| Mon 30 Jun 2003, 17:55 | | AMB Holdings Limited - Interim Results and Results |
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AMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1995/003054/06
Share code: AMB ISIN: ZAE000029682
("AMB" or "the Group")
INTERIM RESULTS ANNOUNCEMENT AND RESULTS OF GENERAL MEETING
For the six months ended 31 March 2003
* Significant increase in net operating income
* Expeditious return of banking licence
* Benefits from rationalisation and restructuring realised
* Interim cash distribution proposed
* Strong group balance sheet
ABRIDGED CONSOLIDATED INCOME STATEMENT
6 months 6 months Year
ended ended ended
31 March 31 March 30 Sept
2003 2002 2002
change (Unaudited) (Unaudited) (Audited)
% R"000 R"000 R"000
Revenue excluding net
finance income 45 052 35 775 77 401
Net finance income 42 932 23 913 56 667
Total revenue 47,4 87 984 59 688 134 068
Operating expenses (36,3) (39 009) (61 217) (137 238)
Pre-tax associate
income/(loss) 394 3 064 (2 789)
Net operating
income/(loss) 3 116,2 49 369 1 535 (5 959)
General and specific
provision for
bad/doubtful debts (15 655) (25 000) (105 460)
Impairment of
investments - - (36 873)
Bad debts written off - - (13 534)
Insurance performance
bonus - 62 000 62 000
Translation gains - 30 699 19 900
Non-recurring expenses (7 659) - (22 082)
Profit/(loss) before
tax (62,4) 26 055 69 234 (102 008)
Tax (6 988) (5 823) (51 532)
Profit/(loss) after
tax (69,9) 19 067 63 411 (153 540)
Minority interests 1 026 1 753 3 550
Net profit/(loss)
attributable to
ordinary shareholders (69,2) 20 093 65 164 (149 990)
Reconciliation of
headline profit:
Attributable
profit/(loss) 20 093 65 164 (149 990)
Goodwill amortised - 1 755 3 510
Impairment of
investment in
associate company - - 30 038
Profit on disposal of
fixed assets (119)
Share of goodwill
amortised in
associate company 195 - 12 926
Share of impairment
of fixed assets
in associate company - - 1 007
Share of profit on
disposal of
fixed assets in
associate company (271) - (483)
Headline profit/(loss) 19 898 66 919 (102 992)
Ratios
Cost to Income ratio
(%) 44 68 102
Weighted average
number of
shares in issue ("000) 104 737 108 491 106 410
Earnings/(loss) per
share
("EPS/(LPS)") (cents) (68,1) 19,2 60,1 (141,0)
Headline EPS/(LPS)
(cents) (69,2) 19,0 61,7 (96,8)
Dividend per share
(cents) - - 40,0
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
6 months 6 months Year
ended ended ended
31 March 31 March 30 Sept
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
R"000 R"000 R"000
Cash flows from operating
activities (104 083) (90 627) 35 941
Cash flows from investing
activities (678) 39 422 65 176
Cash flows from financing
activities (242 269) (26 841) (31 025)
Net (decrease)/increase in cash
and
cash equivalents (347 030) (78 046) 70 092
Cash and cash equivalents at the
beginning of the period 779 951 689 959 689 959
Effects of exchange rate changes
on cash
and cash equivalents (38 068) 30 699 19 900
Cash and cash equivalents at the
end
of the period 394 853 642 612 779 951
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS" FUNDS
6 months 6 months Year
ended ended ended
31 March 31 March 30 Sept
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
R"000 R"000 R"000
Capital and Reserves
At the beginning of the period 948 568 1 170 758 1 170 758
Net (decrease)/increase as a
result
of shares repurchased - (26 831) (31 025)
Net exchange rate adjustments (38 068) 915 722
Attributable profit for the period 20 093 65 164 (149 990)
Dividend - - (41 897)
At the end of the period 930 593 1 210 006 948 568
ABRIDGED CONSOLIDATED BALANCE SHEET
As at As at As at
31 March 31 March 30 Sept
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
R"000 R"000 R"000
Assets
Cash and cash equivalents 394 853 642 612 779 951
Trading securities 7 641 209 424 83 330
Term advances 226 913 768 839 576 905
Investments 247 687 333 161 274 108
Accounts receivable 116 157 185 218 140 695
Deferred tax 5 997 14 861 6 019
Fixed assets 4 118 4 224 4 234
Intangible assets - 4 797 -
Total assets 1 003 366 2 163 136 1 865 242
Capital and reserves
Issued capital 669 163 673 356 669 163
Reserves (36 555) 1 706 1 513
Accumulated profits 297 985 534 944 277 892
Capital and reserves 930 593 1 210 006 948 568
Minority interests 2 008 433 3 094
Total capital and reserves 932 601 1 210 439 951 662
Liabilities
Accounts payable 22 974 44 375 111 701
Trading securities 31 009 18 709 15 293
Debentures - 211 002 2 25 914
Deposits - 571 792 3 58 029
Collateral liabilities 16 782 106 819 202 643
Total liabilities 70 765 952 697 913 580
Total equity and liabilities 1 003 366 2 163 136 1 865 242
Net asset value per share
(cents) 889 1 150 906
Total number of shares in
issue ("000)
(excluding treasury shares) 104 737 105 241 104 737
COMMENTARY
Introduction
The period under review has been characterised by the significant progress
made in achieving AMB"s stated objectives of consolidating its operating
activities and restructuring its capital base. AMB has during the period
liquidated sub-optimal and inefficient balance sheet structures and returned to
its core areas of competence.
