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TOURVEST LIMITED - GROUP INTERIM RESULTS AND WITHDRAWAL OF CAUTIONARY
TOURISM INVESTMENT CORPORATION LIMITED
Registration number 1996/008144/06
Share code: TRT ISIN code: ZAE000012472
Group Interim Results
for the six months ended 25 December 2003
Abridged group income statement
6 months 6 months 12 months
25 Dec 25 Dec 25 Jun
2003 2002 2003
R000 Unaudited Unaudited Audited
Revenue 825 644 895 502 1 665 072
Operating income 74 695 107 262 220 796
Net interest received 1 287 13 769 30 550
Income before taxation 75 982 121 031 251 346
Taxation (65 682) (41 683) (82 443)
Income after taxation 10 300 79 348 168 903
Outside shareholders" (5 416) (9 329) (14 800)
interest
Attributable income 4 884 70 019 154 103
Earnings per share (cents) 0,6 9,3 20,3
Diluted earnings per share 0,6 9,3 19,8
(cents)
Headline earnings per 0,9 9,4 19,7
share (cents)
Dividend paid per share 40,0 8,0 8,0
(cents)
Weighted shares in issue 766 112 752 760 758 874
(000s)
Depreciation (R000s) 16 590 14 056 29 887
Reconciliation of headline
earnings
Attributable income 4 884 70 019 154 103
Impairment provisions - - (1 265)
Capital profits - (195) (4 476)
Amortisation of goodwill 2 197 936 1 949
Headline earnings 7 081 70 760 150 311
Group balance sheet
25 Dec 25 Dec 25 Jun
2003 2002 2003
R000 Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and 116 602 111 161 111 219
equipment
Goodwill 82 156 37 495 38 360
Trademarks 2 352 1 620 2 462
Deferred tax 40 024 39 298 42 913
Financial assets 20 839 47 124 41 268
Current assets
Inventories 199 074 191 471 172 856
Trade and other 128 110 175 975 131 994
receivables
Cash and bank balances 60 538 305 350 418 054
Stock of notes held 83 283 78 696 49 788
Total assets 732 978 988 190 1 008 914
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 36 534 35 135 35 135
Non-distributable reserves 26 965 45 631 31 467
Accumulated profits 178 737 398 024 485 848
Minority interest 22 708 29 761 29 766
Non-current liabilities
Interest-bearing 10 446 4 329 11 787
borrowings
Deferred tax 2 213 - 1 687
Current liabilities
Non interest-bearing
Trade and other payables 304 129 354 668 233 460
Provisions 31 049 34 663 37 490
Taxation payable 22 937 21 752 59 464
Interest-bearing
Bank borrowings 39 192 8 902 38 948
Loans re foreign notes 55 334 55 306 40 869
held
Current portion of 2 734 19 2 993
interest-bearing
borrowings
Total equity and 732 978 988 190 1 008 914
liabilities
Net asset value per share 29,2 57,7 66,5
(cents)
Net tangible asset value 19,0 53,0 61,6
per share (cents)
Ordinary shares in issue 830 350 830 350 830 350
(000s)
Capital commitments 9 364 5 511 14 391
Operating lease 216 457 178 472 258 257
commitments
Group statement of changes in equity
Share Non-
capital Accu- distribu-
and mulated table Total
R000 premiums profits reserves equity
Balance 25 June 35 135 387 491 44 511 467 137
2002
Attributable 154 103 154 103
income to 25 June
2002
Dividend paid (66 451) (66 451)
Dividend received 3 374 3 374
on treasury stock
Deferred tax 8 572 (8 572) -
reversingon
trademarks
Foreign exchange (4 553) (4 553)
translation
differences
Negative goodwill
arising on
purchase of
additional
5% of joint 81 81
venture
Balance as 35 135 487 089 31 467 553 691
previously
reported 25 June
2003
Change in (1 241) (1 241)
accounting policy
Restated balance 35 135 485 848 31 467 552 450
25 June 2003
Attributable 4 884 4 884
income to 25
December 2003
Dividends paid (332 140) (332
140)
Dividends 16 749 16 749
accruing to
treasury stock
Deferred tax 3 396 (3 396) -
reversingon
trademarks
Disposal of 1 399 1 399
treasury stock
for acquisition
of business
Foreign exchange (1 106) (1 106)
translation
differences
Unaudited balance 36 534 178 737 26 965 242 236
25 December 2003
Abridged group cash flow statement
6 months 6 months 12
months
25 Dec 25 Dec 25 Jun
2003 2002 2003
R000 Unaudited Unaudited Audited
Cash flow from operating (281 101) 39 028 95 646
activities
Cash generated by 93 367 134 133 192 062
operations
Net interest received 1 287 13 769 30 550
