| Wed 11 Dec 2002, 18:47 | | Amb Partners - Results Announcement For The Year E |
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Amb Partners - Results Announcement For The Year Ended 30 September 2002
Release Date: 11/12/2002 17:09:08 Code(s): APP
AMB Partners - Results announcement for the year ended 30 September 2002
AMB PRIVATE EQUITY PARTNERS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/015329/06)
Share code: APP ISIN: ZAE000026936
("AMB Partners" or "the Company")
Results announcement for the year ended 30 September 2002
Highlights
* Conclusion of the leveraged buyout and delisting of Servest Holdings
Limited (Servest)
* Internal rate of return (IRR) of 33% on disposal of investment in Federal
Protection Services (Pty) Limited (Federal)
* IRR of 35% on partial realisation of equity interest in Stuttafords Stores
(Pty) Limited (Stuttafords)
* Increase in Company net asset value (NAV) (including debenture interest)
to R17,19 per linked unit
* Stuttafords judged SA`s top non-listed company
INTRODUCTION
The basis on which the Group and Company financial statements have been prepared
is explained in "accounting and valuation policies" below. For the purpose of
this results announcement, commentary will be confined to the Company financial
statements as the directors are of the opinion that these represent a more
meaningful reflection of the nature and activities of the business.
INCOME STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2002
Reviewed Restated
30 September 2002 30 September 2001
Group Company Group Company
R`000 R`000 R`000 R`000
Revenue 650 524 - 568 295 -
Less: cost of goods sold (422 778) - (363 780) -
227 746 - 204 515 -
Investment income 93 548 123 668 52 320 55 430
Total revenue 321 294 123 668 256 835 55 430
Income/(loss) from associates 1 650 - (1 627) -
Other income 15 824 5 15 306 -
Operating expenses (192 418) (9 337) (213 980) (9 161)
Net income from operations 146 350 114 336 56 534 46 269
Financing costs (13 224) (3 569) (14 149) (662)
Revaluation adjustment (57 472) (33 807) (27 361) (21 836)
Unrealised profit on hedging
activities 699 - 4 049 -
Realised profit on hedging
activities 4 691 - 9 557 -
Unrealised loss on
revaluation of investments (62 862) (33 807) (40 967) (21 836)
Movement in provisions against
loans to associates (363) - 644 -
Amortisation of goodwill (4 005) - (2 553) -
Impairment of goodwill (33 138) - - -
Exceptional items 9 801 - (1 438) -
Preference dividend (15 561) (15 561) (2 284) (2 284)
Net income before taxation 32 388 61 399 9 393 21 487
Taxation (19 285) - (10 030) (3 341)
Net income/(loss) after taxation 13 103 61 399 (637) 18 146
Debenture interest (65 689) (65 689) (31 812) (31 812)
Minority interest (14 777) - (3 158) -
Net loss attributable
to ordinary shareholders (67 363) (4 290) (35 607) (13 666)
Transfer from non-
distributable reserve 34 368 33 292 40 907 21 777
(Accumulated deficit)/retained
income for the year (32 995) 29 002 5 300 8 111
(Accumulated deficit)/retained
income previously reflected (6 538) 14 506 (8 993) (8 993)
Adjustment for change in
accounting policy - - (2 845) 15 388
(Accumulated deficit)/retained
income brought forward (6 538) 14 506 (11 838) 6 395
(Accumulated deficit)/retained
income end of year (39 533) 43 508 (6 538) 14 506
Headline earnings per linked
unit (cents) 71,2 118,3 23,6 35,0
(Loss)/earnings per linked
unit (cents) (3,2) 118,3 (7,3) 35,0
Headline loss per share (cents) (55,3) (8,3) (68,6) (26,3)
Loss per share (cents) (129,8) (8,3) (37,7) (26,3)
Number of linked units
in issue 51 912 856 51 912 856 51 912 856 51 912 856
Weighted average number of
linked units in issue 51 912 856 51 912 856 52 079 268 52 079 268
Debenture interest per linked
unit declared (cents) 48,7 48,7 61,3 61,3
