| Tue 7 Sep 2004, 17:19 | | Consolidated results for the year ended 30 June 04 |
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VenFin - Audited consolidated results for the year ended 30 June 2004
VenFin Limited
Registration number 1948/031037/06
ISIN: ZAE000026498
JSE Share Code: VNF
Audited consolidated results for the year ended 30 June 2004
Increase in net asset value per share (at valuation) + 19.2%
Increase in headline earnings per share + 16.3%
Increase in dividend per share + 30.0%
Abridged consolidated balance sheet
30 June 30 June
2004 2003
R million R million
Assets
Non-current assets
Property, plant and equipment 26 *
Intangible assets 556 556
Investments - Associated companies** 1 555 5 595
- Other** 2 497 636
Deferred taxation 12 -
4 646 6 787
Current assets 2 548 1 468
Cash and cash equivalents** 2 389 1 414
Other current assets 159 54
Total assets 7 194 8 255
Equity and liabilities
Capital and reserves 7 669 8 570
Treasury shares (636) (365)
Interest of own members 7 033 8 205
Non-current liabilities 15 -
Interest-bearing debt 7 -
Deferred taxation 8 -
Current liabilities 146 50
Total equity and liabilities 7 194 8 255
*Amount smaller than R500 000
** Change in respect of R&V Holdings Limited
(R&V)
With effect from 30 June 2004, R&V became a
wholly-owned subsidiary of VenFin and was
consolidated from that date. As a result
thereof certain balance sheet items are not
comparable with those of the previous
financial year.
Assuming R&V was accounted for as an
associated company at 30 June 2004:
Investments - Associated companies would
have increased to 5 167
Investments - Other would have decreased to 594
Cash and cash equivalents would have
decreased to 714
Abridged consolidated income statement
Year ended Year ended
30 June 2004 30 June
2003
Company and Associated
its companies Total Total
subsidiaries
R million R million R million R million
Revenue 115 115 256
Net interest income 98 98 179
Share of profit of
associated companies 980 980 769
Amortisation of
goodwill (102) (20) (122) (105)
Impairment of goodwill (198) - (198) (83)
Impairment of assets (6) (4) (10) (234)
Other expenses (46) - (46) (40)
Capital surplus on the
disposal of long-term
investments 20 4 24 362
Profit/(loss) before
taxation (234) 960 726 848
Taxation (14) (280) (294) (255)
Net profit/(loss) for
the year (248) 680 432 593
Reconciliation of
headline earnings:
Basic earnings - net
profit/(loss) for the
year (248) 680 432 593
Plus/(minus) -
attributable to own
members:
- Amortisation of
goodwill 102 20 122 105
- Impairment of
goodwill and assets 203 4 207 317
- Capital surplus on
the disposal of long-
term investments (20) (4) (24) (362)
- Surplus on disposal
of property, plant and
equipment - 3 3 (1)
- Tax effect * * * 13
Headline earnings 37 703 740 665
* Amount smaller than R500 000
Segmental analysis - headline earnings
Year ended Year ended
30 June 30 June
2004 2003
R million R million
Telecommunication 491 404
Technology 33 (1)
Media 25 (28)
Financial and risk services 117 135
Corporate 74 155
740 665
Earnings and dividends per share
Year ended Year ended
30 June 2004 30 June 2003
Company and its Associated
subsidiaries companies Total Total
Headline earnings
(cents) 7.6 143.8 151.4 130.2
Diluted headline
earnings (cents) 7.5 143.5 151.0 130.1
Basic earnings
(cents) (50.7) 139.1 88.4 116.1
Diluted basic
earnings (cents) (50.6) 138.7 88.1 116.1
