| Thu 19 May 2005, 17:55 | | Trematon Capital Investments Limited - Interim Rep |
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Trematon Capital Investments Limited - Interim Report For The Six Months Ended
28 February 2005, Proposed Acquisition Of Spearhead Linked Units And Rights
Offer
TREMATON CAPITAL INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Reg number 1977/008691/06)
Share code : TMT
ISIN: ZAE000013991
(`Trematon`)
INTERIM REPORT FOR THE SIX MONTHS ENDED 28 FEBRUARY 2005, PROPOSED ACQUISITION
OF SPEARHEAD LINKED UNITS AND RIGHTS OFFER
SECTION A:
INTERIM REPORT FOR THE SIX MONTHS ENDED 28 FEBRUARY 2005
GROUP INCOME STATEMENT
(Audited)
Six Six Twelve
months to months to months to
28 February 29 February 31 August
2005 2004 2004
R000 R000 R000
Net interest paid (381) (354) (563)
Foreign exchange profit 962 - 678
Net management and statutory
expenses (845) (342) (685)
Loss from operations (264) (696) (570)
Investment valuation adjustments 16 755 35 803 14 796
Profit before taxation 16 491 35 107 14 226
Taxation - - -
Income for the period 16 491 35 107 14 226
Headline earnings per share
(cents) 15,7 33,4 13,5
Earnings per share (cents) 15,7 33,4 13,5
Weighted average number of shares
in issue (`000) 105 168 105 168 105 168
GROUP BALANCE SHEET
28 February 29 February 31 August
2005 2004 2004
R000 R000 R000
ASSETS
Non-current assets
Listed investments 63 874 80 060 54 946
Unlisted investments and loans 12 383 8 282 11 933
Current assets
Accounts receivable 76 76 140
TOTAL ASSETS 76 333 88 418 67 019
EQUITY AND LIABILITIES
Ordinary shareholders` interest 62 571 66 961 46 080
Current liabilities 13 762 21 457 20 939
Provisions and accounts payable 1 136 395 565
Interest bearing debt 12 626 21 062 20 374
TOTAL EQUITY AND LIABILITIES 76 333 88 418 67 019
Net asset value per share (cents) 59,5 63,7 43,8
Number of shares in issue (`000) 105 168 105 168 105 168
CASH FLOW STATEMENTS
28 February 29 February 31 August
2005 2004 2004
R000 R000 R000
Cash inflows (outflows) from
operating activities 689 (628) (333)
Cash inflows (outflows) from
investing activities 7 376 (15 313) 15 189
Cash (outflows) inflows from
financing activities (8 065) 15 941 (14 857)
Net movement in cash and cash
equivalents - - (1)
STATEMENT OF CHANGES IN EQUITY
Retained income/
Share Share (Accumulated
Capital Premium Loss) Total
R`000 R`000 R`000 R`000
Balance at 31 August
2003 1 052 163 211 (132 409) 31 854
Net income for the
period - - 35 107 35 107
Balance at 29 February
2004 1 052 163 211 (97 302) 66 961
Net loss for the period - - (20 881) 20 881)
Balance at 31 August
2004 1 052 163 211 (118 183) 46 080
Net income for period - - 16 491 16 491
Balance at 28 February
2005 1 052 163 211 (101 692) 62 571
REVIEW OF RESULTS
During the six month period under review, Trematon`s net asset value per share
increased from 43,8 cents to 59,5 cents primarily as a result of the rise in
the share price of Intec Telecom Systems Plc (`Intec`). The headline earnings
per share for the period of 15,7 cents compares with the headline earnings per
share of 33,4 cents for the corresponding period in 2004 and the headline
earnings per share of 13,5 cents for the year ended 31 August 2004.
Intec`s results for its first quarter ended on 31 December 2004 include, for
the first time, a full quarter`s contribution from the Singl.eView business
acquired in August 2004 and are therefore not comparable to any previous
period. Revenue of GBP23,9 million was up 53% on the same period the previous
year and the adjusted EPS of 0,28p was 52% lower than the adjusted EPS of 0,58p
in the comparable period to 31 December 2003.