Debenture interest per linked
unit accrued (cents) 77,8 77,8 - -
Debenture interest
The debenture interest for the
year is made up as follows:
Debenture interest declared 25 275 25 275 31 812 31 812
Debenture interest accrued 40 414 40 414 - -
65 689 65 689 31 812 31 812
Reconciliation of headline
earnings
Net loss attributable to ordinary
shareholders (67 363) (4 290) (35 607) (13 666)
Add: amortisation of goodwill 4 005 - 2 553 -
Add: impairment of goodwill 33 138 - - -
Add: (profit)/loss on sale
of fixed assets (1 389) - 6 277 -
Add: impairment of fixed assets 2 890 - 7 208 -
(28 719) (4 290) (19 569) (13 666)
Exceptional items
Post-retirement medical aid
provision written back - - 5 770 -
Fixed assets written off (2 890) - (7 208) -
Payment received in respect of
cancellation of lease agreement 10 000 - - -
Fit out allowance 2 691 - - -
9 801 - (1 438) -
BALANCE SHEETS
AT 30 SEPTEMBER 2002
Reviewed Restated
30 September 2002 30 September 2001
Group Company Group Company
R`000 R`000 R`000 R`000
Assets
Fixed assets 164 347 - 51 104 -
Intangible assets 17 219 - - -
Investments 633 129 697 423 552 078 602 142
Associates 9 113 - 7 969 -
Goodwill 184 797 - 49 954 -
Loans to associates 34 174 - 34 249 -
Investments at fair value 405 045 697 423 459 906 602 142
Current assets 616 645 240 085 426 071 292 022
Inventories 71 032 - 52 248 -
Short-term loans 8 888 - 5 255 -
Accounts receivable 280 608 20 287 86 790 15 627
Deferred tax 5 370 - 289 -
Cash 250 747 219 798 281 489 276 395
Total assets 1 431 340 937 508 1 029 253 894 164
Liabilities
Loans 169 266 29 231 74 386 25 662
Current liabilities 498 212 74 751 132 199 30 686
Debenture interest payable 58 640 58 640 11 527 11 527
Preference dividend payable 4 058 4 058 685 685
Amount due to subsidiary company - 9 549 - 12 828
Current portion of long-term debt 41 079 - 10 649 -
Short-term loan 30 - 1 902 -
Accounts payable 274 674 2 475 95 796 3 126
Tax payable 23 341 29 5 281 2 520
Deferred tax 2 774 - 3 874 -
Bank overdraft 93 616 - 2 485 -
Total liabilities 667 478 103 982 206 585 56 348
Shareholders` funds
Ordinary share capital 5 5 5 5
Ordinary share premium 271 624 271 624 271 624 271 624
Non-distributable reserves 12 197 629 36 246 33 921
Convertible debentures 517 759 517 759 517 759 517 759
(Accumulated deficit)/retained
income (39 533) 43 508 (6 538) 14 506
Shareholders` funds 762 052 833 525 819 096 837 815
Minority interest 1 809 - 3 571 -
Preference share capital 1 1 1 1
Total shareholders` funds 763 862 833 526 822 668 837 816
Total liabilities and
shareholders` funds 1 431 340 937 508 1 029 253 894 164
Net asset value per linked unit
(including interest)(rands) 15,81 17,19 16,00 16,36
Net asset value per linked unit
(excluding interest)(rands) 14,67 16,06 15,78 16,14
Cash value per linked unit (rands) 3,03 4,23 5,37 5,32
Number linked units in issue 51 912 856 51 912 856 51 912 856 51 912 856
Fully diluted net asset value
per share (rands) 4,90 5,35 5,26 5,38
ABRIDGED SEGMENTAL ANALYSIS
FOR THE YEAR ENDED 30 SEPTEMBER 2002
Reviewed Restated
30 September 2002 30 September 2001
Group Company Group Company
R`000 R`000 R`000 R`000
Total revenue
Private equity 93 548 123 668 52 320 55 430
Retail 182 782 - 187 815 -
Services 17 258 - - -
Manufacturing 27 706 - 16 700 -
321 294 123 668 256 835 55 430
Net income before taxation
Private equity 24 760 61 399 12 249 21 487
Retail 27 709 - 4 671 -
Services (1 572) - - -
Manufacturing (18 509) - (7 527) -
32 388 61 399 9 393 21 487
Assets and liabilities
Private equity 603 931 833 526 763 345 837 816
Retail 6 271 - 47 052 -
Services 149 549 - - -
Manufacturing 4 111 - 12 271 -
763 862 833 526 822 668 837 816
ABRIDGED CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2002
