| Tue 7 Mar 2006, 10:30 | | Mvela Group - Unaudited interim report for the six |
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MVG MVGP
MVG
Mvela Group - Unaudited interim report for the six months ended 31 December 2005
Mvelaphanda Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
("Mvela Group" or "the company")
ISIN: ZAE000060737 & Share code: MVG
ISIN: ZAE000073540 & Share Code: MVGP
Unaudited interim report for the six months ended 31 December 2005
The following are the unaudited results of Mvela Group and its subsidiaries
("the group") for the six months ended 31 December 2005 with comparative
figures.
HIGHLIGHTS
* Intrinsic net asset value per ordinary share-
* up 29% to R10.76 at 31 December 2005
* up 45% to R12.07 at 28 February 2006
* Headline earnings per ordinary share up 360% to 185 cents per share
* Profit from investments of R541 million
* Acquisition of a further effective interest of 2.47% in Absa concluded
* R547 million capital raising successfully concluded
Summarised Group income Statement
Unaudited Unaudited Unaudited
six months six months year
ended ended ended
31 December 31 December 30 June
2005 % 2004 2005
R"000 change R"000 R"000
(restated) (restated)
Revenue 1 512 367 (12%) 1 714 302 3 221 310
Profit from continuing
services businesses
131 725 109 604 239 120
Loss from disposed mining
services operations
- (1 061) (38 101)
Profit from operations 131 725 21% 108 543 201 019
Profit from investments 540 575 35 368 268 088
Income from associates 224 474 607 118 252
Net profit before
interest, exceptional
items and taxation
896 774 521% 144 518 587 359
Net interest (12 272) 2 867 (10 699)
(paid)/received
Exceptional items - - (36 439)
Net profit before 884 502 500% 147 385 540 221
taxation
Taxation (118 019) (52 599) (127 410)
Normal, deferred and (112 906) (30 937) (104 901)
capital gains tax
Secondary tax on (5 113) (21 662) (22 509)
companies
Net profit after taxation 766 483 709% 94 786 412 811
Attributable to:
Ordinary shareholders 754 758 86 471 403 614
Outside shareholders 11 725 8 315 9 197
766 483 94 786 412 811
Net number of ordinary
shares in
issue (000)
440 060 402 947 403 163
Weighted average number
of ordinary shares in
issue (000)
406 277 211 909 306 305
Fully diluted weighted
average number of
ordinary shares in issue
(000)
460 977 211 909 306 305
Earnings per ordinary 185.8 355% 40.8 131.8
share (cents)
Headline earnings per
ordinary share (cents)
185.4 360% 40.3 143.5
Fully diluted earnings
per ordinary share
(cents)
163.7 301% 40.8 131.8
Fully diluted headline
earnings per ordinary
share (cents)
163.4 306% 40.3 143.5
Dividend per ordinary 5.0 - 10.0
share (cents)
Dividend per preference 8.7 - -
share (cents)
SUMMARISED GROUP BALANCE SHEET
Unaudited Unaudited Unaudited
Six months Six months year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
R"000 R"000 R"000
(restated) (restated)
ASSETS
Non-current assets 4 738 128 2 469 359 3 098 329
Property, plant and equipment 327 598 345 588 315 029
Trademarks 60 940 60 927 60 927
Goodwill 666 533 611 726 639 483
Investments in associates 1 134 379 775 862 899 552
Other investments 2 522 655 645 427 1 162 173
Deferred taxation 26 023 29 829 21 165
Current assets 893 971 932 007 668 582
Liquid funds 323 456 232 099 177 376
Other current assets 570 515 699 908 491 206
TOTAL ASSETS 5 632 099 3 401 366 3 766 911
EQUITY AND LIABILITIES
Capital and reserves 4 409 685 2 393 726 2 670 430
Share capital and reserves 4 192 071 2 368 503 2 669 355
Amounts due to vendors - 24 267 -
Outside shareholders" interest 217 614 956 1 075
Non-current liabilities 641 487 299 723 379 491
Interest bearing liabilities 317 123 217 727 275 988
Non-interest bearing liabilities 15 258 10 790 10 336
Deferred taxation 309 106 71 206 93 167
Current liabilities 580 927 707 917 716 990
Interest bearing liablities 58 058 67 994 83 898
Non-interest bearing liabilities 522 869 639 923 633 092
TOTAL EQUITY AND LIABILITIES 5 632 099 3 401 366 3 766 911
Net asset value per ordinary 847.3 593.6 662.1
share (cents)
Net tangible asset value per 695.0 419.3 483.1
ordinary share (cents)
SUMMARISED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Unaudited
