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Tourism Investment Corporation Limited - Tourvest Group Results
For The Year Ended 25 June 2005
TOURISM INVESTMENT CORPORATION LIMITED
Registration number 1996/008144/06
Share code: TRT
ISIN code: ZAE000012472
TOURVEST GROUP RESULTS
for the year ended 25 June 2005
GROUP INCOME STATEMENT for the year ended 25 June
2005 2004 %
R000 Reviewed Audited change
Revenue 1 134 065 1 106 255 2.5
Cost of sales and
operating costs (944 750) (911 992) 3.6
Operating income before
depreciation and
amortisation 189 315 194 263 (2.5)
Depreciation (34 230) (33 973)
Impairment and amortisation
of goodwill and
intangibles (4 451) (4 403)
Operating income before
exceptional item 150 634 155 887 (3.4)
Exceptional item - (7 863)
Operating income 150 634 148 024 1.8
Interest paid (30 258) (26 098) 15.9
Interest income 23 403 22 925 2.1
Income before taxation 143 779 144 851 (0.7)
Taxation (49 073) (88 088)
Income after taxation 94 706 56 763 66.8
Minority interest (6 403) (8 671) (26.2)
Attributable income 88 303 48 092 83.6
Ordinary shares in issue
(000)
Closing 830 350 830 350
Weighted 767 273 755 574
Fully diluted weighted
average number of
ordinary shares 779 499 775 750
Earnings per share (cents) 11.51 6.36 80.9
Headline earnings per
share (cents) 11.50 5.95 93.4
Headline earnings per
share excluding STC
(cents) 11.82 11.56 2.3
Fully diluted earnings
per share (cents) 11.33 6.20 82.7
Fully diluted headline
earnings per share (cents) 11.32 5.80 95.3
Reconciliation of
attributable income to
headline earnings
Attributable income 88 303 48 092 83.6
Adjustments:
Impairment provisions (500) (2 200)
Capital profits (3 770) (4 996)
Impairment and amortisation
of goodwill 4 194 4 052
Headline earnings 88 227 44 948 96.3
GROUP BALANCE SHEET at 25 June
2005 2004
R000 Reviewed Audited
ASSETS
Non-current assets
Property, plant and equipment 102 515 112 692
Goodwill 78 637 82 131
Intangibles 3 851 2 228
Deferred taxation 27 504 36 250
Financial assets 6 700 5 598
Current assets
Inventories 162 893 175 193
Trade and other receivables 176 486 142 757
Cash and bank balances 96 347 96 456
Taxation receivable 14 247 3 133
Foreign notes held 43 690 34 164
Total current assets 493 663 451 703
Total assets 712 870 690 602
EQUITY AND LIABILITIES
Capital and reserve
Share capital and premium 10 593 10 573
Non-distributable reserve 16 189 20 858
Accummulated profits 306 352 233 938
Ordinary shareholders` interests 333 134 265 369
Minority interests 27 229 26 024
Non current liabilities
Interest-bearing borrowings 6 933 8 726
Deferred taxation 1 641 1 792
Current liabilities
Non interest bearing
Trade and other payables 258 182 236 237
Provisions 25 570 21 343
Taxation payable 7 947 9 117
Dividends payable 1 209 1 289
Interest bearing
Current portion interest-bearing
borrowings 1 279 1 271
Bank overdraft - 87 721
Loans relating to foreign notes held 49 746 31 713
Total current liabilities 343 933 388 691
Total equities and liabilities 712 870 690 602
Net asset value per ordinary share
(cents) 40.12 31.96
Operating lease commitment 188 102 159 126
Capital Commitments 57 773 3 974
Authorised and contracted 5 500 524
Authorised but not yet contracted 52 273 3 450
GROUP CASH FLOW STATEMENT for the year ended 25 June
2005 2004
R000 Reviewed Audited
Cash flow from operating
activities 114 101 (277 829)
Cash generated by operations 202 287 154 529
Net interest paid (6 855) (3 173)
Taxation paid (52 762) (131 488)
Dividends paid (28 569) (297 697)
Cash flow from investing activities (26 949) (85 902)
Purchase of property, plant and
equipment (27 503) (38 236)
Proceeds on disposal of property,
plant and equipment 1 909 4 544
Increase in financial assets (1 102) -
Acquisition of subsidiaries and
businesses net of cash acquired (2 580) (52 939)
Disposal of subsidiaries net of
cash disposed 2 327 -
Sale of investments - 729
Cash flow from financing activities (1 765) (3 061)
Decrease in interest-bearing
liabilities (1 785) (3 061)
Exercise of shares in share trust 20 -
Net movement in cash and cash
equivalents 85 387 (366 792)
Cash and cash equivalents at
beginning of year 8 735 379 106
Foreign currency translation reserve 2 225 (3 579)
Cash and cash equivalents at end
of year 96 347 8 735
GROUP SEGMENTAL ANALYSIS
2005 2004
R000 Reviewed % Audited %
Revenue
Inbound Tourism Services 169 868 15 178 144 16
Outbound Travel Services 200 261 18 225 724 21
Financial Services 105 442 9 100 459 9
