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TOURISM INVESTMENT CORPORATION LIMITED - REVIEWED GROUP RESULTS
TOURISM INVESTMENT CORPORATION LIMITED
Registration number: 1996/008144/06
Share code: TRT ISIN code: ZAE000012472
Reviewed group results
for the year ended 25 June 2004
Group income statement for the year ended 25 June
% 2004 2003
change R000 R000
Revenue (6) 1 560 076 1 665 072
Cost of sales and 3 (1 404 686) (1 444 276)
operating costs
Exceptional item (7 863) -
Operating income (33) 147 527 220 796
Interest paid (26 098) (11 574)
Interest received 22 925 42 124
Income before taxation (43) 144 354 251 346
Taxation (7) (87 939) (82 443)
Income after taxation (67) 56 415 168 903
Outside shareholders` (8 671) (14 800)
interest
Attributable income (69) 47 744 154 103
Earnings per share - (70) 6,3 20,9
cents
Headline earnings per (71) 5,9 20,5
share - cents
Diluted earnings per (69) 6,2 20,2
share - cents
Diluted headline (71) 5,8 19,8
earnings per share -
cents
Weighted number of 755 874 737 160
shares in issue (000s)
Depreciation (000s) 33 973 29 887
Amortisation of 4 403 2 268
goodwill and trademarks
(000s)
Reconciliation to
headline earnings:
Attributable income 47 744 154 103
(000s)
Impairment provisions (2 200) (596)
(000s)
Capital profits (000s) (4 996) (4 544)
Amortisation of 4 052 1 963
goodwill (000s)
Headline earnings (70) 44 600 150 926
Group balance sheet at 25 June
2004 2003
R000 R000
ASSETS
Non-current assets
Property, plant and equipment 112 692 111 219
Goodwill 82 131 38 360
Trademarks 2 228 2 462
Deferred taxation 33 438 42 913
Financial assets 5 598 5 721
Current assets
Inventories 175 193 172 856
Trade and other receivables 142 757 132 188
Cash and bank balances 92 555 418 054
Foreign notes held 34 164 49 788
Total current assets 444 669 772 886
Total assets 680 756 973 561
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 10 573 (325)
Non-distributable reserves 20 858 31 467
Accumulated profits 240 500 485 848
Ordinary shareholders` interest 271 931 516 990
Outside shareholders` interest 26 024 29 766
Non-current liabilities
Interest-bearing borrowings 8 726 11 787
Deferred taxation 1 792 1 687
Current liabilities
- Non-interest-bearing
Trade and other payables 225 678 233 129
Provisions 22 528 37 490
Taxation payable 5 984 59 464
Dividends payable 1 289 438
- Interest-bearing
Current portion of interest-bearing 1 271 2 993
Bank borrowings 87 721 38 948
Loans relating to foreign notes held 27 812 40 869
Total current liabilities 372 283 413 331
Total equity and liabilities 680 756 973 561
Net asset value per share (cents) 32,75 62,26
Net tangible asset value per share 22,59 57,35
(cents)
Shares in issue (000s) 830 350 830 350
Capital commitments (R000) 3 974 14 391
Operating lease commitments (R000) 159 126 213 456
Additions to property, plant and 38 236 52 254
equipment
Group statement of changes in equity
Non-
Accu- distribu-
Share Share mulated table Total
capital premium profits reserves equity
R000 R000 R000 R000 R000
Group
Balance as
previously
stated
25 June 2002 7 883 27 252 387 491 44 511 467 137
Consolidation (536) (34 924) (35 460)
of share
trust
Restated
balance
25 June 2002 7 347 (7 672) 387 491 44 511 431 677
Attributable
income to
25 June 2003 154 103 154 103
Dividend paid (63 077) (63 077)
Deferred tax 8 572 (8 572) -
reversing on
trademark
Foreign (4 553) (4 553)
exchange
translation
differences
Negative 81 81
goodwill
arising on
purchase of
additional 5%
of joint
venture
Restated
balance
25 June 2003 7 347 (7 672) 487 089 31 467 518 231
Change in (1 241) (1 241)
accounting
policy
Restated 7 347 (7 672) 485 848 31 467 516 990
balance at 25
June 2003
Attributable 47 744 47 744
income to 25
June 2004
Dividend paid (332 140) (332 140)
Dividend 32 256 32 256
accruing to
treasury
stock
Disposal of 23 2 629 2 652
treasury
stock for
acquisition
of businesses
Exercise of 118 8 128 8 246
shares in
share trust
Deferred tax 6 792 (6 792) -
reversing on
trademark
Foreign (4 086) (4 086)
exchange
translation
differences
Profit 269 269
arising on
sale of
treasury
stock
Balance at 25 7 488 3 085 240 500 20 858 271 931
June 2004
Group cash flow statement for the year ended 25 June
2004 2003
R000 R000
Cash flows from operating (281 729) 93 956
activities
Cash generated by operations 150 629 183 143
Net interest (paid)/received (3 173) 30 550
Taxation paid (131 488) (55 333)
Dividend paid (297 697) (64 404)
Cash flow from investing activities (85 902) (25 215)
Purchase of property, plant and (38 236) (52 254)
equipment
Proceeds on disposal of property, 4 544 3 338
plant and equipment
Proceeds on disposal of financial - 23 882
assets
Decrease in loans advanced - 7 482
Goodwill acquired - (5 126)
Acquisition of subsidiaries, net of (4 138) (1 058)
cash acquired
Sale of investments 729 -
Acquisition of businesses, net of (48 801) (5 720)
cash acquired
Change of shareholding in joint - 81
venture
Sale of subsidiary, net of cash - 4 160
relinquished
Cash flow from financing activities (3 061) 2 921
Increase/(reduction) in liabilities (3 061) 2 921
Net movement in cash and cash (370 692) 71 662
