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VENFIN LIMITED - INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
(UNAUDITED)
VENFIN LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1948/031037/06
ISIN ZAE000026498 Share Code VNF
INCREASE IN HEADLINE EARNINGS PER SHARE: +25.9%
INCREASE IN NET ASSET VALUE PER SHARE: +7.3%
ABRIDGED CONSOLIDATED BALANCE
SHEET
Unaudited Audited
31 December 30 June
2003 2002 2003
R million R million R million
ASSETS
Non-current assets
Goodwill 565 505 556
Investmen - Associated 5 371 6 040 5 595
ts companies*
- Other 693 1 156 636
Deferred taxation - 11 -
6 629 7 712 6 787
Current assets 1 481 1 456 1 468
Cash and cash equivalents 1 452 1 398 1 414
Other current assets 29 58 54
Total assets 8 110 9 168 8 255
EQUITY AND LIABILITIES
Interest of own members 8 083 9 107 8 205
Current liabilities 27 61 50
Total equity and liabilities 8 110 9 168 8 255
*Includes one-third interest in R&V Holdings Limited (R&V). VenFin"s
attributable interest in the cash of R&V amounts to R1 798 million (30 June
2003: R1 712 million).
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Audited
Six months ended Year
31 December ended
30 June
2003 2002 2003
Company and Associated
its Companies Total Total Total
subsidiaries
R million R million R R R million
million million
Revenue 80 80 163 256
Operating loss (22) (22) (13) (40)
Net interest income 63 63 75 179
Profit from operations 41 41 62 139
Amortisation of goodwill (50) (9) (59) (46) (105)
Impairment of goodwill (21) - (21) - (83)
Impairment of assets (4) (185) (189) (17) (234)
Equity adjustment:
Share of net profit
before taxation of 484 484 350 769
associated companies
Exceptional items 20 (1) 19 362 362
Profit/(loss) before (14) 289 275 711 848
taxation
Taxation (11) (143) (154) (123) (255)
NET PROFIT/(LOSS) (25) 146 121 588 593
Reconciliation of
headline earnings:
BASIC EARNINGS - net (25) 146 121 588 593
profit/(loss)
Plus/(minus) -
attributable to own
members:
- Exceptional items (20) 1 (19) (362) (362)
- Amortisation of 50 9 59 46 105
goodwill
- Impairment of goodwill 25 185 210 17 317
and assets
- (Surplus)/loss on
disposal of property, - 1 1 - (1)
plant
and equipment
- Tax effect - - - 13 13
HEADLINE EARNINGS 30 342 372 302 665
EARNINGS AND DIVIDENDS PER SHARE
HEADLINE EARNINGS 6.0 67.9 73.9 58.7 130.2
(cents)
BASIC EARNINGS (cents) (5.0) 29.0 24.0 114.3 116.1
DIVIDENDS (cents) - - 25.0
SEGMENTAL ANALYSIS - HEADLINE EARNINGS
Unaudited Audited
Six months ended Year
ended
31 December 30 June
2003 2002 2003
R million R million R million
Telecommunication 240 183 404
Technology 13 (17) (1)
Media 14 (19) (28)
Financial and risk services 57 74 135
Corporate 48 81 155
372 302 665
ABRIDGED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Unaudited Audited
Six months ended Year ended
31 December 30 June
2003 2002 2003
R million R million R million
Opening balance 8 205 9 335 9 335
Net after-tax cumulative opening
balance adjustment - 808 808
(AC 133)
Net profit for the period 121 588 593
Dividend paid (125) - -
Exchange rate adjustments (275) (807) (1 345)
Change in reserves of associated (5) (87) (99)
companies
Net after-tax fair value
adjustments for the period 184 368) (512)
(AC 133)
Realisation of fair value
adjustments of financial (20) (348) 347)
instruments
Shares in VenFin Limited acquired
by wholly-owned subsidiary (151) (14) (228)
Shares in VenFin Limited sold to 149 - -
the VenFin Share Trust
Interest of own members 8 083 9 107 8 205
ABRIDGED CONSOLIDATED CASH FLOW
STATEMENT
Unaudited Audited
Six months ended Year ended
31 December 30 June
2003 2002 2003
R million R million R million
Net operating profit before 275 711 848
taxation
Adjustments (382) (767) (958)
Operating loss before working (107) (56) (110)
capital changes
Working capital changes 40 (2) (12)
Cash utilised in operations (67) (58) (122)
Net interest received 63 75 179
Dividends received 106 20 112
Taxation paid (47) (22) (41)
Cash available from operating 55 15 128
activities
Dividend paid (125) - -
Net cash inflow/(outflow) from (70) 15 128
operating activities
Investing activities 108 523 426
Net increase in cash and cash 38 538 554
equivalents
Cash and cash equivalents at the
beginning of the period 1 414 860 860
Cash and cash equivalents at the 1 452 1 398 1 414
end of the period
ADDITIONAL INFORMATION
31 December 30 June
2003 2002 2003
Number of shares in issue
- Ordinary shares of 1 cent each 486 493 650 486 493 650 486 493 650
- Unlisted B ordinary shares of 35 506 352 35 506 352 35 506 352
10 cents each
Total number of shares in issue 522 000 002 522 000 002 522 000 002
- Shares held in treasury
(ordinary shares of 1 cent each) (21 565 620) (8 150 000) (21 646 966)
500 434 382 513 850 002 500 353 036
Weighted number of shares in 503 714 598 514 487 568 510 601 673
issue
- In determining the headline earnings and basic earnings per share the
weighted number of shares in issue was taken into account.