Dividends (cents) 32.5 25.0
Weighted number of
shares in issue
(million) 488.9 510.6
Diluted weighted
number of shares in
issue (million) 490.1 511.0
Abridged consolidated statement of changes in equity
Year ended Year ended
30 June 30 June
2004 2003
R million R million
Opening balance 8 205 9 335
Net after-tax cumulative opening balance
adjustment (AC 133) - 808
Net profit for the year 432 593
Dividend paid (123) -
Exchange rate adjustments (1 026) (1 345)
Change in reserves of subsidiary companies and
associated companies 354 (99)
Net after-tax fair value adjustments for the
year (AC 133) 224 (512)
Realisation of fair value adjustments of
financial instruments (20) (347)
Net shares in VenFin Limited acquired by wholly-
owned subsidiary and The VenFin Share Trust
(1 013) (228)
Interest of own members 7 033 8 205
Interest of own members per share (Rand) R15.64 R16.40
Abridged consolidated cash flow statement
Year ended Year ended
30 June 30 June
2004 2003
R million R million
Operating activities
Net interest received 98 179
Dividends received 341 112
Dividend paid (123) -
Other movements (126) (122)
Taxation paid (55) (41)
Net cash inflow from operating activities 135 128
Cash flow from investing activities 821 426
Acquisition of subsidiaries 1 709 -
Proceeds on disposal of investments 324 943
Repurchase of shares (1 015) (228)
Other (197) (289)
Net increase in cash and cash equivalents 956 554
Cash and cash equivalents at the beginning of
the year 1 414 860
Cash and cash equivalents at the end of the
year 2 370 1 414
Cash and cash equivalents - balance sheet 2 389 1 414
Bank overdraft (19) -
Additional information
30 June 30 June
2004 2003
Number of shares in issue
- Ordinary shares of 1 cent each* 447 993 648 486 493 650
- Unlisted B ordinary shares of 10 cents
each 35 506 352 35 506 352
Total number of shares in issue 483 500 000 522 000 002
- Shares held in treasury (ordinary shares
of 1 cent each) (25 268 657) (21 646 966)
- Shares held by The VenFin Share Trust
(ordinary shares of 1 cent each) (8 668 746) -
449 562 597 500 353 036
* 38 500 002 ordinary shares were cancelled
during the year under review
Weighted number of shares in issue 488 922 237 510 601 673
- In determining the headline earnings and
basic earnings per share the weighted number
of shares in issue was taken into account.
- In determining the diluted headline
earnings and basic earnings per share the
weighted number of shares in issue was
adjusted for the dilutive effect of the
shares offered to participants by the VenFin
Share Scheme. The number of shares that was
added to the weighted number of issued
shares to determine the dilutive effect was
1 218 676 (2003: 349 015).
30 June 30 June
2004 2003
Net asset value per share (Rand)
- At book value R15.64 R16.40
- At market value and directors` valuation
of investments R28.80 R24.17
R million R million
Listed investments
Associated
- Carrying value 53 19
- Market value 108 52
Other
- Carrying value 496 607
- Market value 496 607
Unlisted investments
Associated **
- Carrying value 1 502 5 576
- Directors` valuation 7 929 9 982
Other **
- Carrying value 2 001 29
- Directors` valuation 2 038 29
Capital commitments 39 12
(Including amounts authorised, but not yet
contracted)
** These amounts are not comparable with those of the previous financial
year due to the effect of the consolidation of R&V from 30 June 2004.