The results for the six-month period are positive, based on a relative
analysis and encouraging, bearing in mind the difficult trading conditions and
extensive restructuring undertaken.
Overview
The operating environment over the six-month period has been challenging for
most financial services companies. Globally, concerns around the economic
slowdown were compounded by corporate governance and accounting irregularities
and political uncertainties largely centred around the war in Iraq. These
factors led to volatile equity, currency and fixed income markets, and
similarly impacted local markets, making trading conditions in domestic capital
markets and advisory services markets difficult. Treasury activities were
further frustrated by errors in the calculation of inflation statistics, which
made the domestic fixed income market difficult to predict. Consequently, the
strategy of net asset value preservation and reduced risk appetite has been
proven to be correct, as is reflected in the operational performance and
balance sheet of the Group.
Group Results
Balance Sheet
AMB has, over the past six months, focused on handing back its banking
licence, simplifying its balance sheet and restructuring its operations and
capital base to position it as a non-banking financial services group.
On 12 March 2003, the Group officially handed back its banking licence, which
resulted in the repayment of deposits and the receipt of short-term advances.
Furthermore, AMB reduced its exposure to banking and debt related assets, which
resulted in term advances decreasing and a build up of cash resources.
On 11 March 2003, the Group"s secondary capital term loan matured with the
result that the debentures of AMB Advisory Services Limited were redeemed.
Income Statement
AMB"s operating results for the period reflect AMB"s ability to remain
focused during difficult trading conditions and a major restructuring.
Total revenue for the period of R88,0 million was 47% above that of the
comparative period. Encouragingly, commissions and fees were significantly
above levels in the comparative period and in line with budget, demonstrating
AMB"s competitive positioning in this market. Trading income was up on the
comparative period, despite the volatile trading conditions and AMB"s reduced
appetite for risk. The comparative period investment profits were not repeated
in the first half of the financial year due to the unpredictability of the
timing of investment banking realisations.
Expenses were significantly curtailed and will continue to be further
reduced. Certain expenses will continue to be incurred during the second half of
the financial year due to lead times in termination clauses and cancellation
payments on contracts.
Net operating income for the period of R49,4 million was significantly above
that of the comparative period.
Provisions for the current year comprise mainly the net loss on the Telkom SA
Limited ("Telkom") investment banking position taken in 2001. The listing value
of Telkom was disappointing from an AMB perspective and resulted in a
significant write-off for all funders to this transaction.
Non-recurring expenses relate to retrenchment and closure costs associated
with certain non-core businesses and the handing back of the Group"s banking
licence. Further once-off restructuring costs will be incurred in the second
half of the financial year.
Operations
The operations of AMB performed acceptably, bearing in mind the difficult
trading conditions, and the risk appetite and net asset value preservation
approaches adopted during the period.
Advisory services
The corporate finance division completed several transactions, the majority
of these being empowerment related deals where AMB has a clear competitive
advantage. The largest transaction concluded was the R1,9 bn restructuring of
Tsogo Sun Holdings Limited, part of the SAB Miller Plc group, which saw
empowerment groups gaining control of these gaming and hotel assets.
The public finance division concluded a number of parastatal mandates, the
most prominent of which was advising Telkom on its initial public offering of
shares to retail and institutional investors.
The debt advisory division focused on large once-off structured transactions,
due to the subdued nature of the debt origination market. The full benefit of
these initiatives will be realised in the second half of the financial year.
Treasury
Treasury activities were curtailed in the first half of the financial year
due to the higher level of risk relating to global political and economic
uncertainty. Against this, the treasury division performed acceptably over the
period.
Fund management
The private equity division was primarily focused on implementing the
delisting of AMB Private Equity Partners Limited ("AMB Partners"), bedding down
recent transactions and streamlining its portfolio. The division performed well
in progressing these objectives, and is well positioned to extract value from
the portfolio once AMB Partners has been delisted and a more efficient
operational structure effected.
Ten50Six Holdings Limited ("Ten50Six") continues to focus on growing its
market position as a leading provider of administration services to the
retirement fund industry. The management of the company was restructured during
the period, which saw the appointment of a new chief executive officer. Ten50Six
performed acceptably during the period despite the restructuring process.
