| Tue 15 Apr 2003, 17:17 | | Explorer - Abridged reviewed financial results for |
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Explorer Corporation Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/010950/06)
Share code: EPL ISIN: ZAE000039970
("Explorer", "the Company" or "the Group")
Abridged reviewed financial results for the year ended 31 December 2002
Headline earnings increased by more than 100%
Net asset value increased by more than 100%
Turnover increased by more than 100%
INCOME STATEMENTS
Reviewed for the Audited for the
year ended year ended
31 Dec 2002 31 Dec 2001
R"000 R"000
Revenue 34 337 2 219
Exceptional profit - 5 230
Operating expenses and cost of sales (28 656) (11 969)
Profit/(Loss) before finance costs
and depreciation 5 681 (4 520)
Finance costs (346) (33)
Depreciation and amortisation (8 099) (3 345)
Loss before taxation (2 764) (7 898)
Taxation (2 830) -
Net loss for year (5 594) (7 898)
Earnings per share (cents) (8,89) (48,8)
Headline earnings/(loss) per share (cents) 4,1 (31,9)
Reconciliation of headline
earnings/(loss) per share
Headline earnings/(loss) per share has
been calculated in terms of AC 306.
Attributable earnings for year (5 594) (7 898)
Adjusted for:
- Goodwill amortisaion 5 040 240
- Impairment charge 3 103 2 492
- Write-down of Share Incentive Trust - 8
Headline earnings/(loss) 2 549 (5 158)
BALANCE SHEETS
Reviewed for the Audited for the
year ended year ended
31 Dec 2002 31 Dec 2001
R"000 R"000
Assets
Non-current assets 111 143 10 367
Property, plant and equipment 3 729 629
Loans 2 626 2
Debtors - long term 57 058 -
Goodwill on acquisition of ICC 43 186 -
Intangibles 4 544 9 736
Current assets 91 868 2 351
Short-term investments 846 -
Accounts receivable 7 445 13
Net investment in finance leases 81 341 -
Cash on hand 1 923 2 338
Loans 313 -
Total assets 203 011 12 718
Equity and liabilities
Shareholders" funds 68 819 11 788
- Ordinary share capital 11 160 2 580
- Share premium 116 138 49 642
- Foreign translation reserve (12 451) -
- Retained earnings (46 028) (40 434)
Non-current liabilities 31 513 -
- Long-term loans 24 315 -
- Deferred tax 7 198 -
Current liabilities 102 679 930
- Short-term loans and money market instruments 77 596 -
- Accounts payable 11 582 930
- Taxation 75 -
- Bank overdraft 13 426 -
Total equity and liabilities 203 011 12 718
Weighted average number of shares ("000) 62 940 16 169
- calculated on consolidated value of 1:10
Shares in issue ("000) 111 600 25 800
Net asset value per share (cents) 61,67 45,7
CASH FLOW STATEMENTS
Reviewed for the Audited for the
year ended year ended
31 Dec 2002 31 Dec 2001
R"000 R"000
Cash flow from operating activities 8 827 (3 840)
Cash flow from investing activities (116 081) 4
Cash flow from financing activities 93 412 5 000
Net movement in cash and cash equivalents for year (13 842) 1 164
Cash and cash equivalents at beginning of year 2 339 1 175
Cash and cash equivalents at end of year (11 503) 2 339
STATEMENT OF CHANGES IN EQUITY
Foreign
trans- Accu-
Share Share lation mulated
capital premium reserve loss Total
R"000 R"000 R"000 R"000 R"000
Balance at 1 January 2001 880 46 343 - (32 536) 14 687
Net loss for year - - - (7 898) (7 898)
Issue of share capital 1 700 3 300 - - 5 000
Balance at 31 December 2001 2 580 49 643 - (40 434) 11 789
Net loss for year - - - (5 594) (5 594)
Issue of share capital 8 580 66 495 - - 75 075
Share issue expenses - - - - -
Foreign translation reserve - - (12 451) - (12 451)
Balance at 31 December 2002 11 160 116 138 (12 451) (46 028) 68 819
COMMENTS
The board of directors of are pleased to present the reviewed financial
results for the Group in respect of the year ended 31 December 2002.
BACKGROUND
Explorer, the holding company of the Explorer Group of companies, listed on
the JSE Securities Exchange South Africa ("JSE") during 1999.
