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Vestacor - Interim results announcement
VESTACOR LIMITED
("Vestacor" or "the Company")
Reg No 1996/0017285/06
Share Code: VTR
ISIN: ZAE000018412
Interim results announcement
CHANGE IN VESTACOR`S INVESTMENT STRATEGY
Historically, Vestacor`s business has been focussed on private equity
investments. After a review of this strategy and the company`s existing
portfolio of investments, it has been concluded that the business model will be
enhanced by dividing the business into two distinct areas of investment, namely:
* Core businesses, and
* Private equity investments.
Vestacor`s business will be to focus on the development and continued profitable
management of its core businesses which are:
* Moresport comprising of Sportsmans Warehouse, The Pro Shop, Sportshoe
World and Outdoor Warehouse;
* Vestacor Entertainment comprising of Look & Listen and Music for Pleasure;
and
* Retail Africa.
In due course, these core businesses will be augmented by the considered
investment in carefully selected retail businesses.
Change in the presentation of the group results
For the 2001 and 2002 financial years, the Vestacor results reflected the nature
of its business and accounted for the investments, including Moresport, in terms
of AC133. In essence, this meant that:
* The investments were revalued every six months with the increase or
decrease in value being brought into account as a fair value adjustment in the
income statement; and
* The balance sheet reflected the fair value of the investments.
Going forward the results will be presented on a basis which consolidates the
group`s interest in its core businesses while it will continue to apply the
principles of AC133 to its private equity investments, which include Fashion
Africa Ltd ("Fashaf").
RESULTS COMMENTARY
These results comprise:
* The consolidated, unaudited results for the 6 months ended 31 August 2002.
These results have not been audited or reviewed, however, the auditors of
Vestacor have reviewed the change in the presentation of the group results, the
consolidation principles and the workings;
* Consolidated "pro forma" results for the 12 months ended 28 February 2002,
to reflect the impact of the change in the investment strategy on the
presentation of the group results for this period.
These are the audited 28 February 2002 results to which a "pro forma" adjustment
has been made whereby Moresport is consolidated, the then 34% stake (currently
100%) in Look & Listen is equity accounted and the fair value adjustments
pertaining to these two investments are reversed;
* The unaudited results for the 6 months ended 31 August 2001 as published
in the press; and
* The audited results for the 12 months ended 28 February 2002 as published
in the Annual Report.
The table below summarises the treatment of the most significant investments:
6 months 12 months 6 months 12 months
Consolidated Consolidated Published Published
Unaudited Pro Forma Unaudited Audited
31 Aug 02 28 Feb 02 31 Aug 01 28 Feb 02
Moresport Consolidate Consolidate Fair Value Fair value
100% 100% 100% 100%
Look & Listen1 Consolidate Equity Fair value Fair Value
100% Account 34% 34%
34%
Music for Pleasure2 Consolidate N/A N/A N/A
100%
Fashaf Fair Value Fair Value Fair value Fair value
75% 62% 62% 62%
1 Vestacor increased its stake in Look & Listen to 100% on 01 June 2002.
2 On 01 March 2002, Vestacor acquired 100% of Music for Pleasure.
Analysis of earnings
The following table provides a reconciliation of the earnings per share and
separates the profits generated by the core businesses and private equity
investments from the Fashaf losses and deferred taxation adjustments.
Notes 6 months 12 months
Consolidated Consolidated
Unaudited Pro Forma
31 Aug 02 28 Feb 02
Cents per Cents per share
share
(Loss) / Earnings as reported (53,7) 14,0
Add back: 64,4 (2,9 )
Provision for losses: Fashaf 6 53,2 8,3
Reversal / (creation)
of deferred
tax assets 2 11,2 (11,2 )
Earnings for the period from
core businesses and private
equity investments excluding
Fashaf 10,7 11,1
Performance and outlook
The core businesses of the Vestacor group have continued to trade well. Due to
the seasonal cycle of these businesses, the majority of the profits are
generated in the second six months of the financial year. These businesses all
continue to trade within set targets.
FASHAF
On 29 October 2002 Fashaf, a public listed company, in which Vestacor has a 75%
interest, was placed into provisional liquidation.
The impact of the Fashaf liquidation on the results of Vestacor at 31 August
2002 was as follows:
Before the provision Provision for After the provision
for Fashaf losses Fashaf losses for Fashaf losses
Cents per share Cents per share Cents per share
Earnings per share (0,5) (53,2) (53,7)
Net asset value
per share 146,7 (51,4) 95,3
The only remaining exposure of Vestacor to Fashaf is contained in a number of
sureties and guarantees in terms of which the maximum liability is capped at
R38,4 million. No provision has been made for these contingencies or any
potential recoveries from Fashaf in these interim results.