Reviewed Restated
30 September 2002 30 September 2001
Group Company Group Company
R`000 R`000 R`000 R`000
Cash generated by/(applied to)
operating activities 55 994 30 890 62 077 (7 518)
Cash effects of investing
activities (181 154) (87 487) (141 966) (43 016)
Cash flows from financing
activities 3 287 - 54 252 22 217
Net decrease in cash and
cash equivalents (121 873) (56 597) (25 637) (28 317)
Cash and cash equivalents at
the beginning of the year 279 004 276 395 304 641 304 712
Cash and cash equivalents at
the end of the year 157 131 219 798 279 004 276 395
ABRIDGED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2002
Group Non- Total
distribu- share-
Share Share table Retained Deben- holders`
capital premium reserves earnings tures funds
R`000 R`000 R`000 R`000 R`000 R`000
Balance at
1 October 2000 5 271 624 76 292 (8 993) 520 154 859 082
Adjustment for change
in accounting policy - - 1 250 (2 845) - (1 595)
Repurchase of debentures - - - - (2 395) (2 395)
Net income after tax - - - (637) - (637)
Debenture interest - - - (31 812) - (31 812)
Minority interest - - - (3 158) - (3 158)
Movement on reserves - - (41 296) 40 907 - (389)
Restated balance at
30 September 2001 5 271 624 36 246 (6 538) 517 759 819 096
Net income after tax - - - 13 103 - 13 103
Debenture interest - - - (65 689) - (65 689)
Minority interest - - - (14 777) - (14 777)
Movement on reserves - - (24 049) 34 368 - 10 319
Balance at
30 September 2002 5 271 624 12 197 (39 533) 517 759 762 052
Company
Balance at
1 October 2000 5 271 624 76 292 (8 993) 520 154 859 082
Adjustment for change
in accounting policy - - (20 205) 15 388 - (4 817)
Repurchase of debentures - - - - (2 395) (2 395)
Net income after tax - - - 18 146 - 18 146
Debenture interest - - - (31 812) - (31 812)
Movement on reserves - - (22 166) 21 777 - (389)
Restated balance at
30 September 2001 5 271 624 33 921 14 506 517 759 837 815
Net income after tax - - - 61 399 - 61 399
Debenture interest - - - (65 689) - (65 689)
Movement on reserves - - (33 292) 33 292 - -
Balance at
30 September 2002 5 271 624 629 43 508 517 759 833 525
Overview of performance
The combination of investment management and investment banking expertise in AMB
Partners continues to provide the necessary critical mass and synergies for the
Company to explore opportunities and unlock value in investee company
structures. During the year, AMB Partners deployed R168 million in three
investments, despite difficult macro-economic conditions and increased
competition. These deployments largely comprised the investment in Servest and
follow-on investments in Waco International Limited (Waco) and another smaller
portfolio company. In addition, the proceeds of the realisation of Federal, as
well as loan repayments and partial realisation proceeds from Stuttafords, were
received.
In the period under review, AMB Partners was instrumental in the Servest
leveraged buyout and delisting, investing R154 million for a 67,7% stake in the
company, with management investing R18 million to acquire the remaining equity.
AMB Partners` investment is structured largely as a shareholder loan, attracting
interest and preferential repayment terms. Servest is a low-tech, multi-
disciplinary integrated service provider, focused on cleaning services, hygiene
and green services, security and support services. Annual turnover is around R1
billion, with a substantial presence in the United Kingdom and a small operation
in Australia. The investment strategy is to shrink the cost base of the business
and improve profitability which, together with cash generated from operations
and the disposal of non-core assets, will facilitate the repayment of the
acquisition debt and shareholder loan over a three to five year period.