31 December 30 June
2003 2002 2003
Net asset value per share (Rand)
- At book value R16.15 R17.72 R16.40
- At market value and directors" R25.94 R24.86 R24.17
valuation of investments
R million R million R million
Listed investments
Associated
- Carrying value 25 94 19
- Market value 47 91 52
Other
- Carrying value 472 777 607
- Market value 472 777 607
Unlisted investments
Associated
- Carrying value 5 346 5 946 5 576
- Directors valuation 10 783 10 111 9 982
Other
- Carrying value 221 379 29
- Directors valuation 221 379 29
Capital commitments 8 13 12
(Including amounts authorised, but not yet contracted)
ADDITIONAL INFORMATION (CONTINUED)
Six months ended Year ended
31 December 30 June
2003 2002 2003
R million R million R million
Dividends received
Dividends included in operating profit 10 18 20
Dividends from associated companies 98 2 92
Exceptional items
Exceptional items of subsidiary
companies consist of the following:
Net capital surplus/(loss) on the
disposal of
- Richemont A units/depositary
receipts 20 361 361
- Other long-term investments - 1 (4)
Total before taxation per income
statement 20 362 357
Taxation - (13) (13)
Total after taxation 20 349 344
Share of exceptional items of
associated companies after taxation (1) * 5
Total attributable to own members 19 349 349
*Amount smaller than R500 000
ANNEXURE A
COMPOSITION OF HEADLINE EARNINGS
VenFin"s share
R million
Six months
Effective % Year
interest at
31 December
2003
31 31 30 June
December December 2003
2003 2002
ASSOCIATED
COMPANIES
15.0 233 165 376
Vodacom 33.3 85 94 211
R&V
- Dimension Data 12 1 24
- Alexander 57 74 135
Forbes 16 19 52
- Other
e-tv 33.0 13 (17) (24)
Psitek 32.0 8 17 27
Tracker 32.1 6 3 8
Intervid 17.3 - (4) (6)
GenuOne 36.9 (3) (15) (22)
Other * * (6)
342 243 564
SUBSIDIARIES 30 59 101
Net interest
received
Net management fees
Corporate and other
44 53 128
(18) (16) (29)
4 22 2
Headline earnings 372
302 665
* Amount smaller than R500 000
** These percentage interests represent the effective holdings in the
respective companies at 31 December 2003, and do not necessarily represent
the percentage interest during the accounting period.
Annexure B
Composition of net asset value (R million)
31 December 2003 31 December 2002 30 June 2003
Book Book Book
value Valuations value Valuations value Valuations
Listed 511 519 942 868 633 659
(1)
405 405 756 756 572 572
Richemont A
units
SAIL 39 39 56 72 26 43
iTouch 27 27 16 16 23 23
26 26 - - - -
FrontRange
Idion 14 14 3 3 12 12
- 8 109 19 - 9
Intervid
Loans - - 2 2 - -
Unlisted 6 120 11 012 6 767 10 506 6 158 10 023
(2)
Vodacom 1 534 5 805 1 489 5 096 1 436 5 176
R&V 3 859 4 031 4 677 4 677 4 171 4 171
e-tv 322 525 347 347 326 326
Tracker 17 241 8 131 13 131
Psitek 66 96 53 74 63 96
GenuOne 54 46 83 71 61 35
Loans and
other 268 268 110 110 88 88
investments
Cash 1 452 1 452 1 398 1 398 1 414 1 414
Total 8 083 12 983 9 107 12 772 8 205 12 096
Net asset
value per 16.15 25.94 17.72 24.86 16.40 24.17
share
(Rand)
Share price 21.10 17.61 16.80
(Rand)
Discount to
net asset 18.7% 29.2% 30.5%
value
(1) Market value
(2) Directors" valuation
COMMENTS
Accounting policies
The interim results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice, the Listing
Requirements of the JSE Securities Exchange South Africa and the South
African Companies Act.
