| Wed 28 Apr 2004, 13:45 | | Audited Group Results |
|
M Cubed Holdings Limited - Audited Group Results And Dividend Declaration For
Release Date: 28/04/2004 12:42:49 Code(s): MCU
M CUBED HOLDINGS LIMITED - AUDITED GROUP RESULTS AND DIVIDEND DECLARATION FOR
THE YEAR ENDED 29 FEBRUARY 2004
m Cubed Holdings Limited
Registration number: 1998/014568/06
Share code: MCU
ISIN: ZAE000033353
AUDITED GROUP RESULTS AND DIVIDEND DECLARATION FOR THE YEAR
ENDED 29 FEBRUARY 2004
m Cubed group audited r esults
INCOME STATEMENT
for the year ended 29 February 2004
2004 % 2003
R"000 Change R"000
Net revenue 531 255 399 059
Cost of revenue (308 321) (201 096)
Gross profit 222 934 13 197 963
Operating expenditure (158 552) 9 (144 828)
Depreciation (13 807) 28 (10 769)
Results of operating activities 50 575 19 42 366
Net finance income 15 707 50 10 464
Share of profit of associates - 1 922
Minority interest (1 003) (856)
Profit before non-trading items 65 279 21 53 896
Amortisation of goodwill (22 684) (21 007)
Net profit before taxation 42 595 30 32 889
Taxation (25 033) 23 (20 322)
Net profit for the year 17 562 40 12 567
Reconciliation between headline earnings
and net profit for the year
Net profit for the year 17 562 40 12 567
Amortisation of goodwill 22 684 21 007
Headline earnings attributable to
shareholders 40 246 20 33 574
Earnings per share (cents)
Headline earnings/ diluted headline
earnings 5,6 22 4,6
Earnings/ diluted earnings 2,4 41 1,7
BALANCE SHEET
at 29 February 2004
2004 2003
R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment 20 310 31 236
Investments 20 883 654 23 777 646
Goodwill 170 700 183 950
Loans and advances 12 840 18 287
Deferred taxation 349 1 676
21 087 853 24 012 795
Current assets
Receivables and prepayments 50 760 50 926
Cash and cash equivalents 114 152 67 789
164 912 118 715
Total assets 21 252 765 24 131 510
EQUITY AND LIABILITIES
Capital and reserves
Share capital 7 210 7 228
Share premium 317 796 317 778
Non-distributable reserves (11 067) (6 124)
Accumulated profits 53 025 46 177
Ordinary shareholders" funds 366 964 365 059
Minority interests 447 2 965
367 411 368 024
Non-current liabilities
Policyholder liabilities
Insurance contracts 26 422 26 081
Investment contracts 20 784 474 23 629 156
Deferred capital gains tax on policyholder
liabilities 7 611 47 433
20 818 507 23 702 670
Current liabilities
Trade and other payables 65 475 48 315
Current tax liabilities 1 372 12 501
66 847 60 816
Total equity and liabilities 21 252 765 24 131 510
Number of shares in issue
excluding treasury shares (`000) 720 983 722 772
Net asset value per share (cents) 50,9 50,5
Net tangible asset value per share (cents) 27,2 25,1
CASH FLOW STATEMENT
for the year ended 29 February 2004
2004 2003
R"000 R"000
Operating activities (4 604 198) (2 994 453)
Life assurance business (2 836 001) (4 327 866)
Other receipts 479 725 501 990
Net outflow (2 356 276) (3 825 876)
Cash paid (2 221 604) 861 249
Cash utilised by operations (4 577 880) (2 964 627)
Net finance Income 15 707 10 464
Taxation paid (34 835) (25 821)
Dividends paid (7 190) (14 469)
Investing activities 4 650 561 3 000 413
Additions to property, plant and equipment (5524) (16 702)
Proceeds on disposal of property, plant and
equipment 2643 3 756
Acquisition of businesses (10 576) (7 547)
Decrease in investments 4 658 571 3 020 781
Decrease in associates - 6 326
Decrease/(Increase) in loans and advances 5 447 (6 201)
Financing activities - (230)
Proceeds on share issue - 49
Purchase of shares by share incentive trust - (279)
Net movement in cash and cash equivalents 46 363 5 730
Net cash and cash equivalents at beginning of
year 67 789 62 059
Net cash and cash equivalents at end of year 114 152 67 789
m CUBED GROUP AUDITED 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. Other than the adoption of
AC 133 and consolidation of the m Cubed share incentive trust, these accounting
policies are consistent with those of the previous year. These results are
audited by Fisher Hoffman PKF (Jhb) Inc.
The auditors" unqualified report is available for inspection at the registered
office of the company.