Change in working 27 362 4 191 -
capital
Taxation paid (102 716) (50 883) (55 333)
Dividend paid (300 401) (62 182) (71 633)
Cash flow from investing (76 459) (28 729) (25 215)
activities
Fixed asset replacement (21 426) (36 988) (48 916)
- net
Net (3 857) (3 181) 21 345
(acquisition)/disposal
of operations and
investments
Goodwill acquired (51 176) (5 178) (5 126)
Net disposal of - 16 618 7 482
financial assets
Cash flow from financing (200) 1 186 10 150
activities
(Reduction) increase in (1 600) (7 511) 2 921
long-term liabilities
Loan to share incentive 1 400 8 697 7 229
trust
Net movement in cash and (357 760) 11 485 80 581
cash equivalents
Segmental analysis
Operating
Operating assets
Revenue income employed
R000 % R000 % R000 %
Six months
to December
2003
Inbound 361 422 44 20 277 27 29 887 13
Outbound 113 046 14 1 619 2 (44 710) (20)
Financial 50 820 6 10 237 14 72 621 33
services
Retail 300 356 36 42 562 57 161 169 74
merchandise
825 644 100 74 695 100 218 967 100
Six months
to
December
2002
Inbound 387 968 43 22 069 20 3 067 2
Outbound 96 264 11 5 984 6 (37 140) (21)
Financial 55 253 6 20 607 19 47 199 26
services
Retail 356 017 40 58 602 55 164 007 93
merchandise
895 502 100 107 262 100 177 133 100
Commentary
Results
The payment in September 2003 of the special dividend of R268 million (inclusive of STC costs) has made comparisons with previous periods not meaningful, as a once-off tax charge of R31 million has been incurred and interest income has been foregone. Excluding the once-off tax charge, the EPS and HEPS would have been 4,7 cents (2003: 9,3 cents) and 5,0 cents (2003: 9,4 cents). Operating income has fallen by 30% from R107 million to R75 million. This fall can largely be attributed to the appreciation of the rand against the US dollar as 75% of Tourvest business is biased in favour of a weak rand. The average rand/US dollar rate of exchange for the period has appreciated by 29% from R10,09 to R7,15.
This has had the following effects:
* Reducing the discretionary spend of tourists by 29%, which means lower spending in our retail stores - especially the jewellery business.
* Reducing commission on forex transactions from foreigners by 29%.
* Making South Africa a more expensive destination for tourists. This has resulted in tourists either not coming or downgrading their spend.
* Increasing the number of South Africans travelling abroad on holiday, which has benefited our outbound tour businesses.
In order to counter the above, Tourvest has:
* Focused on expense reductions, with expenses on a comparable basis decreasing by 0,4% year on year.
* Created different products with a lower price offering.
* Focused on gaining market share.
* Managed margins aggressively.
The seizure of the "Olympia Countess" due to financial difficulties encountered by the ship owners caused the cancellation of the Starlight cruise season, resulting in a significant reduction in operating income. This will also affec the second half of the year, as no profit will be generated. Net interest received has been reduced from R14 million to R1 million due to the cash outflow from the dividends paid. The balance sheet together with cash generation remains strong. Goodwill has increased mainly due to Tourvest purchasing minority interests in some of our subsidiaries.
Operational reviews
Inbound tourism services division.
Total international arrivals to South Africa in August and September 2003 were lower than the previous year. This is the first time since November 2001 that international arrival numbers have decreased. Although tourist numbers from November 2003 onwards are not available, we expect this negative trend has continued. This, coupled with the reduced spend in South Africa because of the stronger rand has negatively affected the inbound business especially from the East. Under the circumstances, the division has however, performed well as it has focused on margins and cutting out unprofitable business. Order books for the remainder of the year are reasonable.