equivalents
Cash and cash equivalents at 379 106 308 353
beginning of year
Foreign currency translation (3 579) (909)
reserve
Cash and cash equivalents at end of 4 835 379 106
year
Group segmental analysis
25 June 25 June
2004 2003
R000 % R000 %
Revenue
Inbound tourism 626 436 40 663 916 40
services
Outbound travel 231 253 15 253 443 15
services
Financial services 100 459 6 106 200 6
Retail merchandise 601 928 39 641 513 39
1 560 076 100 1 665 072 100
Operating income
Inbound tourism 34 387 23 25 602 12
services
Outbound travel 33 390 23 44 163 20
services
Financial services 22 370 15 49 430 22
Retail merchandise 57 380 39 101 601 46
147 527 100 220 796 100
Net operating
assets/(liabilities)
employed
Inbound tourism 50 167 19 13 974 7
services
Outbound travel 9 359 3 (30 625) (16)
services
Financial services 38 047 14 42 479 23
Retail merchandise 169 886 64 161 739 86
267 459 100 187 567 100
Commentary
Results
The year under review was a very difficult one for Tourvest. The rand
appreciated by 24% against the US dollar (on top of last years 11% rise),
reducing South Africa`s competitiveness as a tourism destination as well as the
discretionary spend of the tourists. Whilst outbound tourism volumes benefited
from the rand`s strength, Tourvest is 75% biased in favour of inbound tourism
and the overall effect on the group was therefore negative.
The special dividend of 30 cents per share paid on 8 September has meant that
comparisons with the previous year`s results are not meaningful. This dividend
resulted in a cash outflow of R268 million, gave rise to a once-off STC tax
charge of R31 million and reduced interest income by R23 million (R16 million
net of taxation). The directors believe that the payment of the special dividend
was in the best interest of shareholders even though it has reduced earnings.
Revenue fell by 6% which resulted in a drop of 33% in operating income.
Comparable expenses, excluding acquisitions, grew by only 2% as a result of
tight cost control. EPS decreased by 70% to 6,3 CPS. Excluding the STC on the
special dividend, EPS fell by 50%. HEPS was 5,9 CPS compared to the previous
year`s 20,5 CPS.
Cash flow remained strong with cash generation of R151 million compared to
operating income of R148 million. The balance sheet remains strong with net cash
of R5 million compared to the previous year`s R379 million before the payment of
the special dividend and related costs.
The disagreement over rebates with a supplier, reported to shareholders on 21
July 2004, has not yet been resolved. A task team from Tourvest and the supplier
has been set up to reconcile the differences that give rise to the disagreement.
An exceptional expense of R8 million was incurred to release our in-flight duty
free business from a trading restriction incorporated in our SAA contract. This
payment enabled us to tender for additional in-flight duty free businesses
including the Virgin Atlantic Airline concession which we won.
Ordinary dividend declaration
An ordinary dividend of 3 CPS has been declared inline with our policy of paying
an annual dividend equal to 50% of earnings per share.
Relevant dates
In compliance with STRATE the following dates are applicable:
Last date to trade cum dividend 3 September 2004
Date trading commences ex dividend 6 September 2004
payments
Record date 10 September 2004
Date of payments 13 September 2004
Share certificates may not be dematerialised or rematerialised from 6 September
to 10 September 2004, both dates inclusive.
Divisional review
Inbound tourism services
The tour operator businesses in this division performed well during the year
despite the slow growth in South African tourism numbers. Welcome Tours had an
exceptional year in terms of market share as well as profit. Crown Travel has
returned to profitability. The tour operator businesses were restructured at the
end of the year into a single multi-branded operation. This will improve the
operations competitiveness through more focused buying, reduced costs and
improved business efficiencies.
The division`s product operations performed to expectations with the exception
of Shongololo Express. The Shongololo business model has been re-engineered and
improved returns are expected.
The remaining minorities in Gametrackers and Sense of Africa were acquired
during the year, making these businesses wholly owned subsidiaries. A 60%
interest was acquired in Global Conferences and Tourvest is now a leader in the
inbound conference market, a niche historically not catered for.
Outbound travel services
The retail travel businesses in this division had a good year despite the
unresolved dispute over rebates referred to above. Organic market share gains
were achieved and these businesses now perform travel services for 57 of the top
100 companies on the Johannesburg Securities Exchange. Rebates as a percentage
of revenue have declined in the current year, and consequently these businesses
are now making greater operating profits before rebates. Maties Travel and
Indojet Travel were acquired during the year to improve our Western Cape market
share.
