| Thu 24 Apr 2003, 15:43 | | M Cubed Group Audited Results |
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m Cubed Group Audited Results
m Cubed Holdings Limited
Registration number: 1998/014568/06
Share Code: MCU
ISIN: ZAE000033353
Audited group results and dividend declaration for the year ended
28 February 2003
m Cubed group audited results
Income Statement
for the year ended 28 February 2003
28 February 28 February
2003 % 2002
R"000 Change R"000
Net revenue 399 059 272 326
Cost of revenue (201 096) (120 034)
Gross profit 197 963 30 152 292
Operating expenditure (155 597) 76 (88 336)
Operating profit before net finance income 42 366 (34) 63 956
Net finance income 10 464 26 8 276
Share of profit of associates 1 922 553
Net profit before taxation 54 752 (25) 72 785
Taxation (20 322) 6 (19 170)
Net profit after taxation 34 430 (36) 53 615
Minority interest (856) 269
Headline earnings attributable to
shareholders 33 574 (38) 53 884
Amortisation of goodwill (21 007) (12 640)
Costs resulting from merger - (4 242)
Earnings attributable to ordinary
shareholders 12 567 (66) 37 002
Weighted number of shares in issue ("000) 750 000 562 500
Headline earnings per share (cents) 4,5 (53) 9,6
Earnings per share (cents) 1,7 6,6
Balance Sheet
at 28 February 2003
28 February 28 February
2003 2002
R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment 31 236 28 706
Investments 23 776 945 28 024 154
Goodwill 183 950 193 148
Investment in associates - 10 689
Loans and advances 34 657 28 741
Deferred taxation 1 676 4 786
Total non-current assets 24 028 464 28 290 224
Current assets
Receivables and prepayments 48 985 41 998
Cash and cash equivalents 67 773 62 059
116 758 104 057
Total assets 24 145 222 28 394 281
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares 7 500 7 500
Share premium 332 460 332 460
Revaluation and other reserves (6 124) 5 967
Accumulated profits 45 646 48 079
Ordinary shareholders" funds 379 482 394 006
Minority interests 2 965 438
382 447 394 444
Non-current liabilities
Provision for policyholder liabilities 23 655 237 27 833 560
Deferred capital gains tax 47 433 96 610
23 702 670 27 930 170
Current liabilities
Trade and other payables 47 604 49 596
Current tax liabilities 12 501 20 071
60 105 69 667
Total equity and liabilities 24 145 222 28 394 281
Number of shares in issue ("000) 750 000 750 000
Net asset value per share (cents) 50,6 52,5
Net tangible asset value per share(cents) 26,1 26,8
Statement of Changes in Equity
for the year ended 28 February 2003
Non-
Share Share distributable Accumulated
capital premium reserve profits Total
R"000 R"000 R"000 R"000 R"000
Balance at
1 March 2002 7 500 332 460 5 967 48 079 394 006
Decrease in
non-distributable
reserve arising
on translation - - (12 091) - (12 091)
Accumulated profits - 12 567 12 567
Dividend - - - (15 000) (15 000)
Balance at
28 February 2003 7 500 332 460 (6 124) 45 646 379 482
Cash Flow Statement
for the year ended 28 February 2003
28 February 28 February
2003 2002
R"000 R"000
Operating activities (2 994 984) 4 081 511
Life assurance business (4 327 866) 10 925 663
Other receipts 501 989 233 889
Cash received (3 825 877) 11 159 552
Cash paid 861 250 (7 062 044)
Cash (utilised by)/generated
from operations (2 964 627) 4 097 508
Net finance income 10 464 8 276
Taxation paid (25 821) (15 186)
Dividends paid (15 000) (9 087)
Investing activities 3 000 698 (4 065 888)
Additions to property, plant
and equipment (16 703) (12 014)
Proceeds on disposal of property,
plant and equipment 3 757 64
Acquisition of business (7 547) 2 136
Decrease/(increase) in investments 3 020 781 (4 023 126)
Decrease/(increase) in associates 6 326 (8 795)
Increase in loans receivable (5 916) (24 153)
Financing activities - (9 039)
Expense on share issue
Net movement in cash and cash equivalents 5 714 6 584
Net cash and cash equivalents at
beginning of year 62 059 55 475
Net cash and cash equivalents at
end of year 67 773 62 059
SEGMENTAL REPORTING
Headline earnings Net revenue Assets under
Annuity Upfront management
2003 2002 2003 2002 2003 2002 2003 2002
(Rm) (Rm) (Rm) (Rm) (Rm) (Rm) (Rbn) ( Rbn)
Wealth Management 6 29 183 79 21 57 13 13
Asset Management 11 17 106 112 51 - 29 29
Specialised
Investments,
Lending and
Treasury 17 8 27 10 11 14 1 1
34 54 316 201 83 71 43 43
* The comparative figures in the segmental reporting table have been restated in
order to reflect the new operational structure of the group.
