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TRT
TRT
Tourvest - Group Results For The 6 Months Ended
Tourvest Investment Corporation Limited
(Registration number: 1996/008144/06)
Share code: TRT
ISIN: ZAE000012472
GROUP RESULTS FOR THE 6 MONTHS ENDED
25 DECEMBER 2005
COMMENTS
Tourvest has elected to adopt International Financial Reporting Standards (IFRS)
with effect from 26 June 2005.
Following the satisfactory completion of the restructuring process, the group
has maintained its external focus. During the review period, all the divisions
delivered good performances, apart from Financial Services which was affected by
reduced volumes.
Operating income grew by 6.5% but it should be noted that comparisons with the
first half of 2004 are skewed by non-recurring incomes in the previous period of
R5.6 million and R2.5 million related to a VAT refund and the sale of Starlight
Cruises. Headline EPS was 5.6 cents compared to 6.1 cents in 2004 as a result
of higher taxation and increases in minorities. The tax rate was higher than in
the previous period as an increased dividend was paid in 2005 with a
corresponding rise in the STC (R6.8 million vs. R2.5 million). The taxation
rate is in line with the annual rate for the 2005 financial year. The partial
completion of the Victoria Falls transaction contributed to the increase in
minorities.
Review of operations
Inbound Tourism Services
After adjusting for the VAT refund of R5.6 million in the previous year, this
division performed well, with the restructuring of the tour operator business
delivering the desired results. The acquisition of the Zambian and Botswanan
businesses which form part of the Victoria Falls transaction was completed and
the profits for the businesses have been accounted for in the trading results
for the review period. The Zimbabwean component of this transaction is still
subject to regulatory approval in that country.
Outbound Travel Services
Excluding the R2.5 million Starlight profit in 2004, this division grew
operating income by 20%. In line with our strategy of increasing our retail
travel market share, Cumming Travel was acquired but its results have not been
included for this period. With the growing trend to internet ticket sales, the
division has developed an internet booking engine for corporate clients. This
is currently in its pilot phase. The Afro-Asian travel operations continued to
perform in line with expectations. While the recently restructured outbound
tour operators is not yet profitable, it has shown a great improvement over last
year and is cash-positive.
Financial Services
This division experienced a decrease in operating income of 21% as a result of
reduced outbound volumes together with reduced note and travellers" cheque
purchases. All corporate customers were retained and controls and costs were
further improved.
Retail Merchandising
This division grew its operating profit by 34%. The start-up problems with the
Virgin Atlantic duty-free business have been resolved and the African arts and
curios operations performed well. Jewellery margins and trading volumes have
improved, but margins are not yet at optimal levels as we continue to sell stock
purchased at weaker exchange rates.
Prospects
At the current exchange rate we anticipate real growth in earnings for the year.
The results for the second half should be better than those for the comparative
period for the previous year as the latter included once-off restructuring costs
for the jewellery and outbound tour operator businesses.
Ordinary dividends
An ordinary dividend of 5.75 cents was paid on 23 September 2005.
Board of directors and executive committee
Ian Meltzer resigned from the board and executive committee on 1 October 2005.
Subsequent events
There are no subsequent events to report.
Basis of preparation and accounting policies
The consolidated interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) IAS34 - Interim
financial reporting and the South African Companies Act of 1973, as amended.
Effect of the first time adoption of IFRS
In accordance with the accounting standard IFRS 1, First Time Adoption of IFRS,
the group has prepared an opening IFRS balance sheet at the date of transition
to IFRS, being 26 June 2004. The group has elected to use the following
exemptions as permitted by IFRS 1:
Cumulative foreign currency translation
The group has elected for the cumulative translation differences for all foreign
operations to be deemed to be zero at 26 June 2004. Consequently, foreign
currency translation reserves that arose before 26 June 2004 has been set to
zero. Foreign currency translation reserves arising after 26 June 2004 will be
recognised directly to equity.