AMB Foord Asset Management (Pty) Limited focuses on the provision of niche,
value styled investment management services to the retirement fund industry. The
company, although in its infancy, has performed in line with key
performance benchmarks.
Strategic
Results of the general meeting of shareholders of AMB
A general meeting of the shareholders of AMB was held at 10:00 on Monday, 30
June 2003, to consider the resolutions relating to the acquisition of
approximately 40% of the issued linked units of AMB Partners ("the
acquisition") by way of a scheme of arrangement ("the scheme").AMB shareholders
representing 99,99% of those present and voting approved the implementation of
the acquisition.
Application will be made to the High Court of South Africa (Witwatersrand
Local Division),which is located in the High Court Building, Von Brandis
Square, corner Pritchard and Von Brandis Streets, Johannesburg ("the Court") to
sanction the scheme on Tuesday, 8 July 2003 at 10:00 or as soon thereafter as
Counsel may be heard. If the Court sanctions the scheme, the only condition
precedent to which the scheme will remain subject, will be the registration of
the Order of Court sanctioning the scheme by the Registrar of Companies.
Share repurchase
At a general meeting of shareholders held on 29 April 2003, shareholders
approved the specific repurchase of 18 301 800 AMB shares. As at 30 June 2003,
13 052 107 shares had been repurchased and cancelled and a maximum of 5 249 693
will be repurchased and cancelled by 30 September 2003. Application will be made
for the delisting of 4 040 740 shares which were repurchased and cancelled on
30 June 2003.
Basis of presentation
Financial statements are prepared in accordance with South African Statements
of Generally Accepted Accounting Practice. Accounting policies applied in
these interim financial results are consistent with those applied in the annual
financial statements for the year ended 30 September 2002. Where necessary,
comparative figures are reclassified to allow for more meaningful comparison.
Until 30 September 2002, AMB classified AMB Capital (Ireland) Limited ("AMB
Ireland") as a foreign operation. Since the cancellation of the Group"s banking
licence and as a result of the expansion of AMB Ireland"s activities, the
classification of AMB Ireland changed from that of a foreign operation to a
foreign entity.
As a result, in order to more fairly reflect the performance of the group and
in compliance with AC112 "The effects of changes in foreign exchange rates"
("AC112"), translation effects from foreign exchange gains or losses on the
capital of AMB Ireland are taken to equity. This change is in line with
international best practice and current exposure drafts. In terms of AC112,
comparative amounts are not restated in the case of a change in classification.
Had the change in classification been applicable from 1 October 2001, the
impact would have been as follows:
6 months ended 6 months ended Year ended
31 March 2003 31 March 2002 30 Sept 2002
Capital and reserves 930 593 1 210 006 948 568
Net attributable
profit/(loss) 20 093 34 465 (169 890)
AMB has made significant progress on the implementation of AC133 "Financial
instruments: Recognition and Measurement" ("AC133"), and it is anticipated that
the Group will be fully compliant by 30 September 2003. The financial impact of
the implementation of AC133 is not expected to be material.
Distribution to shareholders
In light of the restructuring of AMB"s balance sheet and a focus on improving
AMB"s return on equity, the Board has, subject to shareholder approval, agreed
to an interim cash distribution to shareholders. The quantum of this will be
determined once the delisting of AMB Partners has been completed, the
associated debt obligations relating to this quantified and the operational
requirements of AMB assessed. The Board will make a further announcement to
shareholders in this regard in due course.
Warehoused AMB shares
In order to ensure the sustainability of AMB, strengthen its positioning as
an empowerment company and align the interests of all stakeholders, a total of
24 million AMB shares were acquired by Heywood Investments (Pty) Limited in
terms of a warehousing facility, for the benefit of value adding shareholders,
including empowerment groups and management.
The sub-committee of the AMB Board, formed to oversee this process, is
formulating the criteria for participation in the warehousing facility and
identifying a short list of empowerment groups with which to engage. The Board
believes this is a positive step in strengthening AMB"s position in the market,
and once this transaction has been completed, a further announcement will be
made.
Prospects
Given the difficult global and domestic trading conditions and the
significant focus on restructuring the Group, the Board believes it imprudent to
forecast earnings for the remaining six-month period. The directors are however
confident that AMB has made significant progress in achieving a more sustainable
operational and capital structure. The cost base of the business has been
reduced substantially and AMB will continue to focus on reducing this over the
next six-month period. Once the restructuring has been completed, AMB believes
it will be in a position to extract the benefits of this process going forward.
On behalf of the Board
Dave Winckler B Peter Vundla Andrew Sprague
Chairman Executive Deputy Chairman Chief Executive Officer
30 June 2003
Registered address: 18 Fricker Road Illovo.Tel: (+2711) 215-2000
PO Box 786833, Sandton 2146, South Africa
Transfer secretaries: Computershare Investor Services Limited,
70 Marshall Street, Johannesburg 2001, South Africa
PO Box 1053, Johannesburg, 2000, South Africa
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
Sponsor: AMB Advisory Services Limited