Retail Merchandising 658 494 58 601 928 54
1 134 065 100 1 106 255 100
Operating income
Inbound Tourism Services 13 478 9 34 391 23
Outbound Travel Services 50 792 34 32 854 22
Financial Services 27 073 18 22 785 16
Retail Merchandising 59 291 39 57 994 39
150 634 100 148 024 100
Net operating assets
Inbound Tourism Services 30 921 13 48 629 19
Outbound Travel Services 32 276 14 7 583 3
Financial Services 16 807 7 33 381 13
Retail Merchandising 151 849 66 164 591 65
231 853 100 254 184 100
GROUP STATEMENT OF CHANGES IN EQUITY
Non-
Distri- Accumu-
Share Share butable lated Total
R000 capital premium reserve profit equity
Balance as
previously
restated at
25 June 2003 7 347 (7 672) 31 467 485 848 516 990
Prior year
adjustments (6 910) (6 910)
Restated balance
at 25 June 2003
7 347 (7 672) 31 467 478 938 510 080
Attributable
income to
25 June 2004 48 092 48 092
Dividend paid (332 140) (332 140)
Dividend accruing
to treasury stock 32 256 32 256
Disposal of
treasury stock
for acquisition
of businesses 23 2 629 2 652
Exercise of
shares in share
trust 118 8 128 8 246
Deferred tax
reversing on
trademark (6 792) 6 792 -
Foreign exchange
transaction
differences (4 086) (4 086)
Profit arising
on sale of
treasury stock 269 269
Restated
balance at
25 June 2004 7 488 3 085 20 858 233 938 265 369
Attributable
income to
25 June 2005 88 303 88 303
Dividend paid (24 911) (24 911)
Dividend
accruing to
treasury stock 1 618 1 618
Deferred tax
reversing on
trademark (7 404) 7 404 -
Foreign exchange
transaction
differences 2 735 2 735
Exercise of
shares in share
trust 109 (89) 20
Balance at
25 June 2005 7 597 2 996 16 189 306 352 333 134
COMMENTS
The year under review was characterised externally by the continuation of
challenging trading conditions and internally by the virtual completion of the
restructuring required to equip Tourvest for future growth.
Tourvest is and will remain a currency-impacted business and the further
strengthening of the rand during this period consequently took its toll on the
group`s results. The average rand rate against the dollar appreciated by 10.0%
(R6.22 vs R6.91) over this period and it increased by 3.92% against the euro and
3.71% against the pound. The rand`s strength impacted heavily on the Inbound
Tourism Services Division, which again had to contend with reduced passenger
volumes from its major markets as well as with a general pricing downgrade by
tourists. The domestic/corporate travel market was largely flat but the retail
travel business again delivered a good performance, as did the financial
services operation, which benefited from robust foreign currency sales and
reduced cash losses. All the businesses maintained a strong focus on cost
reduction and efficiency improvement.
In these difficult circumstances the group produced solid if unexciting results,
improving operating income marginally. Headline earnings per share, adjusted
for STC, increased by 2.3% over 2004.
REVIEW OF OPERATIONS
Inbound Tourism Services
The consolidation of the inbound tour operators was successfully completed
during the year under review. The benefits from the elimination of duplications
in infrastructure will only be seen in future years but the benefits of combined
purchasing are already evident. Margins are set to improve as the full effect
of group purchasing becomes evident. The performance of both sub divisions were
negatively affected by poor trading conditions.
Outbound Travel Services
The retail travel business continued to perform well, producing growth of 20.8%
after allocating the profit arising from the settlement of the supplier dispute
to the 2004 financial year. The profitability of this business has not been
affected by the introduction of a zero-commission dispensation by the airlines
this year. The turnaround of the division`s outbound tour operators,
consolidated into a single business during the year, is still in progress. The
operation is now cash-positive and should return to profitability in 2006.
During the year Tourvest Retail Travel created a major black-owned travel
agency, Lesedi Travel, through the consolidation and extension of its existing
BEE operations. Lesedi Travel is 51% black-owned by our BEE partners, including
an employee trust and management.
Financial Services
Dollar sales increased by 9.8% and despite the rand`s strength, this division
improved its profitability by 18.8%. Cash losses were significantly reduced
during the year.