Share-based payments
The group has elected not to apply the provisions of IFRS 2 to equity settled
awards granted on or before 7 November 2002, or to equity settled awards granted
after that date but which had vested prior to 1 January 2005. Share based
payments granted and vested after the above dates will be recognised as an
expense with a corresponding credit to equity. Share options will be valued
using the Black Scholes model.
Property and equipment
A first time adopter may elect to use the fair value of individual property and
equipment at transition date as the deemed cost. The group has elected to
measure individual items of property and equipment at original cost.
Business combinations
The group has elected not to retrospectively apply the requirements of IFRS 3
for business combinations that occurred prior to 26 June 2004. As a result, the
carrying amount of goodwill is the depreciated amount on 25 June 2004 and
previously amortised goodwill and goodwill eliminated against share premium and
reserves are not re-instated.
Embedded foreign currency derivatives
Gains or losses arising from trading in foreign currencies other than the
functional currencies of both contracting entities were recognised as an expense
or income with the corresponding entry recognised as a liability or an asset.
The revised IAS 39 states that where the currency of the contract is a currency
that is commonly used in contracts to purchase or sell non-financial items in
the economic environment in which the transaction takes place (e.g. a relatively
stable and liquid currency that is commonly used in local business transactions
or external trade), then the contract is not regarded as a hybrid instrument
with an embedded foreign currency derivative. The group has reversed the
embedded derivatives that arose from trading transactions conducted with the
Japanese customers on the basis that the US$ is the commonly used trading
currency in local business transactions with Japanese customers in Tourism. The
group has made an election not to restate prior year numbers but to adjust the
opening retained income in 2006 financial year by R1.1 million net of taxation.
Restatements
Revenue
During the second half of the prior 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 Dec 2005 Dec 2004
Revenue - old method 868 772 800 804
Revenue - new method 647 709 588 574
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. The current period financial statements have been prepared on the new
basis. The restatement of the prior period resulted in the credit to income
statement of R0.5 million net of taxation.
Adjustments on adoption of IFRS
IAS16 requires that the economic useful lives and residual values of the assets
should be reassessed at each balance sheet date. When calculating depreciation,
the cost of an asset is reduced by its residual value. Under SA GAAP, the
estimated residual value was fixed on initial recognition of the asset and was
not subject to reassessment. Previously, the group fixed its residual values at
zero. The annual reassessment of useful lives and residual values would lead to
an adjustment in depreciation charges and these charges would cease when the
carrying value of an asset equals its residual value. The depreciation
previously recognised in the income statement has accordingly been reversed or
reduced, resulting in a corresponding increase in equity.
IFRS impact
The conversion of IFRS has resulted in a net charge of R22k (December 2004:
R106k) to the current period income statement mainly from depreciation as a
result of revised useful life and residual values of property and equipment and
share based payments.
The most significant impact on the balance sheet from the adoption of IFRS is
the election on foreign currency embedded derivatives which resulted in a net
decrease of R1.1 million in reserves, and the revised useful life and residual
values of property and equipment which resulted in net decrease of R4.3 million
in property and equipment with a corresponding decrease in reserves of R3.5
million net of deferred taxation and minorities.
Comparative information
Comparative information has been restated for the effects of the new definition
of revenue, new accounting developments on operating leases, reclassification of
debit balances on foreign bank accounts from loans relating to foreign notes
held to cash and bank balances and reclassification of credit accounts
receivable balances to accounts payable. 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 reclassifications of foreign bank accounts and
accounts receivable have no income statement effect. An amount of R7.9 million
(December 2004: R16.9 million) was reclassified from loans relating to foreign
notes held to cash and bank balances. The credit accounts receivable balances
reclassified to accounts payable amounted to R14.4 million (December 2004: R17.5
million).