BUSINESS REVIEW
Explorer reported headline earnings of R4,1 million for the year to 31
December 2002, reversing the previous year"s headline loss of R5,16 million.
This represents a R8 million turnaround for the Group, whose principal source of
income is from Industrial Credit Company ("ICC"), a Zambian-based industrial
leasing company acquired from Loita Capital Partners International last year.
This acquisition represents a major addition to Explorer"s traditional business
of issuing Explorer-branded cards. Revenue of R34,3 million (2001: R2,2 million)
consisted mainly of lease income from ICC.
Headline earnings per share increased exponentially to 4,1 cents from (3,2)
cents the previous year.
The Group reported a loss per share of 8,89 cents after accounting for
finance costs of R10,7 million, a goodwill write-off of R5,0 million and a write
off of R2,2 million, pertaining to a non-operational financial asset relating to
Mercantile Bank Limited - a security for leased assets called up during the
termination of business dealings with the bank. Explorer paid R75 million for
ICC, which included goodwill of R47,9 million (the difference between the
purchase price and the net asset value of ICC). This is to be amortised over 10
years. Also included in operating expenses are impairment provisions against the
intangible assets in line with AC 129, of R3,1 million. All development costs
capitalised as part of the initial set-up costs will be written-down by December
2003, in line with AC 129.
An analysis of the operating costs is shown below:
Reviewed for the Audited for the
year ended year ended
31 Dec 2002 31 Dec 2001
R"000 R"000
Total operating costs 28 656 14 641
Operational expenses - Explorer 6 196 14 082
Operational expenses - ICC 17 152 -
Call account write-off 2 205 -
Impairment provision 3 103 559
The balance sheet shows a substantial increase in current assets to R91,8
million (2001: 2,3 million), R81,3 million of which is the net investment in
finance leases, and R7,4 million is accounts receivable. R12,4 million
represents foreign transaction losses arising from the strengthening of the Rand
- US dollar exchange rate. ICC"s income is predominantly dollar-based.
Non-current liabilities include long-term loans of R24,3 million and deferred
tax of R7,2 million. The balance sheet also shows a sharp rise in current
liabilities to R102,6 million, most of it short-term loans and money market
instruments. The bank overdraft pertains mainly to ICC.
The South African card business has undergone a strategic shift towards high-
volume, fixed margin transactions, and to this end a number of contracts were
concluded in the healthcare industry to provide medical aid members with
smartcard technology for the processing of claims and financing products, where
needed. The largest such contract concluded was with the Protector Group, which
is 65% owned by Glenrand MIB.
The Group"s card-based business has started generating annuity revenue from
the first half of 2003 and the directors anticipate that the South African
operations will break even both from a cash flow as well as net profit after tax
perspective within the next 18 to 24 months. Until such time, the Zambian
operations will contribute to the funding of the local operations. Explorer has
broken new ground in the South African smartcard market by linking financial
services products to medical patient and risk management systems. A large
percentage of expenditure incurred by Explorer during the current year pertains
to setup and development costs for the new smart card system.
The directors have secured financing for R5 million and are currently in the
process of attaining a significant additional source of funding to ensure the
growth of all operations, and the ability to continue to meet its current and
future obligations. The Group plans to extend these card services into other
African countries in due course.
The Group"s strategic intent is to transform Explorer into an investment
holding company for Loita Capital Partners" African financial services assets,
the first step of which was the acquisition of ICC.
ICC"s strategy is to extend its service and product offering beyond Zambia to
regional markets such as Malawi, Kenya, Mozambique and Namibia. Research
suggests the region is poorly serviced in terms of the kind of professional and
structured leasing finance offered by ICC.
ICC - BACKGROUND INFORMATION
The historical financial information pertaining to the acquired company is as
follows. Please note that the figures for the year ended 31 December 2002 have
been consolidated with those of Explorer.
