| Thu 12 Dec 2002, 11:28 | | Amb Holdings Limited - Group Results Announcement |
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Amb Holdings Limited - Group Results Announcement For The Year Ended September
Release Date: 12/12/2002 11:21:17 Code(s): AMB
AMB HOLDINGS LIMITED - GROUP RESULTS ANNOUNCEMENT FOR THE YEAR ENDED SEPTEMBER
2002
AMB Holdings Limited
Registration number 1995/003054/06
Share code: AMB ISIN: ZAE000029682
(AMB or the Group)
GROUP RESULTS ANNOUNCEMENT FOR THE YEAR ENDED SEPTEMBER 2002
* Strong balance sheet maintained
* Dividend of 40 cents per share declared
* Liquidity enhanced to enable expeditious return of banking licence
* Right-sizing of business activities initiated to focus on asset quality
and return on equity
INCOME STATEMENT
for the year ended 30 September 2002
Reviewed Audited
2002 2001
R`000 R`000
Revenue excluding net finance income 94 714 173 583
Finance income 220 251 271 758
Finance expense (160 997) (154 184)
Total revenue 153 968 291 157
General and specific risk provisions (105 460) 3 021
Impairment of investments (36 873) -
Bad debts written-off (13 534) -
Insurance performance bonus 62 000 -
Operating expenses (159 320) (124 883)
- Recurring (133 728) (123 713)
- Goodwill (3 510) (1 170)
- Non-recurring (22 082) -
Loss from associate companies (2 789) (4 759)
(Loss)/profit before tax (102 008) 164 536
Tax (51 532) (4 209)
(Loss)/profit after tax (153 540) 160 327
Minority interest 3 550 3 611
Net (loss)/profit attributable to
ordinary shareholders (149 990) 163 938
Weighted average number of shares in issue (`000) 106 410 117 445
(Loss per share) (LPS)/Earnings per share (EPS) (cents) (141,0) 139,6
Diluted (LPS)/EPS (cents) (141,0) 139,4
Headline (LPS)/EPS (cents) (125,0) 140,6
Diluted Headline (LPS)/EPS (cents) (125,0) 140,4
Dividend per share (cents) 40,0 30,0
Reconciliation between (loss)/profit and
headline (loss)/earnings:
Net (loss)/profit attributable to
ordinary shareholders (149 990) 163 938
Add: Goodwill amortised 3 510 1 170
Add: Share of goodwill amortised/impaired
in associate 12 926 -
Add: Share of loss on disposal of fixed
assets in associate (483) -
Add: Share of impairment of fixed
assets in associate 1 007 -
Headline (loss)/earnings (133 030) 165 108
ABRIDGED CASH FLOW STATEMENT
for the year ended 30 September 2002
Reviewed Audited
2002 2001
R`000 R`000
Cash flows from operating activities 35 941 (134 161)
Cash flows from investing activities 65 176 58 306
Cash flows from financing activities (31 025) (107 712)
Net increase/(decrease) in cash and cash equivalents 70 092 (183 567)
Cash and cash equivalents at the beginning
of the year 689 959 850 113
Effects of exchange rate changes on cash
and cash equivalents 19 900 23 413
Cash and cash equivalents at the end of the year 779 951 689 959
Strategic objectives for FY2003
* Expeditious and efficient return of banking licence
* Enhance return on equity and simplify group balance sheet
* Right-size and refocus business on profitability and efficient use of
capital
* Move from a period of fixing to rebuilding AMB`s presence in the market
* Further extend AMB`s transformation objectives
Financial objectives for FY2003
* Return on equity (ROE)
Enhance ROE to acceptable levels
* Capital utilisation
Evaluate capital utilisation within the group to achieve targeted ROEs
and an appropriate capital structure
* Earnings mix
Diversify operational and geographical activities to achieve an appropriate
mix of earnings between advisory, fund management and trading activities
* Cost to income ratio
Right-size to achieve acceptable cost to revenue ratio
* Earnings growth
Achieve profitability throughout the group and real earnings growth
ABRIDGED SEGMENTAL INFORMATION
for the year ended 30 September 2002
Reviewed Audited
2002 2001
R`000 R`000
Revenue
Commission and fees 21 358 49 027
Private equity and investment banking 28 809 75 818
Treasury trading 44 547 48 738
Margin 59 254 117 574
153 968 291 157
(Loss)/profit before tax
Commission and fees (15 819) 4 270
Private equity and investment banking (21 876) 51 545
Treasury trading 29 237 42 484
Margin (93 550) 66 237
(102 008) 164 536
Net assets
Commission and fees 6 145 15 112
Private equity and investment banking 274 108 355 246
Treasury trading 17 962 118 497
Margin 653 447 684 093
951 662 1 172 948
2002 Revenue 2001
14% Commissions and fees 17%
29% Trading income (including hedging) 17%
38% Margin income 40%
19% Investment income 26%
BALANCE SHEET
at 30 September 2002
Reviewed Audited
2002 2001
R`000 R`000
Assets
Cash and cash equivalents 779 951 689 959
Trading securities 68 037 381 420
Term advances 576 905 738 043
Investments 274 108 355 246
Accounts receivable 131 012 196 414
Tax receivable 9 683 18 438
Deferred tax 6 019 8 077
Fixed assets 4 234 5 282
Intangible assets - 8 447
Total assets 1 849 949 2 401 326
Capital and reserves
Issued capital 669 163 700 188
Reserves 1 513 2 113
Accumulated profits 277 892 468 457
Capital and reserves 948 568 1 170 758
Minority interest 3 094 2 190
Total capital and reserves 951 662 1 172 948
Liabilities
Accounts payable and provisions 76 686 82 820
Tax 35 015 3 746
Debentures 225 914 192 942
Deposits 560 672 948 870
Total liabilities 898 287 1 228 378
Total equity and liabilities 1 849 949 2 401 326
Number of shares in issue (`000)
(net of treasury shares) 104 737 109 186
Net asset value per share (cents) 906 1 072
ABRIDGED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2002
Reviewed Audited
2002 2001
R`000 R`000
Balance at 30 September 1 170 758 1 146 497
Shares issued - 2 215
Shares repurchased (31 025) (109 927)
Net exchange rate adjustments 722 791
Attributable (loss)/profit (149 990) 163 938
Dividend (41 897) (32 756)
Balance at 30 September 948 568 1 170 758
The Group preliminary results have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The accounting
policies applied in these Group preliminary results are consistent with those
applied in the 2001 audited annual financial statements.