GROUP INCOME STATEMENT
for the six months ended 25 December 2005
25 Dec 04
25 Dec 05 Unaudited 25 Dec 04
R000 Unaudited Restated Unaudited
Revenue 647 709 588 574 800 804
Operating income 84 020 78 865 78 171
Net interest paid (2 734) (4 003) (4 003)
Income before
taxation 81 286 74 862 74 168
Taxation (31 200) (22 188) (21 889)
Profit for
the period 50 086 52 674 52 279
Attributable to:
Shareholders 42 288 47 900 47 462
Minority
shareholders 7 798 4 774 4 817
Profit for
the period 50 086 52 674 52 279
Reconciliation of
attributable income
to headline earnings
Income attributable
to shareholders 42 288 47 900 47 462
Capital loss
(profits) 272 (6 491) (6 491)
Impairment provision 4 742 4 742
Impairment of goodwill
Headline earnings 42 560 46 151 45 713
Weighted average
shares ("000) 758 293 759 065 759 065
Headline earnings
per share (cents) 5.6 6.1 6.0
Headline earnings
per share excluding
STC (cents) 6.5 6.4 6.4
Earnings per share
(cents) 5.6 6.3 6.3
Secondary taxation
on companies (STC) 6 812 2 523 2 523
Effective taxation
rate 38% 30% 30%
GROUP INCOME STATEMENT (cont"d)
for the six months ended 25 December 2005
25 Jun 05
Unaudited 25 Jun 05
R000 Restated Audited
Revenue 1 134 065 1 134 065
Operating income 151 218 150 634
Net interest paid (6 855) (6 855)
Income before taxation 144 363 143 779
Taxation (49 438) (49 073)
Profit for the period 94 925 94 706
Attributable to:
Shareholders 88 662 88 302
Minority shareholders 6 263 6 404
Profit for the period 94 925 94 706
Reconciliation of attributable
income to headline earnings
Income attributable to
shareholders 88 662 88 302
Capital loss (profits) (3 770) (3 770)
Impairment provision (500) (500)
Impairment of goodwill 4 194 4 194
Headline earnings 88 586 88 226
Weighted average shares
("000) 767 273 767 273
Headline earnings per
share (cents) 11.5 11.5
Headline earnings per share
excluding STC (cents) 11.9 11.8
Earnings per share (cents) 11.6 11.5
Secondary taxation on
companies (STC) 2 523 2 523
Effective taxation rate 34% 34%
GROUP BALANCE SHEET at 25 December 2005
25 Dec 04
25 Dec 05 Unaudited 25 Dec 04
R000 Unaudited Restated Unaudited
ASSETS
Non-current assets
Property and
equipment 109 709 105 979 111 363
Goodwill 81 785 83 239 83 239
Trademarks 6 181 2 086 2 086
Deferred taxation 24 432 33 867 29 809
Financial assets 26 481 5 640 5 640
Current assets
Inventories 202 062 179 959 179 959
Trade and other
receivables 242 531 166 523 165 757
Cash and bank
balances 77 960 35 490 35 490
Taxation paid in
advance - 6 740 6 740
Foreign notes held 53 059 53 018 53 018
Total current
assets 575 612 441 730 440 964
Total assets 824 200 672 541 673 101
EQUITY AND LIABILITIES
Capital and reserves
Share capital
and premium 18 203 11 657 11 657
Non-distributable
Reserves 20 234 28 159 18 506
Accumulated
profits 293 535 248 774 268 732
Ordinary
shareholders
Interest 331 972 288 590 298 895
Minority interest 33 275 24 786 24 664
Total equity 365 247 313 376 323 559
Non-current liabilities
Interest-bearing
Borrowings 9 083 8 248 8 248
Deferred taxation - 1 792 1 792
Current liabilities
- Non interest bearing
Trade and other
payables 355 346 254 149 244 526
Provisions 22 327 28 552 28 552
Taxation payable 13 153 - -
Dividends payable 647 - -
- Interest bearing
Current portion of
interest-bearing
borrowings 470 - -
Loans relating to
foreign notes held 57 927 66 424 66 424
Total current
liabilities 449 870 349 125 339 502
Total equity and