ICC - INCOME STATEMENTS
Audited for Audited for Audited for Audited for
the year the year the year the year
ended ended ended ended
31 Dec 2002 31 Dec 2001 31 Dec 2000 31 Dec 1999
R"000 R"000 R"000 R"000
Income 34 225 13 405 23 549 14 322
Profit before tax 14 215 2 534 13 634 6 186
Tax (2 057) 2 709 (5 730) (2 149)
Profit after tax 12 158 5 244 7 904 4 037
Dividends (4 925) - (1 997) (1 408)
Retained profit for year 7 233 5 244 5 907 2 628
ICC - BALANCE SHEETS
Audited for Audited for Audited for Audited for
the year the year the year the year
ended ended ended ended
31 Dec 2002 31 Dec 2001 31 Dec 2000 31 Dec 1999
R"000 R"000 R"000 R"000
Assets
Non-current assets 60 607 27 560 26 440 13 583
Fixed assets 3 549 2 745 877 957
Net investment in finance leases 57 058 24 799 24 808 11 720
Debtors - long term - 16 755 906
Current assets 90 882 61 192 47 762 37 102
Net investment in finance leases 81 341 49 838 40 347 29 339
Accounts receivable 6 773 5 980 3 353 1 090
Tax recoverable - - 68 -
Short-term investment 846 1 544 - 3 919
Cash and bank balances 1 922 3 830 3 994 2 754
Total assets 151 489 88 752 74 202 50 685
Equity and Liabilities
Current liabilities 95 241 48 531 40 423 27 886
Accounts payable 8 487 6 516 5 062 3 471
Short-term loans 74 275 41 969 32 970 22 377
Tax payable 75 45 - (782)
Bank overdraft 12 404 1 2 391 2 820
Shareholders" funds 24 735 20 659 17 411 9 507
Share capital 753 415 415 415
Reserves 23 982 20 244 16 996 9 092
Deferred tax 7 198 4 858 7 613 2 890
Long-term loans 24 315 14 704 8 755 10 402
Total equity and liabilities 151 489 88 752 74 202 50 685
ICC has been in operation for over 37 years, never once recording a loss.
Currently Explorer"s largest single revenue and profit generator, and the
directors plan to expand its proven and successful business formula and culture
to South Africa and other countries in the region. The ICC acquisition furnishes
Explorer with a strong balance sheet from which to grow its international and
local operations and several transactions are being concluded to significantly
launch local leasing operations.
Some 89% of ICC"s lease book is denominated in hard currency, and its major
clients include multi-nationals and well-established local corporations,
including exporters. ICC"s share of the Zambian industrial leasing market
exceeds 60%, the result of nearly four decades of successful trading in this
market. Its strong brand presence and credibility furnish it with a powerful
platform for expansion into other regional markets. ICC provides principally
full payout lease finance, where the total cost of leased assets is recovered
over the primary period. Under the lease contracts, the lessee is responsible
for all taxes, insurance, value-added tax, legal and other related expenses. ICC
also provides other leasing services such as operating leases, vendor leases and
lease syndication. ICC continues to expand its hard currency lease business,
backed by a diversified and matched funding base from various reputable
financial institutions.
CORPORATE GOVERNANCE
Appropriate standards of Corporate Governance have been applied at Explorer
and the board now comprises an equal number of non-executive directors.
The strength of the ICC brand is largely due to an unwavering focus on sound
corporate governance. ICC complies with - and in most cases exceeds - the
minimum requirements of the Bank of Zambia. It is managed along public company
lines with a board of directors comprising a majority of independent non-
executive directors.
DIVIDENDS
No dividends will be paid in the foreseeable future, as cash generated will
be retained and utilised to grow and expand the business of the Group.
SOUTH AFRICAN STATEMENTS OF GAAP AND COMPANIES ACT REQUIREMENTS
The financial statements were drawn up in compliance with South African
Statements of Generally Accepted Accounting Practices and the Company has
complied with requirements of the Companies Act and accounting policies. The
accounting policies are consistent with those applied in the Annual Financial
Statements for the year ended 31 December 2001, except for adopting of AC 133
financial instruments, recognition and measurement, during the year.
AUDIT OPINION
Ernst & Young"s unmodified review report (which excludes ICC"s historical
financial information) on the condensed financial statements contained in this
preliminary report is available for inspection at the company"s registered
office.
For and on behalf of the board of directors
Justin Chinyanta
Chairman
15 April 2003
Registered office:
C/o Loita Capital Partners International
2nd Floor, East Wing
11 Alice Lane,
Sandton
Transfer secretaries:
Computershare Investor Services Limited
Ground Floor,
70 Marshall Street
Johannesburg
Directors:
J Chinyanta, Y Bazian, K Jones, C M van Nieuwkerk, A Fletcher*,
A Karrim*, R Kelley*, N Molver* *Non-executive