six months six months year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
R"000 R"000 R"000
(restated) (restated)
Profit from operations 131 725 108 543 201 019
Non-cash items 52 787 50 647 110 753
Working capital changes (157 111) (66 363) 123 739
Cash generated from operations 27 401 92 827 435 511
Net interest (paid)/received (12 272) 2 867 (7 110)
Taxation paid (63 805) (45 715) (75 469)
Dividends paid (40 516) (195 152) (195 058)
Cash (utilised in)/available (89 192) (145 173) 157 874
from operating activities
Cash effects of investing (284 699) (96 303) (393 413)
activities
Cash effects of financing 519 971 32 786 (27 874)
activities
Net movement in liquid funds 146 080 (208 690) (263 413)
Net liquid funds at the 177 376 440 789 440 789
beginning of the period
Net liquid funds at the end of 323 456 232 099 177 376
the period
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Unaudited
six months six months year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
R"000 R"000 R"000
(restated) (restated)
Balance at the beginning of the 2 670 430 1 037 489 1 037 489
period
Acquisitions of investments,
subsidiaries and businesses
476 425 1 456 815 1 429 984
Shares issued/bought back 537 297 - (13 820)
Net profit after taxation 766 483 94 786 412 811
Dividends/distribution paid (40 950) (195 365) (196 034)
Balance at the end of the period 4 409 685 2 393 725 2 670 430
RECONCILIATION BETWEEN NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS AND
HEADLINE NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
Unaudited Unaudited Unaudited
six months six months year
ended ended ended
31 December 31 December 30 June
2005 % 2004 2005
R"000 change R"000 R"000
(restated) (restated)
Net profit attributable to
ordinary
shareholders 754 758 773% 86 471 403 614
Goodwill impaired/written off - - 34 809
Impairment of investment in
an associate - - 1 630
Profit on sale of property,
plant
and equipment (1 562) (1 169) (511)
Headline net profit
attributable to
ordinary shareholders 753 196 783% 85 302 439 542
SEGMENTAL INFORMATION
Unaudited Unaudited Unaudited
six months six months year
ended ended ended
31 December 31 December 30 June
2005 % 2004 2005
R"000 change R"000 R"000
(restated) (restated)
REVENUE
Operations 1 512 367 1 714 302 3 221 310
Investments - - -
1 512 367 (12%) 1 714 302 3 221 310
NET PROFIT BEFORE INTEREST,
EXCEPTIONAL ITEMS AND
TAXATION
Operations 131 725 108 543 201 019
Investments 765 049 35 975 386 340
896 774 521% 144 518 587 359
Commentary
Overview
The merger of the businesses and assets of Mvelaphanda Holdings (Proprietary)
Limited and Rebserve Holdings Limited ("the merger") to create Mvela Group was
implemented in December 2004. The results for the period under review reflect
the success which has been achieved in the first year of Mvela Group"s
existence, reinforcing Mvela Group"s status as South Africa"s leading listed
black-controlled, owned and managed diversified industrial group, and
demonstrating Mvela Group"s ability to capitalise on the numerous opportunities
being presented as a result of the buoyant economic environment prevailing in
South Africa at present.
Highlights for the period under review include:
* the acquisition of a further effective interest of 2.47% in Absa Group
Limited ("Absa") (an effective interest of 24.7% in Batho Bonke Capital
(Proprietary) Limited ("Batho Bonke")) for R461 million, which price
represented a discount of approximately 30% to the market value of the
Batho Bonke shares at the time of concluding the acquisition; and
* the issue by Mvela Group, in November 2005, of 54.7 million convertible
perpetual cumulative preference shares ("the preference shares"), raising
R547 million (before expenses) of permanent capital for Mvela Group on
market-related terms, without prejudicing Mvela Group"s BEE credentials.
The growth in Mvela Group"s intrinsic net asset value per ordinary share is
considered to be the best indicator of the group"s overall performance.
Intrinsic net asset value per ordinary share, calculated with reference to the
market value (for listed companies) and/or directors" valuation of the group"s
investments and operating companies, increased by 29%, from R8.35 at 30 June
2005, to R10.76 at 31 December 2005.