m CUBED GROUP YEAR END RESULTS
These results have been prepared in accordance with South African Statements
of Generally Accepted Accounting Practice, as well as the South African
Companies Act of 1973 and the Long-term Insurance Act of 1998. The accounting
policies are consistent with those applied at 28 February 2002. The 2002
comparative figures included 12 months of Escher figures and seven months of the
former m Cubed Capital businesses. These results are audited by Fisher Hoffman
PKF (Jhb) Inc. The auditors" unqualified report is available for inspection at
the registered offices of the company.
Financial commentary
m Cubed is a focused investment services business and SA"s premier
independent multi-manager. It creates risk-adjusted solutions through two major
complementary businesses: Asset Management and Wealth Management.
In the financial year to 28 February 2003, assets under management were R43
billion (2002: R43 billion) and assets under administration were R53 billion
(2002: R52 billion). Challenging operating conditions took their toll with
headline earnings down 38% to R33,5 million (2002:
R53,9 million).
The reduced earnings were partially attributable to the non-renewal of
limited foreign investment on the offshore investment of client funds alluded to
under "Prospects" in the group"s interim results for the six months to 31 August
2002. The incorporation of prudential investment limits from 1 May 2003 should
impact positively on the forthcoming year"s results. Also impacting these
results is the large number of investors who have switched into low margin
portfolios such as cash, on the back of market uncertainty, the decline in local
and international markets and the loss of a large structured investment client.
Asset management portfolio performance
Over the past year, volatile global market conditions, a resurgence in Rand
strength and rampant domestic inflation negatively affected our equity markets.
Over the 12 months to 28 February 2003, the 5th Quadrant Survey and other major
surveys show most of m Cubed"s portfolios continuing to perform within the 1st
and 2nd quartiles of their respective categories, clearly leading our multi-
manager competitors in overall sustained performance. Almost all of our funds
outperformed their benchmarks significantly over this period.
OPERATIONAL REVIEW
1. Asset management
This division incorporates Multi-Manager Solutions, Escher Structured
Products, Corporate Money Managers, Policy Exchange and Asset Management
Implementation Services.
Multi-Manager Solutions provides specialist multi-manager asset management to
institutional and private clients. Despite a sharply declining market
environment, multi-manager solutions stabilised its asset base, largely from
sound institutional and private client inflows. Subsidiary Escher UK has not yet
reached critical mass but has performed in line with expectation.
Escher Structured Products (ESP) is active in the design, implementation and
administration of capital protected and other structured investment products for
the retirement fund and retail investment markets. While earnings were below
budget, due to the loss of a key client (which moved its business to an inhouse
provider) during the year, ESP managed to successfully diversify and grow its
client base.
Corporate Money Managers (CMM) provides treasury services to the group"s
multi-manager platform and specialises in the management of investments in
specialised interest rate portfolios and funds on behalf of clients. m Cubed
increased its shareholding in CMM from 50% to 100% during the year under review.