Year ended Year ended
30 June 30 June
2004 2003
R million R million
Net interest income
Interest received - unlisted
investments and deposits 98 231
Interest paid (*) (52)
98 179
Dividends received
Dividends included in profit 12 20
Dividends from associated
companies 329 92
Capital surplus on disposal of
long-term investments
Subsidiary companies:
Capital surplus/(loss) on the
disposal of
- Richemont A units/depositary
receipts 20 361
- Other long-term investments * (4)
Total before taxation - per
income statement 20 357
Taxation * (13)
Total after taxation 20 344
Associated companies after
taxation 4 5
Total - attributable to own 24 349
members
* Amount smaller than R500 000
Annexure A
Composition of headline earnings
Effective % VenFin`s share
interest at R million
30 June 2004 30 June 2004 30 June 2003
Associated companies
Vodacom 15.0 480 376
R&V* 100.0 180 211
- Alexander Forbes 117 135
- Dimension Data 27 24
- Other 36 52
e.tv 33.0 22 (24)
Tracker 32.1 16 8
Psitek 32.0 12 27
SAIL 25.8 2 (4)
Intervid* 64.9 - (6)
GenuOne 36.8 (6) (22)
Other (3) (2)
703 564
Subsidiaries 37 101
Net interest received 70 128
Net management fees (32) (29)
Corporate and other (1) 2
Headline earnings 740 665
* R&V and Intervid only became subsidiaries on 30 June 2004, therefore their
earnings were accounted for as associated companies during the year under
review.
Annexure B
Composition of net asset value (R million)
30 June 2004 30 June 2003(3)
Book value Valuations Book Valuations
value
Listed (1) 678 624 633 659
Richemont A
units(4) 411 411 572 572
SAIL 29 29 26 43
iTouch 23 23 23 23
FrontRange 62 62 - -
Idion 81 79 12 12
Intervid 72 20 - 9
Unlisted (2) 4 029 9 999 4 446 8 311
Vodacom 1 511 6 990 1 436 5 176
Alexander Forbes
Bonds(3) 1 274 1 274 1 344 1 344
Dimension Data
Bond (3) 629 666 754 754
e.tv 313 525 326 326
Tracker 20 242 13 131
Psitek 69 96 63 96
GenuOne 44 37 61 35
Intervid - - 223 223
International
Bond(3)
Loans and other 169 169 226 226
investments(3)
Cash(3) 2 326 2 326 3 126 3 126
Total 7 033 12 949 8 205 12 096
Net asset value 15.64 28.80 16.40 24.17
per share (Rand)
Share price 19.88 16.80
(Rand)
Discount to net 31.0% 30.5%
asset value
1) Market value
2) Directors` valuation
3) The underlying value of the investment in R&V has been reallocated to achieve
comparability with the current financial year.
During the year under review, 2.2 million Richemont A units were disposed of.
Commentary
Introduction
VenFin operates as an investment holding company focusing on telecommunication,
technology, media businesses and financial and risk services. The group
actively manages its investments through regular dialogue with other
shareholders, directors and the management of investee companies.
Accounting policies
Annual financial statements are prepared on the historical cost basis, unless
otherwise indicated, in accordance with South African Statements of Generally
Accepted Accounting Practice, the requirements of the South African Companies
Act and the Listing Requirements of the JSE Securities Exchange South Africa and
incorporate policies which are consistent with those of the previous year, with
the exception of the consolidation of The VenFin Share Trust and the
implementation of the South African Statement of Generally Accepted Accounting
Practice, AC 140: Business Combinations.
Change in accounting policies
AC 140
With effect from 1 April 2004 VenFin adopted AC 140: Business Combinations. In
terms of the provisions of this accounting statement goodwill arising from a
business combination for which the agreement date is on or after 31 March 2004,
will not be amortised, but be carried at cost less accumulated impairment
losses.
As from 1 July 2004 (i.e. 2005 financial year) all goodwill arising before 1
April 2004 will also be treated in accordance with AC 140.
Consolidation of The VenFin Share Trust (the `trust`)
In terms of the latest rules of the JSE Securities Exchange South Africa,
companies are obliged to consolidate share incentive trusts under certain
circumstances. 8 668 746 (2003: Nil) ordinary shares held in the trust for
participants are accounted for as if they were treasury shares and are now also
deducted from the issued number of shares in determining the weighted average
number of shares. The cost price of the shares has been deducted from the
group`s equity.
As the trust held no shares in 2003, the comparative figures have not been
restated.