FINANCIAL COMMENTARY
m Cubed is a premier provider of risk-targeted investment solutions for
individual and institutional investors, and South Africa"s largest independent
multi-manager.
In the financial year to 29 February 2004, a focus on cost control and margin
management, together with improved market conditions, contributed to a headline
earnings increase of 20% to R40,2 million (2003: R33.6 million). Headline
earnings per share increased to
5.6 cents (2003: 4.6 cents). Assets under management grew to R47 billion (2003:
R43 billion) and assets under administration grew to R63 billion (2003: R53
billion). Net finance income grew by 50%, due to improved cash management and
increased profitability. Operating expenditure increased by 7% per annum, in
line with inflation, excluding a provision for the loan book.
Total net business inflows were R1,3 billion (2003: R1,5 billion), largely due
to inflows into the Wealth Management business.
BEE PROCESS
For some time, the m Cubed board has been seeking to implement a mutually
beneficial Black Economic Empowerment ("BEE") initiative. Incidental to this
process, an offer was received from Momentum to buy certain of the m Cubed
Asset Management businesses.
Final post-implementation issues and their effect on valuation could not be
agreed on to the satisfaction of the m Cubed board. BEE remains a priority for
the group.
GROUP OPERATIONAL REVIEW
The year was marked by the group"s withdrawal from certain low margin business
lines, the streamlining and refocus of Wealth Management and supporting areas,
and the reduction of the group"s total staff complement by approximately 15%
during the early part of the year.
SEGMENTAL REPORTING
1. Asset Management
Headline earnings for the division were R16 million (2003: R11 million), with
major contributions to this increase from the multi-manager business, CMM and
Escher UK.
Annuity revenue of R120 million was up on last year"s R106 million. The Asset
Management division performed in line with expectation for the year under
review.
Portfolio performance
Over the past 12 months, the significant turnaround in the equity markets meant
that all of our multi-manager solutions ended the period to 29 February 2004 by
providing real returns for our investors of between 18% (for our low equity
solutions) to more than 37% (for our diversified equity solutions), either
above or in line with their own strategic benchmarks.
Our structured capital protected portfolios shielded investors against capital
erosion during the equity market downturns that persisted in the early months
of 2003, whilst still providing potential upside.
Our series of absolute return funds and our hedge fund of funds launched during
the year have performed well, with all four funds exceeding their benchmarks.
The Multi-Manager business provides specialist multi-manager asset
management to institutional and private clients. Assets under management grew
by more than 20%, largely on the back of improved market conditions towards the
end of 2003 and sound investment performance. The business is well-poised to
attract investors seeking best of breed multi-manager solutions. This division
performed slightly below expectation.
Asset Management Outsourcing Services ("AMOS") continues to provide outsourced
administration and implementation services to asset managers, multi-managers
and pension fund trustees. The business unit has achieved breakeven.
Escher Structured Products ("ESP") is a niche market leader specialising in
the design and management of capital protected and absolute return investment
portfolios for retirement fund, institutional and wealth management investors.
While ESP is well positioned to extract value from the expected migration of
institutional and retail funds from traditional investments to absolute return
or capital protected strategies, its contribution to the group was lower than
the previous year.
Corporate Money Managers ("CMM") manages specialised interest rate
portfolios and provides treasury services to the group and a variety of
clients. The m Cubed Money Market Fund ranked consistently in the top quartile.
Despite the investment cycle turning away from cash and bonds, CMM managed to
grow assets under management during the year.
Policy Exchange ("Polex") is now a wholly-owned subsidiary of the group
(2003: 70%). Polex, which trades in pre-owned policies, faced difficult trading
conditions during the year as a result of a shortage of tradable stock in the
market. This situation is expected to continue until interest rates start
rising again. The attributable profit earnings were lower than the previous
year but Polex still made a positive contribution to group earnings.
Escher (UK), ranked the number one multi-manager in the UK, has continued to
make solid progress, with assets under management growing to over GBP320
million.
It has now reached profitability.
2. Wealth Management
This division distributes the group"s range of local and international
non-discretionary (life), discretionary (unit trusts, hedge and alternative
investments) and employee benefits products and services, via independent
financial advisors and other complementary distribution channels.
Headline earnings were R7 million (2003: R10 million), with the
non-discretionary business making the most significant contribution. Upfront
revenue of R10 million was down on last year"s R21 million, while annuity
revenue was down to R181 million (2003: R187 million) for the period.
The restructure in the second quarter of the year saw a R3,5 million loss in
the first quarter reversed into a R7 million profit for the year.