Vision
AMB`s vision is "to create the leading fully-fledged empowerment financial
services group, committed to the successful economic transformation of South
Africa".
COMMENT
It has been a year of extreme volatility in currency, fixed income and equity
markets. This was exacerbated by a prolonged and uncertain global economic
recovery, regional instability and, specifically, unprecedented turmoil in the
banking sector, which led to widespread systemic, regulatory and operational
pressures on A2 banks. The crisis of confidence in the banking sector in 2002
meant that second-tier banks focused on survival and liquidity management,
resulting in a severe contraction in banking business and a consequent decline
in earnings.
AMB was not immune to these factors. However, AMB`s focus on managing
liquidity risk and preserving capital, assisted by the diversity of its
operations, saw the group weather the crisis, albeit at a cost. Subsequent to
the year end, the directors announced their decision to deregister African
Merchant Bank Limited (AMBL) as a bank. The costs associated with complying with
regulatory requirements, particularly the anticipated Basle II accord, together
with the opportunity cost of not being able to flexibly deploy its capital, has
resulted in the cost of the banking licence outweighing its potential benefits
over time.
In AMB`s view, the only basis for sustaining an A2 bank in the current
environment is to secure a strategic shareholder of reference to access banking
opportunities. Accordingly, AMB engaged with certain parties to determine
whether support for such a transaction could be procured. Unfortunately, the
uncertainty around the A2 banking sector, difficult economic and trading
conditions, widespread consolidation of the sector and the impending empowerment
charter for the financial services sector have made concluding a transaction,
within the time constraints set, difficult to achieve. Therefore, to obtain
certainty for all stakeholders, the AMB board took the decision to hand back the
banking licence and restructure the business prior to the calendar year end.
This will allow AMB to approach the new year with a more streamlined business,
focused on clearly-defined niches and targeting more optimal use of its capital.
Results
Results for the year ended 30 September 2002 reflect the difficult trading
conditions and regulatory constraints which led to management taking actions to
position AMB to hand back its banking licence. This was achieved by liquidating
long-term illiquid assets and right-sizing its operations at the expense of
operational performance. Furthermore, management took the decision to enhance
the quality of AMB`s balance sheet by providing against and writing-off certain
assets to more accurately reflect their underlying market values. These
decisions have clearly had a material adverse financial effect for the year.
Gross revenue was down on the prior year, reflecting the difficult investment
banking and trading conditions and the cost of maintaining excessive levels of
liquidity. Furthermore, management time involved in dealing with banking and
regulatory issues and negotiations with a strategic investor restricted their
ability to enhance operational performance.
Despite this, the treasury trading and private equity divisions performed
admirably. In particular, the private equity division demonstrated its mettle by
concluding one of the largest and most hotly-contested transactions of the year.
Treasury trading also continued its trend as a core contributor, despite
difficult market conditions.
Operating expenses spiralled during the year, reflecting the costs associated
with the banking licence, additional regulatory costs incurred during the A2
banking crisis and the expensing of certain irrecoverable amounts. Furthermore,
certain non-profitable business units have been closed and a number of employees
retrenched. Some of these costs will, however, accrue in the new financial year.
Empowerment
AMB continues to demonstrate its empowerment credentials through a
combination of shareholding, board composition, senior management and staff, as
well as its investment, transformation and social responsibility policies.
Ratings
During the year, the group maintained its short-term A2 and long-term BBB+
ratings awarded by Global Credit Ratings Co Limited and its short-term zaA2 and
long-term zaBBB awarded by CA Ratings.