With effect from 1 January 2002, the business of Federal was sold to a local
subsidiary of Danish listed security company, Group 4 Falck A/S. This
realisation represents a gross IRR for AMB Partners of 33% and 1,9 times money
in two-and-a-half years. Stuttafords, recently selected as the Business Day non-
listed company of the year, has been an excellent example of the role private
equity can play in entrepreneurial success. In the two years following the
buyout transaction, Stuttafords has repaid the debt inherent in the transaction,
as well as AMB Partners` shareholder loans. In addition, a transaction was
concluded whereby Stuttafords purchased a portion of AMB Partners` equity
through a share buyback mechanism. AMB Partners now holds 50,1% of Stuttafords,
with management owning the balance.
Against this background, AMB Partners recorded a credible increase in Company
NAV per linked unit (including debenture interest) from R16,36 as at 30
September 2001 to R17,19 as at 30 September 2002.
Portfolio review
As at 30 September 2002, the valuation of the AMB Partners` investment portfolio
was made up as follows:
Funds
invested at
cost Percentage Percentage
(incl. accrued of Company of
interest) total valuation total
R`000 (%) R`000 (%)
Leveraged Equity Fund 321 496 46,1 363 107 52,1
Empowerment Equity Fund 92 332 13,2 76 014 10,9
Structured Equity Fund 255 042 36,5 258 302 37,0
Emerging Equity Fund 29 068 4,2 - -
697 938 100,0 697 423 100,0
The majority of the investments in the Leveraged Equity Fund are trading above
their budgeted earnings; with notable performances from Schrader South Africa
(Pty) Limited and Sweet-Orr & Lybro (Pty) Limited. Stuttafords continues to
trade impressively. Waco put in a solid quarter to September 2002, with early
indications of exceeding its annual budget. During the year, Waco raised R103
million in additional capital to fund its Australian and UK businesses through
the issue of compulsorily convertible debentures. AMB Partners subscribed for
its full entitlement of R11,3 million. Within the rest of the Leveraged Equity
Fund, realisation prospects and certain proposals at various stages of
development are currently under consideration. Continued effort is being applied
to responsibly reduce the size of the portfolio, although this is proving a
difficult task in the current investment and economic climate.
The valuation of the Empowerment Equity Fund showed a marginal increase in the
review period, due mainly to an increase in the value of Siphumelele Investments
Limited. AMB Partners is working with the boards of the various portfolio
companies in the Empowerment Equity Fund to maximise value creation for all
shareholders.
The valuation of the Structured Equity Fund declined over the year. The
combined valuations of Comparex Holdings Limited and Dimension Data Holdings plc
declined by R12,1 million during the period. The special purpose vehicles which
house these exposures are the subject of a proposed early unwinding and
distribution. The value of the investment in the MTN Group Limited (formerly M-
Cell Limited) also declined over the year. The initial public offering of
ordinary shares in Telkom SA Limited (Telkom) is now scheduled for early 2003.
In valuing AMB Partners` exposure to Telkom (via its investment in Ucingo
Investments (Pty) Limited), cognisance was taken of enterprise value/earnings
before interest, tax, depreciation and amortisation (EV/EBITDA) multiples of
other emerging market integrated telecommunications operators. AMB Partners`
valuation is deemed to be within the expected range of the proposed listing
price.
In the period under review, the valuation of the Emerging Equity Fund,
essentially a venture capital portfolio, declined by R21,7 million due to the
write-off of certain investments. The remaining portfolio of investments in this
fund is now carried at no value. AMB Partners ceased investing in further
venture capital investments in 2001.