The outbound tour operations and cruise business front, back office and
procurement functions, are currently being integrated to maximise best industry
practices and benefit from combined purchasing power and resources.
Starlight Cruises made an operating loss of R10 million compared with a profit
of R5 million as a result of the impounding of the `Olympia Countess` and the
consequent cancellation of the season. Starlight has reverted to being a general
sales agent for the 2004/2005 season to reduce the risk of any future losses.
Financial services
Volumes in dollar terms grew by more than 15% as we increased our market share.
This volume increase together with an improved margin limited the fall in
revenue to 5% against the rand/US dollar appreciation of 24%.
The major focuses during the year under review were on market share gains and
cost controls. Costs, excluding new store openings and risk costs, were well
controlled. Strong emphasis has been placed on reducing the cost of risk and
security improvements have been implemented. This, coupled with a project to
reduce cash holdings, should result in a further improvement in operating
margins.
Retail merchandise
There was a marginal change in the number of transactions processed by the
Tigers Eye group and the average value per transaction was lower - reflecting
the reduced discretionary spend of inbound tourists. Whilst costs were reduced,
this could not compensate for the lower rand revenue. The Tigers Eye group
secured a further two outlets at Johannesburg International Airport during the
year. In addition they entered the tourist food business through the acquisition
of restaurants in Pilgrim`s Rest, Tsitsikamma (Storms River) and at the Addo
Elephant Parks.
The in-flight duty free business suffered from lower rand turnover even though
sales in US dollars were higher and this resulted in lower operating income. The
worldwide in-flight duty free contract for Virgin Atlantic Airlines was
successfully tendered for during the year. This contract commenced on 1 May
2004. Start-up costs were incurred in the current year.
The jewellery operations had a disappointing year with a fall in the number of
transactions and the gross margin achieved. The margin reduction resulted from
our cost of goods being based on weaker exchange rates. We have changed the
business model of this operation and are confident of improved results. The
minority interest in Centenary Jewellers was acquired during the year.
Board of directors
Tommy Edmond was appointed CEO and a director on 28 July 2003. Bill Lynch
stepped down as Chairman on 14 August 2003 and was succeeded by Carol Scott. He
remains as a non-executive director. Vivienne Mennell resigned from the board on
27 October 2003 and Mpho Makwane resigned on 24 October 2003.
Subsequent events
On 17 August 2004, shareholders were informed that the remaining conditions
precedent of the Sure Holdings offer were not fulfilled and that the offer has
therefore lapsed.
Negotiations for the acquisition of a 60% interest in a new merged business in
Victoria Falls under the Wild Horizons brand, which includes Adrift and African
Sport and Leisure, have been concluded. The transaction, which is still subject
to regulatory approvals, will complement our existing business at Victoria Falls
and enable us to dominate the tourism activities in this region.
Prospects
The rand/US dollar exchange rate has a material influence on Tourvest`s results.
At a level below R6,50 to the US dollar, we anticipate lower volumes of tourists
into South Africa and a further reduction in their discretionary spend.
The restructuring of the inbound tourism services and outbound travel services
divisions will result in greater efficiency, lower costs and increased market
shares. This should counter the effects of the rand appreciation, provided it
remains at the R6,50 level.
The Victoria Falls acquisition will contribute to income during the current
year. The once-off costs related to the impounding of the `Olympia Countess`
will not recur and operating income will grow accordingly.
Generally accepted accounting practice
These results have been compiled in accordance with statement AC127 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 (1 766) 525 (1 241)
income
Effect on current earnings 112 (33) 79
In line with JSE requirements, the Tourvest Share Trust has been consolidated
for the first time. Accordingly, the following adjustments to prior period
results have occurred:
Previously Restated
stated balance
Balance sheet
Financial assets 41 268 5, 721
Share capital and share premium 35 135 (325)
Earnings
Weighted shares in issue 758 874 737 160
Earnings per share (cents) 20,3 20,9
Diluted earnings per share 19,8 20,5
(cents)
Headline earnings per share 19,7 20,2
(cents)
Review by auditors
The results have been reviewed by Tourvest`s Auditors Deloitte & Touche. Their
unqualified review opinion is available for inspection at Tourvest`s registered
office.
For and on behalf of the board
CE Scott RT Edmond
Chairman Chief executive
Johannesburg
19 August 2004
Registered office
2nd Floor, Forum V, Braampark, 33 Hoofd Street, Braamfontein,Johannesburg, 2001
Transferors
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001, (PO Box 61051, Marshalltown, 2107)
Directors
CE Scott (Chairman), RT Edmond (Chief Executive)*+, E de Jager*, AP Geldenhuys*,
IWC Hay*, IC Meltzer*, WG Lynch++, P Maisel,
*Executive +British ++Irish
Company secretary: J Esekow
Sponsor: Investec Securities
Registration number: 1996/008144/06
Share code: TRT ISIN code: ZAE000012472
www.tourvest.co.za
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