liabilities 824 200 672 541 673 101
GROUP BALANCE SHEET (cont"d) at 25 December 2005
25 Jun 05
Unaudited 25 Jun 05
R000 Restated Audited
ASSETS
Non-current assets
Property and equipment 98 190 102 515
Goodwill 78 637 78 637
Trademarks 3 851 3 851
Deferred taxation 28 683 27 504
Financial assets 2 715 2 715
Current assets
Inventories 162 893 162 893
Trade and other receivables 176 172 176 486
Cash and bank balances 96 347 96 347
Taxation paid in advance 14 247 14 247
Foreign notes held 43 690 43 690
Total current assets 493 349 493 663
Total assets 705 425 708 885
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 10 593 10 593
Non-distributable reserves 26 180 16 189
Accumulated profits 292 877 306 352
Ordinary shareholders interest 329 650 333 134
Minority interest 27 253 27 229
Total equity 356 903 360 363
Non-current liabilities
Interest-bearing borrowings 6 933 6 933
Deferred taxation 1 641 1 641
Current liabilities
- Non interest bearing
Trade and other payables 258 182 258 182
Provisions 21 585 21 585
Taxation payable 7 947 7 947
Dividends payable 1 209 1 209
- Interest bearing
Current portion of interest-
bearing borrowings 1 279 1 279
Loans relating to foreign
notes held 49 746 49 746
Total current liabilities 339 948 339 948
Total equity and liabilities 705 425 708 885
GROUP STATEMENT OF CHANGES IN EQUITY
Non-
distri-
Share Share butable
R000 capital premium reserves
Balance at 25 Jun 04 7 488 3 085 20 858
IFRS adjustments:
IAS16 - Property and
equipment
IFRS2 - Share based
Payments 676
IAS21 - Adjustment
to foreign currency
translation reserves 8 639
Restatements
IFRS restated balance
at 25 Jun 04 7 488 3 085 30 173
Attributable income
to 25 Dec 04 338
Dividend paid (2 285)
Exercise of shares
in share trust 3 369
Deferred tax
reversing on
trademark (3 396)
Foreign exchange
transaction
differences 1 044
IFRS restated balance
at 25 Dec 04 7 488 4 169 28 159
Attributable income
to 25 Jun 05 338
Dividend paid 2 285
Dividend accruing to
treasury stock
Deferred tax reversing
on trademark (4 008)
Buy back of shares
and exercise of
shares
in share trust 109 (3 458)
Foreign exchange
transaction
differences 1 691
IFRS restated
balance
at 25 Jun 05 7 597 2 996 26 180
Opening retained
earnings adjustment
resulting from the
reversal of foreign
currency embedded
derivatives
Attributable income
to 25 Dec 05
Dividend paid
Dividend accruing to
treasury stock
Deferred tax
reversing on
trademark (3 206)
Business combination
Exercise of shares in
share trust 49 7 561
Foreign exchange
Transaction
Differences (2 740)
IFRS restated
balance at
25 Dec 05 7 646 10 557 20 234
GROUP STATEMENT OF CHANGES IN EQUITY (cont"d)
Accumu-
lated Minority Total
R000 profits interest equity
Balance at 25 Jun 04 233 938 26 024 291 393
IFRS adjustments:
IAS16 - Property and
equipment (3 947) 165 (3 782)
IFRS2 - Share based
Payments (676) -
IAS21 - Adjustment
to foreign currency
translation reserves (8 639) -
Restatements (572) (572)
IFRS restated
balance at
25 Jun 04 220 104 26 189 287 039
Attributable income
to 25 Dec 04 47 900 4 774 53 012
Dividend paid (22 626) (5 198) (30 109)
Exercise of shares
in share trust 3 369
Deferred tax
reversing on
trademark 3 396 -
Foreign exchange
transaction
differences (979) 65
IFRS restated
balance at
25 Dec 04 248 774 24 786 313 376
Attributable
income to
25 Jun 05 40 762 1 488 42 588
Dividend paid (2 285) -
Dividend accruing
to treasury stock 1 618 1 618