Mvela Group"s intrinsic net asset value per ordinary share at 28 February 2006,
being the last practicable date prior to the finalisation of these results, and
calculated on the basis set out above, and on the assumption that the Mvela
Resources disposal had not been implemented, increased by 45%, from R8.35 at 30
June 2005, to R12.07.
The results and activities of the group, including segmental information, are
presented for its two areas of activity - operations and investments. This is in
line with the manner in which Mvela Group"s activities are now structured and
managed, and the increased value and importance of the investment activities of
the group.
Investments
Mvela Group"s investments performed extremely well in the period under review.
Profit from investments, which includes the unrealised gains on the revaluation
of investments (net of costs relating to the investment activities), increased
by 132%, from R233 million for the six months ended 30 June 2005, to R541
million for the period under review.
The group"s major investments at 31 December 2005 comprise an effective interest
of 4.47% in Absa, an effective interest of 18.1% in Life Healthcare Group
(Proprietary) Limited ("Life Healthcare"), an effective interest of 30% in
Abvest Associates (Proprietary) Limited, an effective interest of 10.8% in Group
Five Limited, and an effective interest of 22.9% in Mvelaphanda Resources
Limited (which, subject to the fulfilment of certain material suspensive
conditions which remain unfulfilled at the date hereof, has been sold).
Mvela Group"s effective interest in Absa now represents the group"s largest
investment, valued at approximately R2 billion at 28 February 2006.
Life Healthcare continues to deliver strong operational results. As a result of
this performance, the general re-rating of the healthcare sector, and the
leveraged structure used to finance this investment, the value of Mvela Group"s
investment in Life Healthcare has increased substantially.
Mvela Group acquired an effective interest of 10.8% in Group Five Limited, a
leading construction group listed on the JSE Limited, in November 2005, and an
effective interest of 39.2% in Swissport South Africa (Proprietary) Limited,
which provides logistics services at major airports in South Africa, in July
2005. The investment in Group Five has performed well over the period.
The performance of Mvela Group"s other investments was in line with
expectations.
On 22 December 2005 Mvela Group announced that it had concluded a written
agreement with Incwala Resources (Proprietary) Limited ("Incwala") to dispose of
its 22.9% interest in Mvelaphanda Resources Limited ("Mvela Resources"), and its
rights and obligations in terms of the management agreement between Mvela Group
and Mvela Resources ("the Mvela Resources disposal"). The purchase consideration
payable by Incwala to Mvela Group is R763 million. The Mvela Resources disposal
remains subject to the fulfilment of certain material suspensive conditions by
31 March 2006, which suspensive conditions remain unfulfilled at the date
hereof. A further announcement in this regard will be made upon fulfilment (or
otherwise) of such suspensive conditions. The reviewed results of Mvela
Resources for the six months ended 31 December 2005 were published in the press
on 23 February 2006, and reported a net profit attributable to its ordinary
shareholders of R935 million. The results for Mvela Resources have been equity
accounted in the period under review.
No impairment of the carrying value of the investment in Mvela Resources has
been or will be made, to restate the carrying value to the consideration
receivable in terms of the Mvela Resources disposal until such time as the
suspensive conditions pertaining to the Mvela Resources disposal might be
fulfilled. Had such an impairment been made, the group"s net profit attributable
to ordinary shareholders would have been reduced by R342 million, equivalent to
84 cents per ordinary share, and the group"s intrinsic net asset value per
ordinary share at 28 February 2006 would have reduced to R11.29.
The cash proceeds of R51 million in respect of the disposal of Mvela Group"s
effective interest in African Life Assurance Limited were received after 31
December 2005.
Operations
Mvela Group"s operations performed in line with expectations. Revenue for the
period under review decreased by 12% from the comparable period to R1 512
million, as a result of the disposal of the JIC Mining Services business in the
second half of the 2005 financial year. Profit from operations for the period
under review increased by 21% to R132 million, from R109 million for the six
months ended 31 December 2004. The overall growth rate achieved by the services
business is gratifying given the flat earnings profile of TFMC, which comprises
almost half of Mvela Group"s profit from operations. The operating margin for
Mvela Group"s operations as a whole increased to 8.7% from 6.3% in the
comparable period.
The performance of the facilities management business remained steady. TFMC
continues to pursue several opportunities relating to the awarding of major new
facilities management contracts both locally and overseas. Progress with the
finalisation of the proposed facilities management contract between TFMC and
Propnet has been delayed pending the conclusion of the restructuring currently
being undertaken by Transnet Limited.