Retail Merchandising
The jewellery business incurred once-off restructuring costs of R6.6 million but
showed growth in normalised trading profit. The duty-free business realised
marginal growth on the back of strong dollar sales after adding back the release
from restraint payment in 2004. Good progress has been made in resolving the
problems in the Virgin Atlantic concession and improved margins were achieved in
the past few months. The African art and curio operations were negatively
affected by the reduced spending of tourists and recorded a marginal decrease in
operating income.
PROSPECTS
Even at R6 to the dollar the group should achieve real growth in earnings as a
result of the reorganisations and refocussing of the previous two years. The
group is also now in a position to look at future growth opportunities both
organically and by acquisition.
The selection of appropriate empowerment partners and BEE structures is in
progress and should be completed by 25 June 2006.
ACCOUNTING POLICIES AND BASIS OF ACCOUNTING
The principal accounting policies and basis of accounting used, are in all
material respects consistently applied, except for the definition of revenue,
the treatment of operating lease expenses and the adoption of AC 140 Business
Combinations. These results have been compiled in accordance with South African
Statement of Generally Accepted Accounting Practice (AC 127).
With the adoption of AC 140 Business Combinations, the amortisation of goodwill
has ceased with effect from the beginning of the current financial year. In
terms of AC 140, an impairment charge of R4.2 million was raised during the year
compared to amortisation expenses of R4.1 million in the prior year.
RESTATEMENTS
REVENUE
During the year, inbound tour operators changed its definition of revenue. In
line with the practice in the industry, revenue from inbound tour operators is
now accounted for on a net basis. Previously, revenue was accounted for on
gross amounts billed to customers. Consequently, cost of sales has been
restated accordingly. This change had no effect on the income statement or
balance sheet other than the calculation of revenue as noted below.
R000 2005 2004
Revenue - old method 1 517 464 1 560 076
Revenue - new method 1 134 065 1 106 255
OPERATING LEASES
According to recent accounting developments, operating lease expenses should be
charged to the income statement on a straight line basis unless another
systematic method is more representative of the time pattern of the user`s
benefit. Previously operating leases were accounted for as expenses when
incurred. This change in operating leases resulted in the effect noted below.
R000 Gross Tax Net
Effect on opening retained income
2005 (decrease) (9 374) 2 812 (6 562)
2004 (decrease) (9 871) 2 961 (6 910)
Effect on income statement
2005 increase 1 532 (444) 1 088
2004 increase 497 (149) 348
COMPARATIVE INFORMATION
Comparative information has been restated for the effects of the new definition
of revenue, new accounting developments on operating leases and reclassification
of debit balances on foreign bank accounts from loans relating to foreign notes
held to cash and bank balances. The effects of the restatements as a result of
new accounting developments on operating leases and the new definition of
revenue are noted above. The reclassification of foreign bank accounts has no
income statement effect. An amount of R11.2 million (2004: R3.9 million) was
reclassified from loans relating to foreign notes held to cash and bank
balances.
SUBSEQUENT EVENTS
There are no subsequent events to report.
BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE
Osman Arbee was appointed as a non executive director on 1 November 2004. Andre
Geldenhuys resigned on 1 November 2004. Ian Hay resigned from the Board on 21
February 2005 and has taken the position of CEO for Tourvest Duty Free within
the Retail Merchandising division. Jan Roesch was appointed chief financial
officer and joined the Board as an executive director with effect from 4 April
2005. Conrad Mortimer was appointed as company secretary on 29 October 2004.
Jonathan Gerber, Andrew McDonic and Luvhengo Neswiswi have joined the executive
committee.
ORDINARY DIVIDEND AND RELEVANT DATES
An ordinary dividend of 3 cents per share was paid on 13 September 2004 in
respect of the previous year. An ordinary dividend of 5.75 cents per share has
been declared in line with our policy of paying an annual dividend equal to 50%
of earnings per share.
In compliance with STRATE the following dates are applicable:
Last date to trade cum dividend Friday, 9 September 2005
Date trading commences ex
dividend payment Monday, 12 September 2005
Record date Friday, 16 September 2005
Date of payment Monday, 19 September 2005
Share certificates may not be dematerialised or rematerialised from Monday 12
September to Friday 16 September 2005, both dates inclusive.
REVIEWED BY AUDITORS
The results have been reviewed by Tourvest 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
18 August 2005
Registered Office: 2nd Floor, Forum V, Braampark, 33 Hoofd Street,
Braamfontein, Johannesburg, 2001
Transfer Secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg, 2001, P O Box 61051, Marshalltown,
2107
Sponsor: Investec Securities Limited
Directors: CE Scott (Chairman), RT Edmond (Chief Executive)*+, O Arbee, E de
Jager*, IC Meltzer*, WG Lynch**, P Maisel, JF Roesch* (*Executive, +British
**Irish)
Company Secretary: CG Mortimer
Date: 18/08/2005 12:15:14 PM
Produced by the JSE SENS Department
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