| Mon 23 Aug 2004, 17:54 | | Rebserve Holdings Limited - Rev |
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Rebserve Holdings Limited - Reviewed Results For The Year Ended 30 June 2004
Release Date: 23/08/2004 17:15:10 Code(s): RBV
Rebserve Holdings Limited - Reviewed Results For The Year Ended 30 June 2004
REBSERVE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Share code: RBV
ISIN: ZAE000034484
(`Rebserve` or `the Company`)
Reviewed RESULTS FOR THE YEAR ENDED 30 JUNE 2004
HIGHLIGHTS
- Revenue up 9% to R3 487 million
- Fully diluted headline earnings per share 112 cents
- Cash generated from operations up 24% to R357 million
- Agreement concluded to substantially increase Rebserve`s BEE credentials
and to reconstitute Rebserve as South Africa`s pre-eminent black-controlled,
owned and managed group by way of a merger with Mvelaphanda Holdings
The following are the reviewed results of Rebserve and its subsidiaries (`the
group`) for the year ended 30 June 2004 with comparative figures.
SUMMARISED GROUP INCOME STATEMENT
Reviewed Audited
Year Year
ended ended
30 June 30 June
2004 % 2003
R`000 change R`000
Revenue 3 487 126 9 3 189 576
Profit from operations 270 523 (2) 276 394
Net investment income 17 765 (26) 24 117
Net profit before taxation and 288 288 300 511
exceptional items
Exceptional items (17 229) (15 024)
Net profit before taxation 271 059 285 487
Taxation (67 079) (66 598)
Net profit after taxation 203 980 218 889
Net profit attributable to outside (23 091) (25 189)
shareholders
Net profit attributable to 180 889 (7) 193 700
ordinary shareholders
Number of shares in issue (after 177 250 176 209
share buybacks) (000)
Weighted average number of shares 177 250 179 604
in issue (000)
Earnings per share (cents) 102,1 107,8
Headline earnings per share 111,8 116,2
(cents)
Fully diluted headline earnings 111,5 (2) 114,0
per share (cents)
Pro forma fully diluted headline 111,5 1 110,5
earnings per share (cents)
Dividend/distribution per share 175,0 35,0
(cents)
- Interim 15,0 -
- Final/Special* 110,0 35,0
- Capitalisation issue* 50,0 -
* The special cash dividend and capitalisation issue are subject to the Merger,
as referred to in the commentary below, becoming unconditional.
SUMMARISED GROUP BALANCE SHEET
Reviewed Audited
30 June 30 June
2004 2003
R`000 R`000
Assets
Non-current assets 701 102 691 596
Fixed assets 627 415 590 116
Investments and loans 29 510 55 685
Deferred taxation 44 177 45 795
Current assets 1 100 957 1 121 579
Liquid funds 440 789 491 912
Other current assets 660 168 629 667
TOTAL ASSETS 1 802 059 1 813 175
EQUITY AND LIABILITIES
Capital and reserves 1 003 458 938 236
Share capital and reserves 971 553 875 769
Amounts due to vendors 31 905 62 467
Outside shareholders` interest 614 31 242
Non-current liabilities 85 297 168 454
Interest bearing liabilities 69 332 160 211
Non-interest bearing liabilities 3 395 -
Deferred taxation 12 570 8 243
Current liabilities 712 690 675 243
Interest bearing liabilities 73 490 65 986
Non-interest bearing liabilities 639 200 609 257
TOTAL EQUITY AND LIABILITIES 1 802 059 1 813 175
Net asset value per share (cents) 565,0 522,1
Net tangible asset value per share (cents) 388,6 355,7
SUMMARISED GROUP CASH FLOW STATEMENT
Reviewed Audited
30 June 30 June
2004 2003
R`000 R`000
Profit from operations 270 523 276 394
Non-cash items 103 422 88 595
Working capital changes (17 407) (76 626)
Cash generated from operations 356 538 288 363
Net investment income 16 982 23 987
Taxation paid (42 641) (84 169)
Dividends paid (26 668) (55 081)
Cash available from operating activities 304 211 173 100
Cash effects of investing activities (145 785) (90 700)
Cash effects of financing activities (209 549) (331 917)
Net movement in liquid funds (51 123) (249 517)
Net liquid funds at the beginning of the 491 912 741 429
year
Net liquid funds at the end of the year 440 789 491 912
STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
30 June 30 June
2004 2003
R`000 R`000
Balance at the beginning of the year 938 236 863 017
Shares acquired - (55 259)
Acquisition of subsidiaries and businesses (26 945) (8 141)
Net income attributable to ordinary 180 889 193 700