Financial review
Headline earnings
Headline earnings for the year to 30 June 2004 was R740 million compared to R665
million for the year to 30 June 2003. This represents an increase of 11.3%.
Headline earnings per share for the year to 30 June 2004 increased by 16.3% from
130.2 cents to 151.4 cents, reflecting the positive effect of the share
repurchase programme.
The increase in headline earnings is largely attributable to:
A 27.7% increase in equity accounted earnings from Vodacom, from R376 million to
R480 million, due to steady growth in Vodacom`s earnings.
The continued turnaround of e.tv during the current year. The contribution of
e.tv to VenFin`s headline earnings for the year to 30 June 2004 amounted to R22
million, compared to a loss of R24 million during the comparative year.
Reduced attributable losses at GenuOne Inc, from R22 million to R6 million,
during the year under review.
Vodacom
Vodacom has performed well, with headline earnings of R3 133 million (2003: R2
308 million) and an EBITDA margin (earnings before interest, tax, depreciation
and amortisation) of 33.1% (2003: 33.9%) for its year ended 31 March 2004.
Vodacom`s headline earnings for the three months from 1 April 2004 to 30 June
2004 was R763 million (2003: R699 million).
e.tv
In the second half of the year under review e.tv turned into a profitable and
cash flow positive business.
Corporate (Wholly-owned subsidiaries)
The contribution of net interest income to headline earnings decreased by 45.3 %
to R70 million (2003: R128 million), mainly as a result of a lower average cash
balance, due to the share repurchase programme and lower interest rates.
Dividends received from other investments contributed R12 million (2003: R20
million) to headline earnings.
Basic earnings
Basic earnings for the year ended 30 June 2004 decreased by 27.2% to R432
million (2003: R593 million). Basic earnings reflect earnings after goodwill
amortisation, impairments of non-financial assets and non-recurring exceptional
items. The decrease in basic earnings is mainly attributable to the lower
capital surplus on the sale of long-term investments of R24 million, compared to
a surplus of R349 million in 2003.
Impairment of investments and goodwill
Provision for impairment of investments and goodwill amounting to R208 million
has been made, of which the most significant are the following:
An impairment provision amounting to R156 million has been made against the
unamortised goodwill created on the investment in Intervid Limited to reflect
the risks associated with the total investment in the Intervid group.
An impairment provision amounting to R25 million has been made against the
unamortised goodwill created on the investment in SAIL, to reflect the decrease
in the share price during the year under review.
An analysis and detailed composition of the performance of the various
investments appears in Annexures A and B and a full operational review of all
investments is given in the group`s 2004 annual report, due for distribution by
the end of September 2004.
Net asset value
The net asset value, at market value and directors` valuation of investments,
increased by 7.1% from R12 096 million to R12 949 million at 30 June 2004.
The net asset value per share, at market value and directors` valuation of
investments, at 30 June 2004 amounted to R28.80 compared to R24.17 per share at
30 June 2003, an increase of 19.2% year-on-year, reflecting the increase in the
value of Vodacom and the effect of the share repurchase programme.
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
Growth potential and risk factors
Underlying net asset value
Profit history
Cash flow projections
CHANGES TO INVESTMENTS
The most significant changes to VenFin`s investment portfolio during the year
ended 30 June 2004 were:
R&V Holdings Limited (R&V)
With effect from 30 June 2004, VenFin and Compagnie Financiere Richemont SA
(Richemont) restructured their interests in the R&V group of companies.
The effect of this restructuring is that R&V and certain subsidiary companies
that were not sold to Richemont, became wholly-owned subsidiary companies of
VenFin, resulting in the GBP100 million Alexander Forbes Bonds; the $100
million Dimension Data Bonds and R1 675 million cash coming under the direct
control of VenFin from 30 June 2004. However, R&V`s earnings were still equity-
accounted at 33.3% for the year under review.
