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FOORD COMPASS LIMITED - PRELIMINARY REPORT TO DEBENTURE HOLDERS FOR THE YEAR
ENDED 31 DECEMBER 2004
FOORD COMPASS LIMITED
(formerly Compass Property Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1987/003591/06)
Share code: FCPD ISIN: ZAE000054466
(`the company`)
PRELIMINARY REPORT TO DEBENTURE HOLDERS FOR THE YEAR ENDED 31 DECEMBER 2004
The directors hereby report on the results of the group for the year ended 31
December 2004. These results have been reviewed by our auditors, Deloitte &
Touche, whose unqualified review opinion is available for inspection at the
registered office of the company.
GROUP BALANCE SHEET
at 31 December 2004
Note Reviewed Audited
2004 2003
R`000 R`000
ASSETS
Non-current assets
Long-term investments 93 340 90 895
Current assets
Trading investments 116 352 36 760
Trade receivables 2 140 32 908
Cash and cash equivalents 17 897 54 153
136 389 123 821
Total assets 229 729 214 716
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 88 88
Accumulated profits 6 927 4 788
7 015 4 876
Long-term liabilities
Unsecured debentures 2 200 395 190 645
Current liabilities
Accounts payable 2 874 2 625
Debenture interest payable 19 445 16 570
22 319 19 195
Total equity and liabilities 229 729 214 716
Cents Cents
Net attributable asset value per 79.715 55.409
ordinary share
Net attributable asset value per 508.362 483.628
debenture
GROUP INCOME STATEMENT
for the year ended 31 December 2004 Notes Reviewed Audited
2004 2003
R`000 R`000
Investment income 13 545 17 974
Realised trading profits 24 475 16 675
Administration expenditure (5 465) (4 493)
Net distributable profit 32 555 30 156
Unrealised trading profits 7 554 3 387
Realised (losses) profits on sale of (4 875) 838
long-term investments
Revaluation of long-term investments 8 155 7 915
Net portfolio income before debenture 43 389 42 296
interest
Debenture interest (29 300) (27 594)
Revaluation of unsecured debentures 2 (9 750) (10 473)
Profit before taxation 4 339 4 229
Taxation 3 - -
Profit after taxation 4 339 4 229
Cents Cents
Debenture interest per debenture 74.328 70.000
Earnings per debenture 99.062 96.568
Earnings per ordinary share 49.306 48.056
Headline earnings per ordinary share 49.306 48.056
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2004 Ordinary Accumulate Total
share d profits
capital
R`000 R`000 R`000
Balance at 1 January 2003 88 559 647
Profit after taxation for year - 4 229 4 229
Balance at 31 December 2003 88 4 788 4 876
Dividends - (2 200) (2 200)
Profit after taxation for year - 4 339 4 339
Balance at 31 December 2004 88 6 927 7 015
GROUP CASH FLOW STATEMENT
for the year ended 31 December 2004 Reviewed Audited
2004 2003
R`000 R`000
Net distributable profit 32 555 30 156
Debenture interest paid (26 425) (16 435)
Dividends paid (2 200) -
Net purchases of trading investments (72 038) (30 278)
Change in working capital 31 017 (31 374)
Net cash outflow from operating (37 091) (47 931)
activities
Net cash inflow (outflow) from 835 (13 112)
investing activities
Net cash inflow from financing - 108 462
activities
Net (decrease) increase in cash (36 256) 47 419
resources
Cash resources at beginning of year 54 153 6 734
Cash resources at end of year 17 897 54 153
NOTES TO THE PRELIMINARY REPORT
1. Accounting policies
The preliminary report has been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice applicable to interim
financial reporting. The principal accounting policies used in the preparation
of the preliminary report are consistent with those applied for the year ended
31 December 2003.
2. Unsecured debentures Reviewed Audited
2004 2003
Number of issued debentures 39 419 774 39 419 774
Unsecured debentures comprise R`000 R`000
Debenture capital 180 561 180 561
Undistributed share of reserves 19 834 10 084
Fair value of unsecured debentures 200 395 190 645
Reconciliation of balance
Balance at beginning of year 190 645 71 710
Net proceeds on issue of debentures - 108 462
Revaluation as per income statement 9 750 10 473
Balance at end of year 200 395 190 645
Revaluation of unsecured debentures
Net portfolio income before debenture 43 389 42 296
interest
Allocated as follows:
- 10% to ordinary shareholders 4 339 4 229
- 90% to debenture holders 39 050 38 067
Less: interest distribution for year (29 300) (27 594)
Retained debenture earnings credited to 9 750 10 473
carrying value of debentures
3. Taxation
The group has an estimated taxation loss for normal taxation purposes of R23 284
000 at 31 December 2004 (assessed 2003: R26 258 000) which is available to be
set off against future taxable income. The estimated future benefit at current
taxation rates amounts to R6 985 200 at 31 December 2004 (2003: R7 877 400).