shareholders
Dividends / distribution to shareholders (88 722) (55 081)
1 003 458 938 236
RECONCILIATION BETWEEN NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS AND
HEADLINE NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
Reviewed Audited
Year Year
ended ended
30 June 30 June
2004 % 2003
R`000 change R`000
Net profit attributable to ordinary 180 889 193 700
shareholders
Goodwill amortised 16 991 14 347
Impairment of a loan account 238 677
Headline net profit attributable to 198 118 (5) 208 724
ordinary shareholders
SEGMENTAL INFORMATION
Reviewed Audited
30 June 30 June
2004 % 2003
R`000 change R`000
REVENUE
Facilities management and 1 269 351 1 138 491
professional services
Mining and technical services 658 509 696 970
Food services 788 502 738 087
Support services 770 764 616 028
3 487 126 9 3 189 576
PROFIT FROM OPERATIONS
Facilities management and 139 610 100 124
professional services
Mining and technical services 36 336 81 400
Food services 36 206 47 965
Support services 58 371 46 905
270 523 (2) 276 394
COMMENTARY
Overview
The overall performance of the group was in line with expectations, with steady
performances primarily in the facilities management and support services
divisions being offset by deteriorating operating conditions mainly in the
mining services division. Rebserve`s businesses operating in the mining sector
have continued to underperform due to severe margin pressure in this industry
largely as a result of the continued strength of the rand. This has impacted
negatively on the group`s overall results, particularly in the second six months
of the year under review.
The positive effect of the receipt by TFMC of the gainshare payment from Telkom
was offset mainly by the reduction in the profitability of the mining services
division and restructuring costs incurred in this division.
On 10 May 2004 the group announced the terms of the proposed merger (`the
Merger`) of Rebserve with the businesses and assets of Mvelaphanda Holdings
(Proprietary) Limited (`Mvela Holdings`). The Merger, if approved, will boost
the group`s BEE credentials by transforming Rebserve, which is to be renamed
Mvelaphanda Group Limited (`New Mvela`), into South Africa`s pre-eminent broad-
based black-controlled, owned and managed diversified group, and the only large
services player in South Africa with such BEE credentials. A detailed circular
(`the Circular`) to Rebserve shareholders relating to the Merger was posted to
Rebserve shareholders on or about 30 July 2004.
Despite the underperformance of the mining services division, the annuity and/or
contractual nature of the major portion of the balance of the group`s revenue
and profits ensured a reasonable overall financial result. Fully diluted
headline earnings per share at 111.5 cents per share is above the pro forma
fully diluted headline earnings per share for the prior year of 110.5 cents,
which pro forma figure is calculated on the assumption that the balance of the
Molope purchase consideration had been paid on 1 July 2002 and at an assumed
interest rate of 10% per annum.
Financial Results
Revenue increased by 9% to R3 487 million and profit from operations decreased
by 2% to R271 million. Net investment income, which comprises net interest and
dividends received, decreased to R18 million following the decrease in interest
rates, the payment of the balance of the Molope purchase consideration of R188
million on which amount interest was earned in the prior year, and share buy-
backs concluded in the previous financial year.
Headline net profit attributable to ordinary shareholders was R198 million. The
weighted average number of shares in issue decreased slightly as a result of
share buybacks concluded during the previous financial year and the
consolidation of the Rebserve Share Incentive Scheme. Headline earnings per
share was 111.8 cents. Fully diluted headline earnings per share of 111.5 cents
(which is based on 177.6 million shares after taking into account the number of
shares still to be issued pursuant to historic acquisitions) was 2% below the
fully diluted headline earnings per share for the prior year of 114.0 cents.