Intec`s first quarter of the year can be volatile, however these results are a
very good foundation for the rest of 2005.
PROSPECTS
The attention of shareholders is drawn to the proposed acquisition of Spearhead
linked units and rights offer as detailed below in this announcement.
In future, Trematon will actively pursue new investment opportunities and will
no longer be solely dependent on Intec`s share price. Intec is however likely
to remain an important component of the company`s assets in the short to medium
term.
Management expenses are likely to increase from the current low base as the
company becomes more active, however the new management team believe their
expenses will be more than offset by increased profits from investment
activities.
ACCOUNTING POLICIES
The financial statements of the Group comply with South African Statements of
Generally Accepted Accounting Practice and are consistent with those applied in
the previous financial year.
APPROVAL BY DIRECTORS
The Directors of Trematon have approved the results for the period ended 28
February 2005.
SECTION B:
PROPOSED ACQUISITION OF SPEARHEAD LINKED UNITS AND RIGHTS OFFER
1.INTRODUCTION
Further to the cautionary announcement dated 5 of April 2005, the board of
directors of Trematon (`the board`) announces that:
- Trematon has taken steps which will result in Trematon becoming a
proactive investment company with a dedicated professional management
team which will actively seek out opportunities to add value to shareholder
wealth;
- the company has reached an agreement in principle to acquire, subject to the
fulfilment of the conditions precedent set out in paragraph 2.3 below,1 700 000
linked units in Spearhead Property Holdings Limited(`Spearhead`) (`the
acquisition`); and -
- Trematon will undertake a rights offer in the amount of at
least R25 million (`the rights offer`).
2.THE ACQUISITION
2.1 Terms of the acquisition
Subject to the fulfilment of the conditions precedent set out in paragraph 2.3
below, Trematon will acquire 1 700 000 Spearhead linked units at a price of
2150 cents per linked unit. The acquisition consideration of R36.6 million will
be satisfied by the issue of 66 454 545 new Trematon shares at 55 cents per
share (`the new Trematon shares`). The pricing of the transaction is based on
the net asset value of Trematon at the time the agreement in principle was
reached between the parties and ensures that there is no dilution in net asset
value to Trematon shareholders.
The 1 700 000 Spearhead linked units will be acquired from the following
vendors:
- The Armchair Trust, as to 850 000 Spearhead linked units. Mr Allan Groll, an
executive director of Trematon, is a trustee and beneficiary of The Armchair
Trust; and
- The Fynvest Trust,as to the other 850 000 Spearhead linked units.
The Fynvest Trust is an entity representing primarily the interests of the
Beare family, which is the controlling shareholder in Trematon;
collectively,`the vendors`.
2.2 Rationale for the acquisition
Trematon has limited cash resources to participate in or pursue investment
opportunities. To broaden and diversify Trematon`s asset base and augment
its income, the board proposes that Trematon purchase the Spearhead linked
units from the vendors and issue new Trematon shares as consideration
therefore. The effect of the acquisition is that Trematon will have
another liquid asset with a good income yield and good prospects for
capital growth.
A further reason for the acquisition is to ensure that the controlling
shareholders and executive directors maintain a substantial direct investment
in Trematon in order to ensure that their interests are directly aligned with
those of other shareholders.
2.3
Conditions precedent
The acquisition is conditional on the fulfilment of the following conditions
precedent:
- conclusion of a formal legal agreement relating to the transaction.
- approval by the Trematon shareholders in general meeting, excluding the
related parties and their associates (as detailed in paragraph 2.5 below);
- approval being granted by the JSE Securities Exchange South Africa (`the
JSE`) for the listing of the new Trematon shares; and
- any other regulatory approvals, if required.
2.4 Nature of Spearhead`s business
Spearhead is a listed property loan stock company, holding, developing and
investing in immovable commercial, industrial and retail properties, focused in
the Western Cape. Spearhead currently has a market capitalisation in excess of
R500m and has an income yield in excess of 8%.