CORPCAPITAL LIMITED OFFER
Shareholders are referred to the cautionary announcement published in the press
on 07 November 2002 and are advised that an agreement has been reached whereby
PSG Investment Bank Holdings Limited has disposed of its 47,1% stake in Vestacor
to Corpcapital Limited.
Shareholders are referred to the Corpcapital announcement published in the press
today, for further details of this transaction and the mandatory offer to
minorities.
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 31 AUGUST 2002
Income statement
Notes 6 months 12 months 6 months 12 months
Consolidated Consolidated Published Published
Unaudited Pro Forma Unaudited Audited
31 Aug 02 28 Feb 02 31 Aug 01 28 Feb 02
R`000 R`000 R`000 R`000
Revenue 463 696 604 524 690 7 038
Cost of sales 297 235 401 253 - -
Gross profit 166 461 203 271 690 7 038
Other operating income 2 609 3 854 1 938 26 129
Fair value adjustments
on investments (95 469) (4 767) 36 398 49 150
Fashaf (95 893) (13 878) - (13 878)
Other 424 9 111 36 398 63 028
Operating expenses (145 255) (192 858) (12 510) (28 314)
Operating (loss)/profit (71 654) 9 500 26 516 54 003
Finance costs (876) (3 867) (72) (77)
Income from associates 350 (1 138) - -
Amortisation of
Goodwill 4 263 9 850 - (721)
(Loss)/Profit before
taxation (67 917) 14 345 26 444 53 205
Taxation 2 (28 966) 9 207 ( 1 838) (8 936)
Net (loss)/profit
for the
period (96 883) 23 552 24 606 44 269
(Loss)/Earnings per
share (cents) 3 (53,7) 14,0 15,0 26,4
Headline (loss)/earnings
per share (cents) 3 (56,1) 8,2 15,0 26,8
Weighted average
number of shares
in issue (`000) 180,234 168 003 163 747 168 003
Balance Sheet
Notes Consolidated Consolidated Published Published
Unaudited Pro Forma Unaudited Audited
31 Aug 02 28 Feb 02 31 Aug 01 28 Feb 02
R`000 R`000 R`000 R`000
ASSETS
Non-current assets
Fixed assets 53 528 30 787 130 373
Goodwill 4 978 (24 890) - 7 704
Investments and loans 21 864 87 421 292 611 295 264
Deferred taxation 24 965 31 370 4 875 -
Loan to share scheme 13 819 16 158 20 301 16 158
Current Assets
Inventory 198 444 122 216 - -
Trade & other
Receivables 70 939 34 469 3 341 9 349
Cash & cash
equivalents 12 940 34 856 15 129 25 907
Total Assets 401 477 332 387 336 387 354 755
EQUITY AND LIABILITIES
Capital and reserves 177 758 257 491 303 890 332 699
Share capital 18 651 17 396 16 375 17 396
Share premium 171 480 155 585 147 460 155 585
Non-distributable
reserve 24 357 24 357 64 338 59 364
Accumulated
(losses)/profits (36 730) 60 153 75 717 100 354
Non-Current Liabilities
Long term
borrowings 4 57 405 6 747 - -
Deferred taxation - - 8 500 10 733
Current Liabilities
Trade & other
payables 142 153 67 735 23 997 11 323
Bank overdraft 21 460
Short term loans 2 701 414 - -
Total equity and
liabilities 401 477 332 387 336 387 354 755
Net asset value
per share
(cents) 95,3 148,0 185,6 191,2
Tangible net asset value
per share (cents) 79,3 144,3 182,6 193,0
Number of shares in issue
(`000) 186 507 173 962 163 747 173 962
Abridged Cash Flow Statement
6 months 12 months 6 months 12 months
Consolidated Consolidated Published Published
Unaudited Pro Forma Unaudited Audited
31 Aug 02 28 Feb 02 31 Aug 01 28 Feb 02
R`000 R`000 R`000 R`000
Cash and cash
equivalents
At beginning of
the period 34 856 (18 092) 1 447 1 447
Net (decrease)/
increase in
cash and cash
equivalents (46 340) 52 090 13 682 23 602
Cash and cash
equivalents of
subsidiaries acquired 2 964 858 - 858
Cash and cash equivalents
at the end of
the period (8 520) 34 856 15 129 25 907
Abridged statement of changes in equity
Notes 6 months 12 months 6 months 12 months
Consolidated Consolidated Published Published
Unaudited Pro Forma Unaudited Audited
31 Aug 02 28 Feb 02 31 Aug 01 28 Feb 02
R`000 R`000 R`000 R`000
Equity at the beginning
of the period 257 491 279 284 279 284 279 284
Adjustments arising on
the consolidation and
equity accounting of
investments previously