The growth of assets under management during the year exceeded expectation.
Policy Exchange (Polex) is a dominant participant in the traded policy market
in SA. It helps provide the group with a core smooth bonus portfolio to augment
its multi-manager offering. m Cubed increased its shareholding in Polex from 50%
to 70% during the year under review. Polex exceeded its forecast for 2003.
Asset Management Implementation Services (AMIS)
AMIS provides outsourced administration and implementation services to asset
managers, multi-managers and pension fund trustees. Launched during the year
under review, it has yet to reach critical mass.
2. WEALTH MANAGEMENT
This division is responsible for the distribution of the group"s range of
life, international, employee benefit, unit trust, hedge fund and alternate
investment products, via carefully selected independent financial advisors.
Life investment products provides compulsory and voluntary life products and
local and international hedge and capital protection investments under the life
license. Gross new business inflows, though higher than the prior year, were
below expectation without international capacity. The life company is currently
the 9th largest in South Africa.
Alternative investments focuses on the creation and marketing of innovative
hedge fund products. This business performed above expectation.
The unit trusts division offers local and international multi-manager unit
trusts and investment portfolios. Various unit trusts were launched during the
year, resulting in pleasing performance. The Unit Trust Management Company grew
to be South Africa"s 5th largest Manco.
The international division offers a range of investment products from mutual
funds to US Dollar life cover. It also provides multi-manager global investment
opportunities for local and international clients, in conjunction with SEI, a
premier US-based global multi-manager. The lack of foreign investment capacity
impacted the new business volumes negatively resulting in a significant reversal
to a loss for the year. However, the incorporation of prudential investment
limits from 1 May 2003 should positively impact the coming year"s results.
During the year, a small employee benefits business was acquired, which had
been fully integrated by year end. It is expected that the business will grow
organically in addition to helping retain assets.
The unit trust and international outsourced administration divisions
performed in line with expectation.
3. SPECIALISED INVESTMENTS, LENDING AND TREASURY
This division performs a treasury function for the group and certain clients
and invests the group"s capital. It is also a niche provider of customised
financial solutions for institutions, corporate and high net worth individuals.
During the 2003 financial year, the division expanded its capacity to perform
corporate funding and treasury functions.
PROSPECTS
The outlook is obviously challenging. We have a strong business foundation
and as good a team of people as exists in our marketplace. We have planned and
will strive to improve results substantially in 2004.
DECLARATION OF DIVIDEND
The directors have recommended that a dividend of 1 cent per share be
declared for the year ended 28 February 2003. The dividend will be payable to
the shareholders recorded in the register at the close of business on Friday, 6
June 2003. The following dates are relevant to shareholders in respect of the
dividend payment:
2003
Last day to trade cum dividend Friday, 30 May
Commence trading ex dividend Monday, 2 June
Record date Friday, 6 June
Date of dividend payment Monday, 9 June
*Share certificates may not be dematerialised or rematerialised between 2 June
2003 and 6 June 2003, inclusive.
For and on behalf of the board of directors
C M B Bothner J C Storey
Chairman Group managing director
24 April 2003
Directors: C M B Bothner* (chairman), J C Storey (group managing director),
A Cabot-Alletzhauser (American), P J Croeser*, J du Toit*,
M M Dawes, J F Mouton* (alternate), C A Otto*, W Roux*,
I H S Sinton*.
(*Non-executive)
Company secretary: J Steyn
Transfer secretaries: Computershare Services Limited
Edura House,
41 Fox Street
Johannesburg 2001.
PO Box 61051, Marshalltown, 2107.
Telephone: (011) 370-7700; Facsimile: (011) 836-0792.
Registered office: The Cube
Investment Place
10th Road (off 2nd Avenue)
Hyde Park, 2196
PO Box 41259, Craighall, 2024.
Telephone: (011) 340-2300.
Facsimile: (011) 880-8844.
www.mcubed.co.za