The accounting policies used in the preparation of the interim financial
statements are consistent with those used in the annual financial statements
for the year ended 30 June 2003, with the exception of accounting for the
Company"s long-term share incentive scheme.
Change in accounting policy
The accounting policy in respect of the Company"s long-term share incentive
scheme (the "scheme") has been changed.
In the past, the diluted headline and basic earnings per share were based on
the weighted number of shares in issue after adjustment for the dilutive
effect of shares which were to be issued to participants in the scheme. The
trustees of the Share Trust subsequently decided to rather acquire shares in
the open market and 9 056 974 shares were purchased during the period under
review. Therefore, no diluted headline and basic earnings per share are
presented.
The estimated cost of the scheme, after taking into account dividends
received on the relevant shares, is not material and is accounted for against
income and headline earnings as a once-off expense during the period under
review.
Financial review
The headline earnings for the six months to 31 December 2003 increased by
23.2% from R302 million to R372 million.
The headline earnings per share for the six months to 31 December 2003,
however, increased by 25.9% from 58.7 cents to 73.9 cents, reflecting the
positive effect of the share repurchase programme.
The group"s main sources of earnings were: Vodacom Group (Proprietary)
Limited (Vodacom) (15.0% interest), which contributed approximately 63%
(2002: 55%) to group headline earnings, the associated company R&V Holdings
Limited (R&V) (33.3% interest), which contributed 23% (2002: 31%) to headline
earnings, and interest income from cash resources, which contributed 12%
(2002: 18%) to headline earnings.
The increase in headline earnings is largely attributable to:
The increase in equity accounted earnings from Vodacom, from R165 million to
R233 million, due to the additional 1.5% interest purchased in Vodacom as
well as the steady growth in Vodacom"s interim earnings.
The continued turnaround of e-tv during the current interim period. The
contribution of e-tv to VenFin"s headline earnings for the six months to 31
December 2003 amounted to R13 million, compared to a loss of R17 million
during the comparative period.
Reduced losses at GenuOne Inc, from R15 million to R3 million during the
period under review.
Net asset value
The net asset value, at market value of listed investments and directors"
valuation of unlisted investments, at 31 December 2003 amounted to R25.94 per
share compared to R24.17 per share at 30 June 2003. This represents an
increase of 7.3%.
The following factors, or a combination of them, were taken into account in
determining the directors" valuations of the unlisted investments:
Market value and earnings yield of similar listed shares, discounted for
limited tradeability of the unlisted shares and/or
Growth potential and risk factors
Underlying net asset value
Profit history
Cash flow projections
Impairment of investments and goodwill
Provision for impairment of investments and goodwill amounting to R210
million has been made, of which the most significant are the following:
An impairment provision amounting to R185 million has been made against the
carrying value of the Intervid International convertible loan in RFS Holdings
to reflect the risks associated with the total investment in the Intervid
group.
An impairment provision amounting to R18 million has been made against the
unamortised goodwill created on the investment in SAIL, to reflect the
decrease in the share price during the period under review.
Exchange rate differences
Net negative exchange rate differences arising on the translation of foreign
entities to SA rand at 31 December 2003 amounted to R275 million (2002: R807
million) and were debited directly to reserves.
Changes to investments
The most significant changes to VenFin"s investment portfolio for the
six months ended 31 December 2003 were:
FrontRange Limited (FrontRange)
During the period under review, VenFin invested R19 million in JSE listed
FrontRange, a developer of business relationship management solutions with a
worldwide presence. At 31 December 2003, VenFin"s effective interest in
FrontRange was 6.9%.
SAIL Group Limited (SAIL)
During the year ended 30 June 2002, it was reported that SAIL, in co-
operation with VenFin, entered into an empowerment transaction with AKA
Capital in terms of which VenFin sold 20 million of its SAIL shares to AKA
Capital. On 31 December 2003 this transaction was partially reversed and 18
million SAIL shares were transferred back to VenFin. Following this
transaction, VenFin"s interest in SAIL amounted to 26.1%.