Cash generated from operations of R357 million was up 24% on the prior year. The
group`s businesses remain highly cash generative, notwithstanding the difficult
trading environment. Free cash flow for the year was R213 million. R89 million
was paid to shareholders during the year by way of the capital distribution paid
in October 2003 and the interim dividend paid in March 2004. The group`s net
cash (comprising liquid funds less interest bearing liabilities) increased from
R266 million at 30 June 2003 to R298 million at 30 June 2004.
Divisional Performance
Facilities Management and Professional Services
TFMC`s performance was in line with expectations. The success of the TFMC Telkom
contract was confirmed in May 2004 with Telkom`s agreement that TFMC has
exceeded the savings contractually guaranteed by TFMC to Telkom for the first
three years of the Telkom contract, and the receipt by TFMC from Telkom of the
resultant gainshare payment. This amount has been accounted for during the year.
The receipt by TFMC of this payment confirms the success of the outsourcing
partnership established between TFMC and Telkom in August 2000. Other new
contracts in the facilities management division, notably the joint venture in
relation to the Department of Trade Industry campus in Tshwane, contributed
positively to the result.
Prospects for winning further facilities management contracts have been enhanced
by the proven success of the Telkom contract. Several new opportunities are
being pursued or developed locally, including the proposed joint venture with
Propnet, and in the Middle East and Asia-Pacific regions. Certain of these
opportunities are at an advanced stage of development.
Mining and Technical Services
Trading conditions in the mining sector were extremely difficult, mainly as a
result of the strong rand, and impacted negatively on the performance of the
group`s mining and technical services businesses.
Steps were taken in the second half of the year to restructure the JIC Mining
Services (`JIC`) business in order to adapt JIC to the changing environment in
which it operates. A new CEO for JIC was appointed in May 2004. The combined
effect of highly negative trading conditions in the South African mining sector
as well as the short term cost of these restructuring initiatives, has had a
material impact on the performance of JIC in the year under review, but the
benefits of these initiatives are expected to materialise in the ensuing year.
Trollope Mining Services performed reasonably in the context of an
underperforming mining sector. Slightly lower operating margins and a decrease
in operating profit were partially offset by the effect of lower interest rates
and debt levels.
Food Services
Stamford Sales performed below expectations as a result of the loss of a major
contract in April 2004, which necessitated the downsizing of certain areas of
the business and the retrenchment of employees. Trading conditions for the
business remain difficult in a competitive environment.
Royal Food Services performed well during the year. Growth in turnover was
complemented by improved operating efficiencies and operating margins. As a
result of the restructuring of JIC, the business of MRS has been operationally
merged with Royal Food Services and will function as a specialist mining
catering division within Royal Food Services. MRS performed in line with
expectations despite the difficult trading conditions in the mining sector.
Support Services
Coin Security delivered a good performance. Growth in market share and
profitability in the existing areas of guarding, assets in transit and armed
reaction was supplemented by a positive contribution from a new division which
provides a range of security risk management services. A joint venture was
established in the Middle East and has commenced operations in Abu Dhabi.
Protea Security continued to perform well with good growth in turnover and
profitability.
Rebserve Cleaning Services performed in line with expectations. Good growth was
achieved in the Mediguard division which provides specialist cleaning services
in hospitals and similar medical facilities. The benefits of the increased sales
and marketing initiatives in Gauteng are starting to materialise.
The performance of the freight forwarding business was, as expected, negatively
impacted as a result of the stronger rand, despite volumes being maintained.
Accounting Policies
The results for the year ended 30 June 2004 have been prepared in accordance
with South African statements of Generally Accepted Accounting Practice. The
accounting policies used are consistent in all respects with the accounting
policies applied in the financial statements for the year ended 30 June 2003.
Review by the independent auditors
The results have been reviewed by the group`s auditors Fisher Hoffman PKF (JHB)
Inc. Their unqualified review report is available for inspection at the
company`s registered office.