held as private equity
investments - (54 491) - -
Adjusted equity at the
Beginning of the period 257 491 224 793 279 284 279 284
Shares issued during the
period 5 17 150 9 146 - 9 146
Earnings for the period
Excluding the provision
for Fashaf losses and
deferred taxation
adjustment 19 250 37 430 24 606 58 147
Provision for Fashaf
losses 6 (95 893) (13 878) - (13 878)
Reversal of deferred
tax asset 2 (20 240) - - -
Equity at the end
of the period 177 758 257 491 303 890 332 699
Segmental Analysis
31 August 2002 Retail Private Head- Consolidated
equity office investments
R`000 R`000 R`000 R`000
Turnover 460 217 - 3 479 463 696
Operating Profit 29 884 (95 469) (2 480) (68 065)
Net Assets 139 302 21 145 17 311 177 758
Total assets 359 986 21 145 20 346 401 477
Total liabilities 220 684 - 3 035 223 719
Notes to the results
1. Compliance with SA GAAP
These financial statements have been prepared in accordance with the South
African Statements of Generally Accepted Accounting Practice. The accounting
policies adopted are consistent with those applied in the preparation of the
audited financial statements for the year ended 28 February 2002, in that the
core businesses are consolidated and the private equity investments are fair
value accounted.
2. Deferred Taxation
The taxation charge for the 6 months ended 31 August 2002 includes the reversal
of a deferred tax asset raised at 28 February 2002 amounting to R20 240 115.
The deferred tax asset in Vestacor at 28 February 2002 has been reversed due to
the change in investment strategy. Management however note that a potential
asset of some R49 million exists largely as a result of the losses on the Fashaf
investment but that it is not considered appropriate to recognise this asset
until such time as management has greater certainty of the period over which the
asset will be utilised.
The only deferred tax assets now recognised are those in the core businesses.
3. Earnings and headline earnings per share
The difference between earnings and headline earnings per share is attributable
to the amortisation of goodwill and is reconciled as follows:
6 months 12 months 6 months 12 months
Consolidated Consolidated Published Published
Unaudited Pro Forma Unaudited Audited
31 Aug 02 28 Feb 02 31 Aug 01 28 Feb 02
Cents per Cents per Cents per Cents per
share share share share
Earnings (53,7) 14,0 15,0 26,4
Amortisation
of goodwill (2,4) (5,8) - 0,4
Headline
earnings (56,1) 8,2 15,0 26,8
4. Long-term borrowings
Consolidated Consolidated
Unaudited Pro Forma
31 Aug 02 28 Feb 02
R`000 R`000
Interest bearing borrowings 26 966 6 747
Moresport 6 747 6 747
Look & Listen 20 219 -
Interest free
borrowings 30 439 -
Retail Africa 439 -
Vestacor Entertainment 30 000 -
57 405 6 747
The Vestacor Entertainment liability is the balance of the purchase price
payable on 31 March 2005 for the acquisition of Music for Pleasure.
5. Shares issued during the period
On 01 June 2002 Vestacor acquired the remaining 66% equity stake in Look &
Listen for a consideration of R17,2 million settled by the issue of 12 545 100
Vestacor shares issued to PSG Investment Bank Holdings Limited (7 407 407) and H
Lazarus (5 137 693).
6. Subsequent Events
Subsequent to balance sheet date, Fashaf, a public listed company, in which
Vestacor has a 75% interest,was placed into provisional liquidation. As a
result, the entire investment in Fashaf has been written-off and no account has
been taken of any potential recoveries.
A B Rubenstein G B Rubenstein
Chief Executive Officer Chairman
Johannesburg
29 November 2002
Directors: G B Rubenstein (Chairman)*, A B Rubenstein (Chief Executive Officer),
D J Levy, K G Hodgson, B M Jerling*, M J Kaplan*, D P Kennealy*+,
JA Mackay, C Otto*, C F Turner*
*Non-executive +Irish
Date: 29/11/2002 05:17:00 PM Produced by the JSE SENS Department
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