The group has an estimated capital gains taxation loss for capital gains
taxation purposes of R7 297 380 at year-end (assessed 2003: R2 421 993) which is
available to be set off against future taxable capital gains.
OBJECTIVE
Compass has set itself a benchmark total return of 10% per annum above the South
African inflation rate (CPI), on a rolling five-year basis. It is widely
accepted that this is an onerous benchmark.
RESULTS FOR THE YEAR
Your directors are pleased to report that a final distribution of 49.3 cents per
debenture has been declared. This, together with the interim distribution of 25
cents, brings the total interest distribution for the financial year to 74.3
cents. This is an increase of 6.2% over the 70 cents distribution for 2003.
PERFORMANCE ASSESSMENT
Debentures earned the following returns for the
year:
2004 2003
(After
dilution)
Income 15.4% 15.3%
Capital 5.1% 5.9%
Total return 20.5% 21.2%
Once again a difficult first six months was followed by a rewarding second half
to the year. The company has been able to beat the rolling 5-year benchmark of
CPI + 10% per annum in the reporting period for the second consecutive year.
This was achieved by taking timeous advantage of a further rerating of listed
property units as interest rates declined further on the back of confidence that
inflation would stay lower for longer. The company also took advantage of the
rise in South African industrial shares. Investments in resource shares on the
other hand were impacted negatively by the strength of the Rand. These form an
important balance in the risk management of the portfolio of assets.
The need to be conservative and protect capital while at the same time producing
an exceptionally high yield has been extremely challenging, but we are pleased
with the progress made. With time, the capital base should increase so that the
ability to place more than a small portion of the capital in high total return
opportunities will expand, thus enabling the company to take greater advantage
of the sort of opportunities that were available this year.
The distribution of 74.3 cents represents a return of 15.4% on the capital base
at the beginning of the year.
EFFECTIVE EXPOSURE
Effective exposure modifies the relative value of investments and cash (shown in
the balance sheet) by exposure to derivatives contracts (futures and options) in
respect of the individual asset classes expressed as a percentage of total
assets.
The effective exposure of the portfolio at 31
December 2004 was as follows:
2004 2003
Equities 42% 63%
Bonds 7% 2%
Listed property 51% 31%
Cash 9% 40%
Notional derivatives liability -9% -36%
100% 100%
CORPORATE STRATEGY
The long-term strategy is to increase the distributions slowly, while expanding
the capital base as fast as prudent opportunity permits. The capital base needs
to grow faster than the distributions in order to bring more security to the
regularity and level of interest distributions to debenture holders.
INTEREST DECLARATION
Notice is hereby given that a debenture interest payment (number 35) of 49.328
cents per debenture in respect of the six months ended 31 December 2004 is
payable to debenture holders recorded in the books of the company on the record
date. Debenture interest payment (number 34) of 25.000 cents per debenture in
respect of the six months ended 30 June 2004 was paid to debenture holders on 16
August 2004.
The last day to trade in the debentures for purposes of entitlement to the
interest payment will be Friday, 4 February 2005. The debentures will commence
trading ex the interest payment on Monday, 7 February 2005 and the record date
will be Friday, 11 February 2005. The interest will be paid on Monday, 14
February 2005. Debenture certificates may not be dematerialised or
rematerialised between Monday, 7 February 2005 and Friday, 11 February 2005,
both days inclusive.
Signed on behalf of the board
CLR HIRSCHSOHN D FOORD
18 January 2005
Directors: CLR HIRSCHSOHN (Chairman), BT ACKERMAN, D FOORD*, JC GREYLING, MO
HODGES*, DA MOIR * British
Company secretary: PE CLUER
Date: 18/01/2005 05:22:00 PM
Produced by the JSE SENS Department
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