Proposed merger with Mvelaphanda Holdings
Further to the detailed terms announcement on 29 July 2004 relating to the
proposed Merger and the issue of the Circular, shareholders are advised that the
process of finalising the Merger, including the completion of reciprocal due
diligence investigations by both Rebserve and Mvela Holdings, is proceeding.
Shareholders are further advised that, as a result of the time which will be
required to obtain the numerous formal written consents and waivers, duly
executed by the requisite third parties, in terms of which such third parties
(where applicable) consent to the transfer of the Mvela Holdings assets to New
Mvela, waive certain pre-emptive rights over such assets and release certain
securities held over such assets, not all of the conditions precedent to the
Merger (including the finalisation of the due diligence investigations) will
have been completed by 3 September 2004, being the date of the general meeting
of Rebserve shareholders which has been convened to, inter alia, approve the
Merger. Notwithstanding the aforegoing, the general meeting of Rebserve
shareholders will take place on the scheduled dates and times set out in the
notice to Rebserve shareholders contained in the Circular.
Dividend and capitalisation issue
As disclosed in the Circular -
- Rebserve intends, subject to the Merger becoming unconditional, to pay a
special cash dividend of R1.10 per Rebserve share to all existing Rebserve
shareholders, and to also make a capitalisation issue out of its existing
capital and/or reserves to all existing shareholders, on the basis of 7.14286
new Rebserve shares at R7.00 per Rebserve share, credited as fully paid, for
every 100 Rebserve shares held (equivalent in value to a further 50 cents per
Rebserve share). Subject to the requisite shareholder approvals being obtained,
the salient dates for payment of the special cash dividend and the
capitalisation issue will be announced on SENS and in the press upon the
fulfilment of all conditions precedent to the Merger;
- save as set out above, there will be no further dividend payable by
Rebserve to its shareholders in respect of the financial year ended 30 June
2004.
Prospects
The relatively flat operating performance of the group over the past two years
highlights the fact that significant growth prospects for the group will be
influenced by, and dependent on, the successful completion of the Merger.
The Merger will combine the stature and reputation of the Mvela Holdings brand
and team and the prospect of substantial BEE deal flow at the most active stage
of the transformation of the South African economy, with the solid cash
generative base, track record and proven operational and transactional skills of
Rebserve and its management. The Merger will establish a platform for the
transformation, rapid growth and expansion of Rebserve into a major black-owned,
controlled and managed group.
Pursuant to the Merger, Rebserve anticipates a boost in business opportunities
and the awarding of new contracts for most companies in the group, as well as
preventing any potential loss of existing contracts, particularly where a
significant BEE shareholding is a prerequisite. Selected businesses of Mvela
Holdings will be integrated into the Rebserve operating structures to increase
the growth and development of these businesses.
The increase in and diversification of the range of services offered by New
Mvela as a result of the Merger is expected to entrench Rebserve`s position as
the leading services group in South Africa, and make it the outsourcing partner
of choice to the public and private sectors. New Mvela is expected to benefit
from the increasing number of public private partnerships and government`s
stated objective of revitalising and further developing South Africa`s
infrastructure.
The present difficult trading conditions, particularly in the mining services
division, are expected to persist for the short term whereafter the benefits of
the restructuring initiatives in JIC are expected to materialise. A material
improvement in the performance of the group`s food services division is not
anticipated until the second half of the 2005 financial year. Growth in the
facilities management division remains dependent on the winning of new
facilities management contracts. The other group businesses continue to trade
satisfactorily.
SM Levenberg WJ Paskins
Chairman Chief Executive
23 August 2004
Sandton
Directors:
SM Levenberg (Chairman), WJ Paskins (Chief Executive), MH Brodie *, K Dlamini *,
LM Mojela *, RM Patel *, CD Stein *, BC Till (* non-executive)
Registered Office:Rebserve House, Hunts End, 36 Wierda Road West, Wierda Valley,
Sandton, 2196 Telephone 27 11 290-4200 Telefax 27 11 783-0027
Sponsor:Deutsche Securities SA (Pty) Limited
Transfer Secretaries:Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Marshalltown,Johannesburg, 2001ISIN: ZAE000034484
Share code: RBV
A copy of these results are available on the Rebserve website at:
www.rebserve.co.za
