| Fri 26 May 2006, 17:15 | | Stratcorp Limited - Abridged annual report |
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STA
STA
Stratcorp Limited - Abridged annual report
Stratcorp Limited
(Registration number: 2000/031842/06)
(Incorporated in the Republic of South Africa)
Share Code: STA ISIN Code ZAE000034294
ABRIDGED ANNUAL REPORT
Group audited results for the 12 months ended 28 February 2006 were as follows:
Abridged Group Balance Sheet At At
28 February 2006 28 February 2005
(Reclassified)
R"000 R"000
Non-current assets
Property, plant & equipment 556 498
Goodwill 1 318 1 318
Intangible assets 1 023 753
Other financial assets 1 544 3 108
Deferred tax - 492
4 441 6 169
Current assets
Inventories 345 177
Other financial assets 22 730 8 561
Trade & other receivables 1 200 539
Cash and cash equivalents 2 440 1,157
26 716 10 434
Total assets 31 157 16 603
Equity and liabilities
Equity
Share capital 12 805 10,438
Reserves 3 042 -
Distributable reserves 10 740 (1,242)
26 587 9 196
Non-current liabilities
Other financial liabilities - 413
Deferred tax 1 190
1 190 413
Current liabilities
Financial liabilities 1 053 2 375
Current tax payable - 846
Trade and other payables 2 327 3,773
3 380 6 994
Total liabilities 4 570 7 407
Total equity and liabilities 31 157 16 603
Number of ordinary shares in issue
(`000) 70 394 46 538
Cents Cents
Net asset value per share 37.8 19.8
Net tangible asset value per share 34.4 15.1
Abridged Group Income Statement 12 Months 12 Months
ending ending
28 February 28 February
2006 2005
(Reclassified)
R"000 R"000
Revenue 19 670 11 050
Profit / (loss) from operations 4 335 (173)
Net interest 477 (14)
Fair value adjustments 7 988 88
Profit / (loss) before taxation 12 799 (99)
Taxation (817) (444)
Profit / (loss) for the period 11 982 (542)
Number of ordinary shares in issue (`000) 70 394 46 538
Weighted average number of ordinary shares
in issue 59 762 45 016
Cents Cents
Basic earnings per share 20.1 (1.2)
Headline earnings per share 7.2 (0.4)
Diluted earnings per share 20.1 (1.2)
Dividend per share - -
Reconciliation of headline earnings net of
tax R"000 R"000
Basic earnings 11 982 (542)
Impairment losses / (reversals) (346) 346
Profit on sale of subsidiary (834) -
Fair value adjustments - investments held
for sale (6 483) -
Headline earnings 4 319 (196)
Group Statement of Changes Share Share Retained Total
in Equity Capital repurchase Earnings
reserve
R"000 R"000 R"000 R"000
Balance at 01 March 2004 9,727 - (700) 9,027
Issue of shares 1,000 - - 1,000
Share issue costs (100) - - (100)
Reduction of share capital (177) - - (177)
Treasury shares (12) - - (12)
Loss for the year - - (542) (542)
Balance at 01 March 2005 10,438 - (1,242) 9 196
Issue of shares 3,726 - - 3,726
Share issue costs (1,352) - - (1,352)
Equity profit on reduction of
treasury shares - 3 034 - 3,034
Treasury shares (7) 8 - 1
Net profit for the period - - 11 982 11 982
Balance at end of period 12,805 3 042 10 740 26 587
Abridged Group Cash Flow Statement 12 Months 12 Months
ending ending
28 February 28 February
2006 2005
(Reclassified)
R"000 R"000
Cash flow from operating activities 1 690 629
Net interest paid 477 (14)
Cash flow from investing activities (1 038) (1 329)
Cash flow from financing activities 631 1 338
Net cash flow for period 1 283 639
Cash and cash equivalents at beginning of
period 1 157 519
Cash and cash equivalents at end of period 2 440 1 157
Comments on results
The group as a whole experienced an exciting, challenging and profitable year.
The board is relieved that their devotion and persistence to stick to the
original business plan, even during difficult times, is finally bearing the
fruit of positive results.
Financial Results
The consolidated turnover of the group increased by 72% to R 19,670 million in
2006 (2005: R11,444 million). The total consolidated profits after tax for the
full year was R11 982 526.(2005: loss of R 542 464)
For comparison purposes, the preceding 4years" revenue, gross profits,
operating expenses and net profit after tax are indicated in the table below.