Deferred tax
reversing on
trademark 4 008 -
Buy back of
shares and
exercise of shares
in share trust (3 349)
Foreign exchange
transaction
differences 979 2 670
IFRS restated
balance
at 25 Jun 05 292 877 27 253 356 903
Opening retained
earnings adjustment
resulting from the
reversal of foreign
currency embedded
derivatives (1 140) (1 140)
Attributable
income to
25 Dec 05 42 288 7 798 50 086
Dividend paid (45 303) (2 545) (47 848)
Dividend accruing
to treasury stock 1 607 1 607
Deferred tax
reversing on
trademark 3 206 -
Business combination 3 447 3 447
Exercise of shares in
share trust 7 610
Foreign exchange
transaction
differences (2 678) (5 418)
IFRS restated
balance at
25 Dec 05 293 535 33 275 365 247
GROUP CASH FLOW STATEMENT
for the six months ended 25 December 2005
25 Dec 04
25 Dec 05 Unaudited 25 Dec 04
R000 Unaudited Restated Unaudited
Cash flows from
operating
activities 33 654 40 757 40 757
Cash flow from
investing
activities (31 872) (10 663) (10 663)
Cash flow from
financing
activities (18 065) 562 562
Net movement in
cash and cash
equivalents (16 283) 30 656 30 656
Cash and cash
equivalents at
beginning of
year 96 347 4 834 4 834
Foreign currency
translation
reserve (2 104)
Cash and cash
equivalents at
end of the
period 77 960 35 490 35 490
GROUP CASH FLOW STATEMENT (cont"d)
for the six months ended 25 December 2005
25 Jun 05
Unaudited 25 Jun 05
R000 Restated Audited
Cash flows from operating
activities 110 701 110 701
Cash flow from investing
activities (23 849) (23 849)
Cash flow from financing
activities (1 765) (1 765)
Net movement in cash and
cash equivalents 85 087 85 087
Cash and cash equivalents at
beginning of year 8 735 8 735
Foreign currency translation
reserve 2 525 2 525
Cash and cash equivalents at
end of the period 96 347 96 347
GROUP SEGMENTAL ANALYSIS
25 Dec 04
25 Dec 05 Restated
R000 % R000 %
Revenue
Inbound Tourism
Services 113 974 18 92 576 16
Outbound Travel
Services 103 803 16 102 730 17
Financial
Services 51 200 8 54 846 9
Retail
Merchandising 378 732 58 338 422 58
647 709 100 588 574 100
Operating income
Inbound Tourism
Services 12 557 15 14 629 18
Outbound Travel
Services 20 368 24 19 518 25
Financial Services 12 382 15 15 750 20
Retail Merchandising 38 713 46 28 968 37
84 020 100 78 865 100
Net operating
assets
Inbound Tourism
Services 40 509 14 58 809 20
Outbound Travel
Services 46 256 17 22 928 8
Financial Services 39 916 14 57 217 20
Retail Merchandising 155 636 55 151 503 52
282 317 100 290 45 100
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS Income statement
25 Dec 04 25 Jun 05
R000 Unaudited Audited
Attributable income as
previously reported 47 462 88 302
SA GAAP adjustments
Adjustment for recognising
operating lease costs on
a straight line basis 544
IFRS adjustments (106) 360
Property and equipment 256 1 026
Share based payment (338) (676)
Other adjustments (66) (132)
IFRS impact on
minority shareholders 42 142
Income attributable to
shareholders 47 900 88 662
For and on behalf of the board
CE Scott RT Edmond
Chairman Chief executive
Johannesburg 21 February 2006
Registered Office:
33 West Street, Houghton, Johannesburg, 2198
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*, WG Lynch**, P Maisel, JF Roesch* (*Executive, +British **Irish)
Company Secretary: CG Mortimer
www.tourvest.co.za
Date: 21/02/2006 12:15:19 PM Produced by the JSE SENS Department
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