY
Arcay Group hereby announces its interim results for the six months ended 30
September 2002. The accounting policies adopted for purposes of this interim
report comply, and have been consistently applied in all material respects, with
Statements of South African Generally Accepted Accounting Practices (GAAP). The
accounting policies applied are consistent with those adopted in respect of the
annual financial statements at 31 March 2002. Where necessary, comparative
figures have been reclassified to conform to changes in presentation in the
current year.
NATURE OF BUSINESS
Arcay Group provides a comprehensive range of financial services to owner-driven
businesses and entrepreneurs in South Africa. It delivers these services through
five closely co-ordinated, but independently managed businesses: Arcay Merchant,
Arcay Investments, Arcay Systems, Arcay Private Financial Services and Arcay
Client Support.
RESULTS
During the period under review, various factors impacted negatively on the
Group`s results. The severe decline in the market value of companies engaged in
the information technology sector and the micro lending industry, coupled with
reduced levels of corporate finance activity, led to a reduction in fees earned
and significant capital losses in relation to listed and unlisted investments
held by Arcay Group. The negative sentiment towards the financial services
industry contributed to the deterioration in the Group`s share price.
There has been a continued reduction in corporate finance activity over the
reporting period, as current market conditions have led to a reticence on behalf
of clients to engage in corporate actions. In addition, the postponement of the
introduction of the Financial Advisors and Intermediary Services Bill impacted
on the Arcay I-Trac initiative, resulting in this initiative bearing fruit more
slowly than envisaged. Finally, the costs associated with the Arcay Group
debenture dispute were significant for the Group.
These factors have resulted in the Group reporting poor results for the six
months ended 30 September 2002 and in a major decrease in its net asset value
(NAV). The Group reported a trading loss of R5.7 million after taxation, and a
headline loss per share of 25.5 cents. The non-trading loss of R26.9 million
after taxation for the six months was as a result of significant write-downs on
investments.
INVESTMENT IN SUBSIDIARY
Arcay Sponsored Fund A100/5, previously an associated company of the Group, is
now a wholly-owned subsidiary of the Group.
DIVIDEND
No dividend has been declared in respect of the period ended 30 September 2002.
PROSPECTS
While the Group has faced a challenging period, it has established a strong
platform upon which future growth can be supported, within its main operating
areas of Corporate Finance, Systems and Private Financial Services. The Group
will continue to serve its client-partners and will strive to increase further
its market share within its niche markets.
WITHDRAWAL OF RESTRUCTURING CAUTIONARY ANNOUNCEMENT
Further to the renewal of the restructuring cautionary announcement of, inter
alia, 24 October 2002, and in light of advice received from the Group`s
advisors, together with a review of various restructuring alternatives and the
Board`s decision to apply for the delisting of Arcay Group from the JSE
Securities Exchange SA (JSE) (see below), the Group has decided not to proceed
with any formal restructuring process. Accordingly, the restructuring cautionary
announcement is hereby withdrawn.
PROPOSED REPURCHASE AND DELISTING OF ARCAY GROUP FROM THE JSE
In terms of the arbitration order granted on 26 September 2002 and announced on
27 September 2002, Arcay Group is required to repay the debentureholders the
full amount of the capital of the Arcay Group debentures at 249 cents per
debenture, together with accrued interest thereon. This debt, in the amount of
approximately R21 million, is repayable on 02 December 2002. The terms and
conditions under which the necessary funding has been secured are such that a
further diminution in the Group`s NAV is inevitable.
Accordingly, Arcay Group`s Board has taken the decision to make an application
to delist from the JSE. It is proposed that a pro rata offer be made by the
company to all Arcay Group shareholders, excluding the controlling shareholders,
for the repurchase of all, or part, of their Arcay Group shareholding for a
repurchase consideration, inclusive of Secondary Tax on Companies, which will
not be less than Arcay Group`s attributable tangible NAV per share, as at 30
September 2002. A circular will be forwarded to shareholders within 28 days of
this announcement.
CAUTIONARY ANNOUNCEMENT
As a result of the above proposed delisting and share repurchase, shareholders
of Arcay Group are advised to exercise caution when dealing in their Arcay Group
securities, until such time as a further announcement is made.
CHANGES TO THE BOARD OF DIRECTORS
In compliance with the JSE Listings Requirements and in line with the above
developments, Arcay Group hereby announces the following changes to its Board of
Directors, with immediate effect:
Directors: RC Frolich has resigned as Non-executive Deputy Chairman. SJ de Vos
and R Leonard have resigned as Non-executive Directors.
Alternate Directors: G Leonard has resigned as Non-executive Alternate Director
to R Leonard. MH Prangley has resigned as Non-executive Alternate Director to RC
Frolich.
Changes in significant roles on the Board of Directors: HC van Heerden,
previously Executive Chairman, has been appointed as Non-executive Director. KDD
de Villiers has been appointed as Executive Chairman J van Rooyen, previously
Executive Financial Director, has been appointed as Non-executive Director. MC
Jones, previously Executive Alternate and Deputy Financial Director, has been
appointed as Executive Financial Director. FC Botha, previously Alternate
Director to RA de Villiers, has been appointed as Executive Director.
By order of the Board
Kevin de Villiers
Chairman and Chief Executive Officer
25 November 2002
Registered office
Arcay House II, Number 3 Anerley Road
Parktown, 2193, PO Box 62397, Marshalltown, 2107
Transfer secretaries
Computershare Investor Services Limited
11th Floor, 70 Marshall Street, Johannesburg, 2001
Directors
KDD de Villiers (Chief Executive Officer), FC Botha, TB Davies, RA de Villiers,
MR Gahagan, MC Jones, D Kalkwarf, WJ Snyman, J van Rooyen (Non-executive)
Sponsor
KPMG Services (Pty) Ltd
Date: 25/11/2002 07:30:00 AM Produced by the JSE SENS Department
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