2.5 Related party transaction
As the vendors are classified as related parties in terms of the JSE Listings
Requirements, the acquisition is a related party transaction which requires
approval by the Trematon shareholders, excluding the related parties and their
associates. In addition, the board, excluding Messrs, Peter Ditz, Allan Groll,
and Allan Mundell (`the independent board`), is required to
obtain an opinion from an independent professional expert (`the expert`)
acceptable to the JSE as to the fairness and reasonableness of the terms and
conditions of the acquisition. The opinion of the expert will be published in
the circular to Trematon shareholders, to be issued in due course.
2.6 Financial effects of the acquisition
Set out in the table below are the pro forma financial effects of the
acquisition based on Trematon`s published interim results for the six months
ended 28 February 2005. The pro forma financial effects have been prepared for
illustrative purposes only to provide information of how the acquisition may
have impacted on the results and financial position of Trematon. Because of
their nature, the pro forma financial effects may not give a fair reflection
of Trematon`s financial position after the acquisition or the effect on future
earnings.
Note Before the After the Percentage
Acquisition(1) acquisition change
(cents) (cents) (%)
Earnings per share 2 15.68 12.53 (20.0)
(cents)
Headline earnings per 2 15.68 12.53 (20.0)
share (cents)
Net asset value per 3 59.5 59.7 0.34
share (cents)
Net tangible asset
value 3 59.5 59.7 0.34
per share (cents)
Notes:
1. Extracted from the published interim results of Trematon for the six months
ended 28 February 2005.
2. Earnings and headline earnings per share in the `After the acquisition`
column have been based on the following assumptions:
a. the acquisition was effective from 1 September 2004;
b. the weighted average number of shares in issue before and after the
acquisition was 105 168 000 and 171 622 545, respectively.
3. Net asset value and net tangible asset value per share in the `After the
acquisition` column have been based on the following assumptions:
a. the acquisition was effective 28 February 2005;
b. the number of shares in issue at 28 February 2005 was 105 168 000
before the acquisition and 171 622 545 after the acquisition.
4. The pricing of the transaction ensures that there is no asset value
dilution to Trematon shareholders. The earnings and headline earnings per
share numbers are provided for illustrative purposes only and are not
considered to be relevant for the purposes of the comparison.
3. THE RIGHTS OFFER
Trematon proposes to undertake a rights offer to raise
at least R25 million. The rights offer will be fully underwritten by a
consortium representing the controlling shareholders of Trematon. The terms
and conditions of the rights offer will be announced prior to posting of the
circular.
The rights offer will be subject to approval by the requisite majority of
Trematon shareholders in general meeting of the resolutions necessary to
increase the authorised share capital of Trematon.
As mentioned above, the company has limited cash resources. Trematon`s major
asset is 7 736 979 ordinary shares in Intec Telecom Systems Plc listed on the
London Stock Exchange. The board considers this a core asset with good growth
prospects and of high quality and wishes to retain this asset. The rationale
for the rights offer is to further supplement the company`s cash resources to
enable it to make further investments and improve earnings.
4. CHANGES TO THE BOARD AND MANAGEMENT OF THE COMPANY
Messrs Allan Groll and Arnold Shapiro were appointed to the board as executive
directors on 5 April 2005 and will remain as executive directors following the
implementation of the acquisition and the rights offer. Mr Arnold Shapiro was
appointed Chief Executive Officer of Trematon with effect from 1 May 2005.
5. GENERAL MEETING AND CIRCULAR TO SHAREHOLDERS
A circular containing the full details of the acquisition and rights offer, and
incorporating a notice of general meeting of Trematon shareholders convening a
general meeting to approve the acquisition will, subject to JSE approval, be
posted to Trematon shareholders in due course.
By order of the board
CW GARVIE
SECRETARY
19 May 2005
Registered office Postal address
The Manor House PO Box 712
14 Nuttall Gardens Durban
Morningside 4000
4001
Telephone: 021-421 5550
Fax: 021-421 5551
Directors:
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg, 2001
Lead Sponsor: Exchange Sponsors (Pty) Limited
Transaction Sponsor: Bridge Capital Services (Pty) Limited,
1st Floor,Building 22a, The Woodlands,
Woodlands Drive, Woodmead, Sandton, 2196
Reporting Accountants
and Auditors: KPMG Inc.
Date: 19/05/2005 05:32:49 PM
Produced by the JSE SENS Department