The non-discretionary business consolidated its international product offering,
rationalised its local offering and launched several new products during the
year.The discretionary business continues to show steady growth and achieved its
budget for the financial year. m Cubed Unit Trust Management Company remains
the 5th largest unit trust company in South Africa with R22 billion under
management. Our retail unit trusts received net inflows of R315 million in the
financial year and this continues to be a consistently profitable business.
The employee benefits division saw a steady growth in assets and the number of
members. The platform has been laid to take the business to the next level, but
it has not yet broken even.
The international outsourced administration division performed in line with
expectation, while unit trust outsourced administration performed well.
3. Specialised Investments, Lending and Treasury
This division has performed well. Headline earnings grew to R17 million
(2003: R13 million). Annuity revenue was R12 million (2003: R23 million),
while upfront revenue was up at R21 million (2003: R11 million).
Specialised Investments is a niche provider of customised investment solutions
for institutions, corporates and high net worth individuals. During the 2004
financial year, the division concluded several relatively large transactions,
resulting in it performing ahead of the forecast.
The Lending division focuses primarily on providing bespoke lending solutions
to high net worth individuals and corporates who invest with m Cubed. Although
the decrease in prime lending rates over the period lead to a slight erosion of
the gross interest margins earned for the second half of the year, the division
ended the financial year ahead of budget. Conservative provisioning was made
against the portfolio during the second half of the year.
The Treasury division, which performs a treasury and funding function for the
group, performed in line with expectation.
PROSPECTS
The outlook, whilst improved at current market levels, remains challenging and
the business environment potentially volatile. Replacing upfront revenues will
be demanding.
We aim to cement and enhance the benefits of the group restructure, including a
focus on the implementation of an empowerment strategy. We are resolved to
facilitate the release of value inherent in the company.
DECLARATION OF DIVIDEND
The board of directors has recommended that a dividend of 1.5 cents per share
be declared for the year ended 29 February 2004. The dividend will be payable
to the shareholders recorded in the register at the close of business on 28 May
2004. The following dates are relevant to shareholders in respect of the
dividend payment:
* Last day to trade cum dividend Friday, 21 May 2004
* Commence trading ex-dividend Monday, 24 May 2004
* Record date Friday, 28 May 2004
* Date of dividend payment Monday, 31 May 2004
Share certificates may not be dematerialised or rematerialised between 24 May
2004 and 28 May 2004, both dates inclusive.
For and on behalf of the board of directors
C M B Bothner J C Storey
Chairman Group managing director
23 April 2004
Transfer secretaries:
Computershare Limited,
70 Marshall 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.
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 directors
Company secretary: J Steyn www.mcubed.co.za
SEGMENTAL REPORTING
Headline earnings
2004 2003
(Rm) (Rm)
Wealth Management 7 10
Asset Management 16 11
Specialised Investments, Lending and Treasury 17 13
40 34
Net revenue
Annuity Upfront
2004 2003 2004 2003
(Rm) (Rm) (Rm) (Rm)
Wealth Management 181 187 10 21
Asset Management 120 106 187 *51
Specialised Investments, Lending and
Treasury 12 23 21 11
313 316 218 83
Assets under
management
2004 2003
(Rbn) (Rbn)
Wealth Management 15 13
Asset Management 31 29
Specialised Investments, Lending and Treasury 1 1
47 43
*Policy Exchange became a subsidiary during 2003. Had it been consolidated for
the full 2003 year, upfront net revenue in Asset Management would have been
R228 million.
STATEMENT OF CHANGES IN EQUITY
for the year ended 29 February 2004
Non-
Share Share distributable
capital premium reserves
R"000 R"000 R"000
Balances as previously reported 7 500 332 460 (6 124)
Prior year adjustment - change in
accounting policy
to consolidate m Cubed share
incentive trust (272) (14 682) -
Balance at 1 March 2003 restated 7 228 317 778 (6 124)
Change in accounting policy - AC 133* - - -
Increase in foreign currency
translation reserve - - (4 943)
Net profit for the year - - -
Dividend - - -
Shares purchased by share incentive
trust (18) 18 -
Balance at 29 February 2004 7 210 317 796 (11 067)
Accumulated
profits Total
R"000 R"000
Balances as previously reported 45 646 379 482
Prior year adjustment - change in accounting policy
to consolidate m Cubed share incentive trust 531 (14 423)
Balance at 1 March 2003 restated 46 177 365 059
Change in accounting policy - AC 133* (3 524) (3524)
Increase in foreign currency translation reserve - (4943)
Net profit for the year 17 562 17 562
Dividend (7 190) (7190)
Shares purchased by share incentive trust - -
Balance at 29 February 2004 53 025 366 964
* The adoption of AC 133 resulted in the revaluation of financial
instruments at the beginning of the year to fair value, with a consequent
restatement to opening retained income.