Corporate governance
The directors endorse and fully comply with the code of corporate practice
and conduct recommended in the first King report. In addition, the directors
have studied the second King report, and while AMB already complies with many of
the applicable recommendations, attention is being given to areas where the
group does not yet fully comply. By supporting these codes, AMB demonstrates its
commitment to the highest standards of integrity and ethical conduct in dealings
with all stakeholders.
Recent press coverage
The board of AMB regrets that the Group has attracted a degree of speculative
press coverage recently. In this regard, the board assures stakeholders that
AMB`s "financial health" has been sound at all times during this difficult
period and at no stage has AMB faced liquidity constraints.
The board has been fully appraised of all correspondence between the South
African Reserve Bank (SARB) and AMB and is fully satisfied that all
correspondence has been appropriately dealt with and that the highest levels of
corporate governance have been adhered to. Finally, the board is precluded from
making any disclosure of the contents of such correspondance to any third party
by Section 33(2) of the SARB Act, the breach of which is a criminal offence.
Commitment
AMB would not have been able to survive this tumultuous year without the
commitment of its people. Consequently, it was with great sadness that AMB
embarked on a retrenchment process in November 2002, which saw the company part
ways with many capable people. We particularly wish these people well in their
endeavours in the future.
Furthermore, and in light of recent press publicity, we express our
appreciation to our shareholders, who have been fully supportive during this
difficult period. We also thank our fellow board members for their dedication
and counsel through these volatile times, and especially our clients and
investee companies, whose support is pivotal to AMB`s success.
Dividend
In view of AMB`s high level of liquidity, an ordinary dividend of 40 cents
per share has been declared for the year ended 30 September 2002. This is an
increase of 33,3% on the dividend paid in respect of the previous year. The
dividend will be paid on 24 February 2003 to all AMB shareholders recorded in
the register of the company at the close of business on 21 February 2003. The
last date to trade cum dividend will be 14 February 2003 and trading will
commence ex dividend from 17 February 2003. Share certificates may not be
dematerialised or rematerialised between 17 February 2003 and 21 February 2003,
both days inclusive.
Share buy back
During the year under review, the Group acquired AMB shares as part of the
share buy-back program. A total of 4 451 206 shares were acquired at an average
price of R6,97.
The year ahead
AMB enters the new financial year with greater certainty on its future
strategic direction, as it returns to its core competency of niche investment
banking activities. The group concentrated in the second half of the 2002
financial year on addressing the capital and operational structure of the
business, and creating the liquidity necessary to hand back the banking licence.
This has led to a leaner and more focused organisation with a strong balance
sheet.
In the new year, AMB will focus on rebuilding the organisation from its
current base. This will entail the final cancellation of the banking licence,
strengthening AMB`s empowerment credentials and improving AMB`s return on
equity. In this regard, AMB will evaluate the level of capital and liquidity
necessary to sustain its existing business and return surplus capital to
shareholders to the extent that it cannot be deployed in assets generating an
acceptable return on equity.
The business model will be focused on AMB`s areas of core competency, namely
advisory, fund management and trading activities. AMB has well established
business units, highly talented people, a hallmark that symbolises quality
service and innovation and an established reputation for integrity in our
dealings with clients. Although AMB expects the difficult investment banking
environment to continue in 2003, management is intent on returning the business
to acceptable levels of profitability in the new year.
Review opinion
The results have been reviewed by AMB`s auditors, Deloitte & Touche Chartered
Accountants (SA), and their review opinion is available for inspection at AMB`s
registered office.
Further cautionary announcement
Further to the cautionary announcement published on 6 November 2002, AMB
shareholders are advised that AMB is still involved in negotiations with
unitholders of AMB Private Equity Partners Limited which, if successfully
concluded, could have a material effect on the price at which AMB shares trade
on the JSE Securities Exchange South Africa. Accordingly, AMB shareholders are
advised to continue exercising caution when dealing in their shares, until such
time as a further announcement is made in this regard.
On behalf of the board
Dave Winckler B Peter Vundla Andrew Sprague
Chairman Executive Deputy Chairman Chief Executive Officer
12 December 2002
Registered address:
18 Fricker Road Illovo.
Tel: (+2711) 215-2000
Transfer secretaries:
Computershare Investor Services Limited,
8th Floor, 70 Marshall Street,
Johannesburg 2001, South Africa
PO Box 1053, Johannesburg, 2000,
South Africa
Sponsor:
African Merchant Bank Limited
Registered Bank
Registration number: 1996/016470/06
EXECUTIVE DIRECTORS:
Zenzo Lusengo, Owen Maubane, Andrew Sprague,
Chris Vosloo, Peter Vundla
NON-EXECUTIVE DIRECTORS:
Dr Danisa Baloyi, John Chalsty*, Dr Azar Jammine,
Akhter Moosa, Jim Myers*, Robin Rumboll*, Dave Winckler
*Non-South African
COMPANY SECRETARY:
Rian Smit
www.amb.co.za
Date: 12/12/2002 11:21:07 AM Produced by the JSE SENS Department