Accounting and valuation policies
From a group perspective, to comply with South African Statements of Generally
Accepted Accounting Practice, AMB Partners has changed its accounting policies
in the current year for associate and subsidiary companies. Where AMB Partners
holds an equity interest in a company of between 20% and 50% and exercises
significant influence, it equity accounts for such interest. Where AMB Partners
holds an equity interest of greater than 50% and has control, it consolidates
such interest. From a Company perspective, to comply with valuation guidelines
set out by the South African Venture Capital and Private Equity Association
(SAVCA), AMB Partners has adopted an earnings-based valuation approach for all
investments it has held for more than one year. Valuations in the Leveraged and
Emerging Equity Funds are based on the most recently reported historical
earnings and entry earnings multiples (or lower multiples if deemed necessary)
on making the investment. Where there is a firm offer for the business, the
offer price is used for valuation purposes. Valuations in the Structured Equity
Portfolio are typically marked to market by valuing the underlying equity
exposure. Due to the inherent uncertainties associated with inputs into
valuation models including the illiquidity of the markets, the directors`
valuations may differ from the values that would be realised on exit from these
investments.
Review opinion
The results have been reviewed by the Company`s auditors, Deloitte & Touche
Chartered Accountants (SA), and their review opinion is available for inspection
at AMB Partners` registered office.
Results
Results for the past six months, which show a marginal increase in Company NAV,
further demonstrate AMB Partners` ability to preserve value (through appropriate
hedging strategies) to create value for investors (through optimal management of
the portfolio) and to identify attractive sectoral themes.
The Company balance sheet at 30 September 2002 reflects total investments
(valued using the SAVCA valuation principles) of R697,4 million and gross cash
resources of R219,8 million. The Company income statement for the 12 months
ended 30 September 2002 reflects investment income of R123,7 million, which
comprises a realised gain on an investment, interest earned on uninvested
capital and income from investments. Operating expenses for the Company for the
12 months to 30 September 2002 were in line with those incurred in the 2001
financial year. The preference dividend relates to an amount paid to the fund
manager of AMB Partners in accordance with the preference share agreement
between the fund manager and AMB Partners.
It should be noted that AMB Partners continues to implement a conservative
approach in valuing its unlisted investments, due to the difficult macro-
economic conditions facing companies in South Africa and the higher risks
associated with small and medium capitalisation companies.
Debenture interest
Debenture interest of R18,1 million (35,0 cents per linked unit) has been
declared for the six-month period ended 30 September 2002, and will be paid to
linked unitholders on 30 December 2002. Unitholders will recall that R7,1
million (13,7 cents per linked unit) was declared for the six month period ended
31 March 2002.
An additional R40,4 million (77,8 cents per linked unit) of debenture interest
has been accrued, consisting of interest accrued on the loan portion of
investments in portfolio companies. This interest is payable to the linked
unitholders in terms of the debenture interest trust deed. However, this
interest has not been received in cash and will not be paid out until such time
as the interest is recovered from the investee companies. The amount has been
reduced in the case where an investment has been written down in value and the
recoverability of the interest is in question.
Prospects
Deal flow in the private equity market continues to be healthy 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.
The board of AMB Partners is currently considering proposals which will affect
the continued listing of AMB Partners on the JSE Securities Exchange South
Africa and linked unitholders` attention is drawn to the cautionary announcement
set out below.
Further cautionary announcement
Further to the cautionary announcement published on 12 November 2002, AMB
Partners unitholders are advised that AMB Partners is still in negotiations,
which, if successfully concluded, may have a material effect on the price at
which the AMB Partners units trade. AMB Partners unitholders are therefore urged
to continue exercising caution in their dealings in AMB Partners` units until a
further announcement is made in this regard.
On behalf of the board
Zenzo Lusengo Andrew Sprague
Executive Chairman Managing Director
11 December 2002
Registered address:
18 Fricker Road, Illovo, South Africa
P O Box 786833, Sandton, 2146, South Africa
Tel: (011) 215-2000 Website: www.ambpartners.co.za
Transfer secretaries:
Computershare Investor Services Limited,
70 Marshall Street, Johannesburg, 2001
Date: 11/12/2002 05:09:00 PM Produced by the JSE SENS Department