Veritas Venture Partners (Cayman) L.P. (Veritas)
During August 2003, VenFin invested a further $150 000 in VVP Fund II, L.P.
On 31 December 2003 the total investment in the fund amounted to $450 000.
GEMS Oriental and General Fund II (GEMS)
During the period under review, VenFin invested $6 million in GEMS, a venture
capital fund investing in businesses in Asia.
Richemont A units
During September 2003, RGH Investments Limited, a wholly-owned foreign
subsidiary of VenFin, sold 2.2 million Richemont A units for R321 million. A
capital surplus of R20 million was realised and is accounted for as an
exceptional item.
VenFin Share Trust (Trust)
During the period under review, VenFin Securities (Proprietary) Limited
(VenFin Securities) sold 8 896 346 of the treasury shares to the Trust for a
net consideration of R149 million.
Buy-back of VenFin shares
During the period under review, VenFin"s wholly-owned subsidiary, VenFin
Securities, acquired an additional 8 815 000 ordinary VenFin shares for R151
million. After the sale of 8.9 million shares to the Trust, the number of
shares which are held as treasury shares on 31 December 2003, was 21 565 620,
or 4.4% of the issued ordinary shares of 1 cent each.
Since 31 December 2003
Acquisition by VenFin of controlling interest in Intervid Limited (Intervid)
Subsequent to the reconstitution of the Intervid Board on Monday, 23 February
2004, initiated by the Howard family, VenFin offered the Howard family the
opportunity to acquire the VenFin shareholding in Intervid at 34 cents per
share. The Howard family declined the offer, but accepted an offer to sell
their shares to VenFin at the same price. Should the agreement become
unconditional, VenFin"s effective shareholding in Intervid will increase to
49.78%.
The agreement is subject, inter alia, to approval of the transaction by the
Competition Authorities. Once such approval has been obtained, VenFin will,
in terms of the Securities Regulation Code on Takeovers and Mergers, extend a
mandatory offer to all the other minority shareholders of Intervid on
substantially the same terms as those agreed with the Howard family.
VenFin has re-entered into discussions with the Intervid Board regarding the
ongoing financing requirements of Intervid.
DIVIDENDS
No dividend is proposed for the six months ended 31 December 2003.
GENERAL
In the trading statement dated 4 February 2004, VenFin advised that the
increase in headline earnings during this interim period does not necessarily
give an indication of the level of earnings growth for the financial year to
30 June 2004. Factors impacting on headline earnings, such as seasonality,
mainly in the earnings from Vodacom and e-tv, as well as fluctuations in
exchange rates, can distort earnings to 30 June 2004.
The headline earnings for the six months under review was significantly
influenced by the uplift effect of the additional 1.5% interest acquired in
Vodacom during the second six months of the previous financial year. The
impact on headline earnings for the year to 30 June 2004 will be less
material as the additional interest has already been accounted for during the
second half of the comparative period.
Signed on behalf of the Board of Directors.
Johann Rupert
Chairman
Josua Malherbe
Chief Executive Officer/Deputy Chairman
Stellenbosch
2 March 2004
DIRECTORS AND ADMINISTRATION
Directors
Johann Rupert* (Chairman),
Josua Malherbe (Chief Executive Officer/Deputy Chairman),
Piet Beyers*, Mike Bosman*, Liesbeth Botha*, Jan Dreyer*, Jan Durand,
GT Ferreira*, Anthony Fletcher*, Elias Links*, John Newbury*
(*Non-executive)
Secretary
Mariza Lubbe
Listing
JSE Securities Exchange South Africa
Sector: Financial-Investment Companies
American depositary receipt (ADR) program
Cusip number 759905508 ADR to ordinary share 1 : 1
Depositary
The Bank of New York, 620 Avenue of the Americas, New York NY 10011
Business address
25 Quantum Street, Techno Park, Stellenbosch 7600
P O Box 456, Stellenbosch 7599
Registered office
Carpe Diem Office Park
Techno Park, Stellenbosch 7600
Transfer office
Computershare Limited, 70 Marshall Street,
Johannesburg 2001 (P O Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc.
Stellenbosch
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Corporate Finance
www.venfin.com
Date: 02/03/2004 05:49:10 PM Produced by the JSE SENS Department
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