Coin Security experienced a disturbing increase in the number of armed attacks
on its assets-in-transit vehicles during the period under review, in line with
the current industry trend in South Africa.
The other operating businesses performed in line with expectations.
Cash generated from operations was below expectations as a result of lower than
anticipated collections from customers over the Christmas holiday period and the
early payment of certain major creditors, primarily by TFMC, prior to the period
end. Apart from this temporary unusual cash fluctuation at 31 December 2005, the
group"s operating cashflow remains strong.
Financial performance
Net profit attributable to ordinary shareholders increased by R669 million, from
R86 million for the six month period ended 31 December 2004, to R755 million in
the period under review. Net profit attributable to ordinary shareholders
increased by 138%, from R317 million for the six months ended 30 June 2005, to
R755 million in the period under review.
The weighted average number of ordinary shares in issue increased from 306
million ordinary shares for the year ended 30 June 2005, to 406 million ordinary
shares, as a result of the inclusion of the ordinary shares issued pursuant to
the merger for the full period. The effect of the 33.9 million new ordinary
shares issued in partial settlement of the purchase consideration for the
acquisition of the additional effective interest of 2.47% in Absa in December
2005, was not material in the period under review.
Fully diluted headline earnings per ordinary share increased by 306%, from 40.3
cents per share in the comparable period, to 163.4 cents in the period under
review, mainly as a result of the performance of the group"s investments.
The fully diluted headline earnings per ordinary share is calculated using the
weighted average number of ordinary shares in issue during the period plus the
maximum number of ordinary shares which may be issued on conversion of the
preference shares to ordinary shares after 4 November 2009. Net asset value per
ordinary share and net tangible asset value per ordinary share are calculated
using the net number of ordinary shares in issue at 31 December 2005 (after
deducting the ordinary shares held by the share incentive scheme) plus the
maximum number of ordinary shares which may be issued on conversion of the
preference shares to ordinary shares after 4 November 2009.
The net profit attributable to outside shareholders of R12 million, and the
outside shareholders reflected on the balance sheet of R218 million, relate to
the outside shareholders in the Batho Bonke consortium where certain of the
special purpose entities comprising the Batho Bonke consortium have been
consolidated pursuant to the acquisition of the further effective interest of
2.47% in Absa, and also relate to the outside shareholders in certain of the
operating subsidiaries.
As a result of the adoption of IFRS, certain special purpose entities which were
created to hold certain of Mvela Group"s investments and the non-recourse
funding related to these investments have been consolidated. This has resulted
in an increase in the gross carrying value of these investments, and a
corresponding increase in the non-recourse interest bearing liabilities on the
balance sheet at 31 December 2005, of approximately R160 million.
Accounting policies and International Financial Reporting Standards (IFRS)
With effect from 1 July 2005 Mvela Group is required to prepare its consolidated
financial statements in accordance with IFRS. Accordingly, the interim results
for the six months ended 31 December 2005 have been prepared in accordance with
IFRS. In accordance with IFRS1 - First Time Adoption of IFRS, Mvela Group has
prepared an opening IFRS balance sheet at the date of transition to IFRS, being
1 July 2004. Comparative figures for the year ended 30 June 2005 and the six
months ended 31 December 2004 have been restated accordingly. The IFRS standards
are subject to ongoing review and interpretation by the International Accounting
Standards Board. Consequently IFRS information at year end may differ from the
information reported in this interim report.
Adjustments which reflect the major differences between South African Statements
of Generally Accepted Accounting Practice (SA GAAP) and IFRS are:
* Consolidation of special purpose entities
* Certain special purpose entities which were previously not consolidated
under SA GAAP have been consolidated in accordance with the requirements of
IAS 27 - Consolidated and Separate Financial Statements. These special
purpose entities relate to certain of Mvela Group"s investments and were
put in place to facilitate the non-recourse financing of the relevant
investments.
Trade marks previously written off
In accordance with the requirements of IFRS1, as applicable to IAS 38 -
Intangible Assets, trademarks which were previously written off under SA GAAP
have been recognised on the balance sheet at their impaired carrying value at 1
July 2004 and are tested annually for impairment.
Property, plant and equipment
Depreciation of property, plant and equipment has been calculated with reference
to the estimated useful life and residual value of each part of an item of
property, plant and equipment with a cost that is significant in relation to the
total cost of the item, in accordance with IAS 16 - Property, Plant and
Equipment.