Outbound travel services division
The division traded well and achieved budget. The seizure of the "Olympia Countess" however, resulted in once-off expenses being incurred. The tour operators benefited from the stronger rand with increased passenger flows to destinations outside South Africa. The retail travel businesses are on line to achieve annual override targets. The accounting for these overrides is such that a greater portion is taken to income in the second half of the financial year. Financial services division Gross traded volume of forex in US dollar terms exceeded the comparative period. This good performance did not however, convert to increased rand revenue as a result of the appreciation of the rand. Expenses were well controlled with the exception of the cost of theft, which was higher than anticipated. Additional security and risk management measures have been implemented to counter this.
Retail merchandising division
During the period under review, trading conditions remained difficult with our customers' discretionary spend continuing to be eroded by a strong rand. Higher value merchandise was particularly hard hit, with the jewellery operations experiencing a strong decline in demand. A restructuring exercise has commenced to reduce costs and improve returns in these operations. The inflight duty free business performed well. The addition of the Virgin Atlantic Airways worldwide inflight concession from
1 May 2004 will enable this business to grow as a global player in this niche market. The 57 African store destination business performed well considering the rand strength. Initial refurbishments have now been completed in the National Parks and these stores have traded well, although at lower margins due to the grocery component.
Dividends
An ordinary dividend of 10 cents per share and a special dividend of 30 cents per share were paid on 8 September 2003.
Acquisitions
The remaining minority shareholding in Centenary Jewellers (Pty) Limited, Gametrackers (Bop) (Pty) Limited and Sense of Africa (Pty) Limited were acquired. A 100% interest in Maties Travel was purchased giving our retail travel business representation in Stellenbosch. 100% of Global Conferences (Pty) Limited was acquired making Tourvest the largest player in the inbound conference industry.
Opportunities
Tourvest has made an offer to acquire 100% of Sure Holdings. If successful this will strategically reposition the retail travel business. The inbound division is in advanced negotiations with product owners in Victoria Falls. Once concluded, this will materially enhance our product offering.
Prospects
At an exchange rate of R7/US dollar, we anticipate inbound tourist numbers for the second half of the year to be lower than last year. This, together with the reduced discretionary spend, will negatively affect our inbound, forex and retail businesses. The impact will not be as marked as in the first half as the average rand/US dollar exchange rate for the second half of last year was 8,28 compared to 10,09 in the first half. The cancellation of the Starlight cruise season will result in losses from this operation for the second six months compared to a profit of +/-R8 million last year.
Inspite of the above we anticipate operating income for the second half being materially better than the first half due to tight cost controls, margin controls and the impact of new business. Dividends and STC amounting to R356 million were paid on 8 September 2003. This will result in a net interest charge for the second half of the year. The tax charge for the year excluding STC will normalise. The offer for the purchase of 100% Sure Holding Limited, if successful, will not have a significant effect on current year earnings.
Board of directors
Vivienne Mennell resigned on 27 October 2003.
Mpho Makwana resigned on 24 October 2003.
Generally accepted accounting practice
These results have been compiled in accordance with statement AC 127 of South African Statements of Generally Accepted Accounting practice. The accounting policies and methods of computation used in the preparation of these results are consistent in all material respects with those used in the annual financial statements to 25 June 2003 with the exception of the implementation of AC133.
The adoption of this statement for the first time resulted in the following adjustments:
Gross Tax Net
Effect on opening retained income (1 766) 525 (1,241)
Effect on current earnings 112 (33) 79
Subsequent events
The following material subsequent events, the effects of which have been disclosed above, have occurred:
The closure of our cruise season for Starlight Cruises, due to the seizure of our charter vessel "Olympia Countess". A final offer has been made for the acquisition of 100% of Sure Holding Limited.
Cautionary announcement
Shareholders are advised that the cautionary relating to the release of the trading update on 27 October 2003 has now been lifted.
For and on behalf of the board
CE Scott RT Edmond
Chairman Chief executive officer
Johannesburg
16 February 2004
Registered office
2nd Floor, Forum V, Braampark, 33 Hoofd Street, Braamfontein
Transfer Secretary
Computershare Limited, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsoring brokers
Investec Securities Limited
Directors: CE Scott (Chairman), RT Edmond (Chief Executive)*+, E de Jager*, AP
Geldenhuys*, IWC Hay*, WG Lynch++, P Maisel, IC Meltzer*, *Executive
+British ++Irish
Company secretary: J Esekow
www.tourvest.co.za
Date: 16/02/2004 02:00:15 PM Produced by the JSE SENS Department
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