Repurchase of VenFin shares
VenFin Securities (Pty) Ltd (VenFin Securities)
VenFin`s wholly-owned subsidiary, VenFin Securities, acquired a further 51 018
039 ordinary VenFin shares at an average price of R19.82 per share for R1.0
billion. After the sale of 8 896 346 million shares to the Trust during July
2003 and 38 500 002 shares to VenFin Limited, the number of shares which are
held as treasury shares was 25 268 657 on 30 June 2004, or 5.6% of the issued
ordinary shares of 1 cent each.
Since the repurchase programme started in the 2002 financial year, a total of 72
665 005 ordinary shares (16.2% of the issued ordinary shares of 1 cent each)
were acquired at an average price of R18.94 per share.
VenFin Limited (VenFin)
VenFin repurchased 38 500 002 VenFin ordinary shares (7.9% of the issued
ordinary shares), from VenFin Securities for a total consideration of R754
million, at an average price of R19.58 per share. These shares were
subsequently cancelled.
Intervid Limited (Intervid)
VenFin purchased a further 44 321 314 Intervid shares at 34 cents per share, for
a total consideration of R15 million. On 30 June 2004, VenFin`s interest in
Intervid was 64.9%, which resulted in Intervid becoming a subsidiary.
FrontRange Limited (FrontRange)
VenFin invested R38 million in JSE listed FrontRange, a developer of customer
relationship management software solutions with a worldwide presence. At 30
June 2004, VenFin`s effective interest in FrontRange was 11.1%.
Idion Technology Holdings Limited (Idion)
On 14 May 2004 VenFin acquired a further 28.96% interest in Idion for R69
million. This interest was part of the 42.58% shareholding in Idion that was
previously held by DataMirror Corporation.
At 30 June 2004 VenFin`s effective interest in Idion was approximately 35.0%.
The investment in Idion, previously classified as an investment available for
sale, is now classified as an investment in an associated company.
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. At 30 June 2004, VenFin`s interest in Richemont was 0.4%.
Venture Capital (VC) Funds
In order to strengthen VenFin`s network globally, VenFin made additional
investments in the VC funds mentioned below. In addition to providing VenFin
shareholders with access to high-growth opportunities in markets that they
otherwise would not have access to, these investments provide VenFin and its
investees with access to networks and expertise in markets outside South Africa.
GEMS Oriental and General Fund II (GEMS)
VenFin invested $7.6 million in GEMS, a VC fund investing in businesses in the
Asia Pacific region. GEMS provide an alternative source of capital for well-
managed and well-positioned companies in need of equity for strategic growth,
acquisitions or market expansion. A further $4.9 million is committed to the
fund.
Milestone China Opportunities Fund I L.P. (Milestone China)
VenFin invested $500 000 in Milestone China, a VC fund investing in well-
established, high-growth companies seeking expansion or acquisition capital in
China. On 30 June 2004 a further $500 000 was committed to the fund.
Veritas Venture Partners (Cayman) L.P. (Veritas)
VenFin invested a further $300 000 in Veritas. On 30 June 2004 the total
investment in the fund amounted to $600 000. VenFin has committed a further
$900 000 to the fund.
Prospects
New investments and strategy
We continue to evaluate new investment opportunities on a regular basis both
inside and outside South Africa. Our investment strategy is to take a long-term
view. The focus remains on larger investments which can make a meaningful
contribution to VenFin.
Share repurchases
We have also again invested surplus cash to repurchase VenFin shares, on the
basis that it supported our strategy to add value to our shareholders over the
longer term. We will continue to repurchase shares in terms of this strategy.
Subsequent to the year-end:
GBP100 million Alexander Forbes Exchangeable Bonds (the Bonds)
VenFin has reached an agreement with the Board of Alexander Forbes Limited
(Alexander Forbes) regarding the Bonds, which are only eligible for redemption
on 15 September 2005 (the transaction). In terms of the transaction, the Bonds
will be sold to Alexander Forbes for a cash payment of GBP12.5 million and R1
159.5 million. VenFin has agreed to employ the latter amount to subscribe for
114.8 million Alexander Forbes shares. This will result in VenFin holding an
effective 24.96% of the enlarged share capital of Alexander Forbes.