Investments in associated companies
The investments in and income from associated companies have been restated as a
result of the restatement of the results of the associated companies on adoption
of IFRS by the associated companies.
The financial effects of these adjustments, net of taxation, are set out in the
table below.
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
Unaudited Unaudited IFRS
six months year transition
ended ended date
31 December 30 June 1 July
2004 2005 2004
R"000 R"000 R"000
Capital and reserves
As previously reported 2 362 385 2 610 185 1 004 072
under SA GAAP
Trademarks previously 42 000 42 600 42 000
written off
Consolidation of special - 33 445 -
purpose entities
IFRS adjustments by - (3 063) -
associates
Property, plant and (10 659) (12 737) (8 583)
equipment
Capital and reserves 2 393 726 2 670 430 1 037 489
(restated)
Unaudited Unaudited
six months year
ended ended
31 December 30 June
2004 2005
R"000 R"000
Net profit after taxation
As previously reported 96 863 385 983
under SA GAAP
Trademarks previously - 600
written off
Consolidation of special - 33 445
purpose entities
IFRS adjustments by - (3 063)
associates
Property, plant and (2 077) (4 154)
equipment
Net profit after taxation 94 786 412 811
(restated)
Dividends
Ordinary shares
The directors of Mvela Group have resolved to declare an interim cash dividend
(No. 12) of 5 cents per ordinary share ("the ordinary dividend") to ordinary
shareholders. The last day to trade "cum" the ordinary dividend in order to
participate in the ordinary dividend is Friday, 31 March 2006. The ordinary
shares of Mvela Group will commence trading "ex" the ordinary dividend from the
commencement of business on Monday, 3 April 2006 and the record date will be
Friday, 7 April 2006. The ordinary dividend will be paid to ordinary
shareholders on Monday, 10 April 2006. Ordinary share certificates may not be
dematerialised or rematerialised between Monday, 3 April 2006 and Friday, 7
April 2006, both days inclusive.
Preference shares
The directors of Mvela Group have resolved to declare a cash preference dividend
(No. 1) of 8.73973 cents per preference share ("the preference dividend") to
preference shareholders. The last day to trade "cum" the preference dividend in
order to participate in the preference dividend is Friday, 31 March 2006. The
preference shares of Mvela Group will commence trading "ex" the preference
dividend from the commencement of business on Monday, 3 April 2006 and the
record date will be Friday, 7 April 2006. The preference dividend will be paid
to preference shareholders on Monday, 10 April 2006. Preference share
certificates may not be dematerialised or rematerialised between Monday, 3 April
2006 and Friday, 7 April 2006, both days inclusive.
Prospects
Growth in Mvela Group"s intrinsic net asset value per ordinary share is expected
to continue as a result of the continued strong performance of the group"s
quality investments.
Given the current increase in corporate activity and the buoyant market
conditions in South Africa, Mvela Group is confident of its ability to conclude
major BEE and other corporate transactions on favourable terms, and to continue
to enhance shareholder value, primarily by growing its intrinsic net asset value
per ordinary share.
The performance of Mvela Group"s services operations remains solid. New
opportunities for the existing operations, and potential new operations, are
constantly being evaluated and developed. Steady growth in the group"s
operations and cash flows will continue to complement and facilitate Mvela
Group"s investment activities.
T M G Sexwale S M Levenberg
Chairman Chief Executive Officer
7 March 2006
Sandton
Executive Directors:
TMG Sexwale (Executive Chairman), MSM Xayiya (Executive Deputy Chairman), SM
Levenberg (Chief Executive Officer), YZ Cuba,
WV Mavimbela, PJA Mphafudi, BC Till, MJ Willcox
Non-Executive Directors:
KD Dlamini *, BD Hopkins *, OA Mabandla *, D Moshapalo *, JRT Moxon *, MZ
Nxumalo *, RM Patel *, CD Stein (* Independent)
Registered Office:
Hunts End, 36 Wierda Road West, Wierda Valley, Sandton, 2196
Telephone 27 11 290-4200 Telefax 27 11 783-0027
Sponsor:
Deutsche Securities SA (Pty) Ltd
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001
A copy of these results are available on the Mvelaphanda Group website at:
www.mvelagroup.co.za
Date: 07/03/2006 10:30:22 AM Produced by the JSE SENS Department