VenFin is of the view that the transaction will yield the most benefit for
VenFin shareholders in the medium term by enabling Alexander Forbes to grow its
international business more aggressively than the current status quo. The
transaction was approved by Alexander Forbes shareholders on 6 September 2004.
Intervid scheme of arrangement
Subsequent to the approval by the Competitions Authorities for VenFin to become
the majority shareholder in Intervid, VenFin proposed a scheme of arrangement in
terms of section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended,
between Intervid and its shareholders, other than VenFin and its subsidiaries
(the scheme), in terms of which VenFin would acquire all the Intervid shares it
does not already own for a cash consideration of 34 cents or 1 VenFin share for
every 60 Intervid shares held. The scheme was approved by the requisite
majority of scheme members on 27 July 2004 and on 5 August 2004 the High Court
granted an order sanctioning the scheme. The consideration consisted of R9
million and 99 458 VenFin shares. Intervid was delisted on 24 August 2004.
SAIL Group Limited (SAIL)
On 1 September 2004, VenFin Media Beleggings (Pty) Ltd, as member of a
consortium consisting of SACTWU Investment Group (Pty) Ltd and members of the
SAIL management team, made an offer for the shares held by the minority
shareholders of SAIL. The offer price for the proposed purchase is two-tiered:
long-term shareholders, Nedbank and Luna Corporation have been offered 40.48c
per ordinary shares, while all the other remaining shareholders have been
offered 42c per share.
This transaction is subject to the fulfilment of certain suspensive conditions.
VenFin`s interest in SAIL will change to approximately 37% after this
transaction.
Milestone China
During August 2004, VenFin committed a further $4 million to the fund. $2
million was subsequently invested in the fund. The total investment to date
amounted to $2.5 million.
Exchange rate differences
Net negative exchange rate differences arising on the translation of the value
of foreign entities to SA Rand at 30 June 2004 amounted to R1 026 million (2003:
R1 345 million) and were debited directly to reserves.
Audit report
The annual financial statements have been audited by PricewaterhouseCoopers Inc.
and their unqualified audit reports on the comprehensive annual financial
statements and the summarised financial statements are available for inspection
at the registered office of the Company.
Dividend
Declaration of Dividend No 2
Notice is hereby given that a final dividend of 32.5 cents (2003: 25 cents) per
share has been declared in respect of both the ordinary shares of one cent each
and the unlisted B ordinary shares of ten cents each, for the financial year
ended 30 June 2004.
Dates of importance:
Last day to trade in order to participate in the Friday, 8 October 2004
final dividend
Trading on or after this date will be ex the final Monday, 11 October 2004
dividend
Record date Friday, 15 October 2004
Payment date Monday, 18 October 2004
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 11 October 2004 and Friday, 15 October 2004, both days
inclusive.
On payment date, Monday, 18 October 2004, if so mandated, dividends due to
holders of certificated securities will either be transferred electronically to
bank accounts, or alternatively, cheques will be posted to their registered
addresses.
Dividends in respect of dematerialised shareholdings will be credited to
shareholders` accounts at their broker or Central Securities Depository
Participant (CSDP) on Monday, 18 October 2004.
The Annual Report will be posted to members during September 2004.
Signed on behalf of the Board of Directors.
Johann Rupert Josua Malherbe
Chairman Chief Executive Officer/Deputy Chairman
Stellenbosch
7 September 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 Investor Services 2004 (Proprietary) Limited, 70 Marshall Street,
Johannesburg 2001 (P O Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Corporate Finance
www.venfin.com
Date: 07/09/2004 05:07:36 PM Produced by the JSE SENS Department