2002 2003 2004
Gross Revenue 8,409,559 3,350,447 11,261,490
Gross profit 6,255,604 3,257,335 10,318,286
Expenses (6,990,356) (5,430,949) (7,042,214)
Net profit after tax (835,414) (1,338,008) 2,512,354
2005 2006
Gross Revenue 11,050,189 19,670,348
Gross profit 6,502,944 12,165,414
Expenses (6,898,569) (8,813,993)
Net profit after tax (542,464) 11,982,526
Basis of preparation
The results of the Group for the twelve months ending 28 February 2006 have
been prepared in accordance with the Group"s accounting policies which comply
with International Financial Reporting Standards (IFRS). The standards are
subject to ongoing review and may change.
The Group"s transition date is 1 March 2004 and IFRS 1 - First Time Adoption of
International Financial Reporting Standards has been applied in preparing this
financial information. There were no material adjustments retrospectively
although some figures were reclassified.
Except for the transition to (IFRS), the accounting policies applied is
consistent with those applied during the comparative periods.
No segment analysis was prepared as the Group is not operating in different
market segments.
Five Year Review
StratCorp started operations in January 2001 as a result of the acquisition of
StratEquity on 15 January 2001. StratCorp"s main business is that of an
investment holding company. The company focuses on two areas, namely Financial
Services (Investments) through its wholly owned subsidiaries, and strategic
investments.
Financial Services (Investments)
Through its StratEquity subsidiary, the company has been a provider of
expansion capital to developing companies since inception. These investments
are procured through StratEquity"s client base. During the period of 2001 to
2004, market conditions were extremely difficult as a result of the global
negative investor perceptions of equity investments. These perceptions have
positively changed over the past 12-18 months, as a result of the positive
economic climate of our country, the continuous achievement of new highs on the
JSE, and more positive world markets in general. There has also been a
significant increase in new company listings on the JSE.
The ordinary man has more money available for investment purposes. This has had
a positive affect on the group"s earnings.
The business model, changes affected over the past 5 years, and future
prospects are further elaborated on under the subsidiary discussion,
(StratEquity heading).
Strategic investments
Since inception, the company has applied its strategy to make investments in a
number of developing companies. The company was fortunate to maintain this
strategy through the difficult times. The company classify these investments as
"for sale" and an annual fair value adjustment on the portfolio as a whole is
applied, and is subsequently shown in the income statement as a net movement
(up or down). The list of strategic investments is available on request in line
with the Access to information Act.
Cash flows
Over the period January 2001- June 2005, the group"s cash flows were constantly
under threat. The company occasionally had to acquire external funding to
finance operations and also to make certain strategic investments. From July
2005, positive cash flows were clearly visible in the finances of the company.
Cash generated from operations is now adequate to sustain and grow the
infrastructure and the company does not anticipate acquiring further external
funding to fund operations. Should opportunities however arise, where
acquisitions can be made to add to the shareholders value, such opportunities
will be evaluated on merit.
Systems and infrastructure
Systems
It was important that a system had to be developed that could apply the
business model through to its operating subsidiaries, and could also handle all
the different facets of the business model/s. Due to the lack of the luxuries
of time and money to pre-develop such a system, the development was done on the
trot. The company is exceptionally privileged in having been able to retain the
services of a committed company that have delivered a world class system.
Through comparative analysis of the global playing field in our industry, we
are of the opinion that this system, and our unique products, will enable the
company to offer a solution in markets that are 10 times bigger than the local
market. Following company expansion, the executive team, and other dedicated
resources, will be tasked to investigate and conclude joint ventures with
reputable and established companies in the USA, Europe and Far East.
The other systems being utilised by the group are constantly being evaluated
and upgraded by the company, with the necessary safeguards in place in order to
ensure that the operations of the group is not hampered in any way. All third
party software is properly licensed.
Infrastructure
The control of the operations of the group is centralised at its head office in
Centurion. Limited decentralised capturing will start during the current
financial year as a result of the establishment of branch offices across the
country. The infrastructure was properly established during 2001 and changes
are affected only to optimise operational capabilities.
Human Resources
The group faced a number of other challenges since inception. One major
challenge was to employ and retain the services of a strong, energetic, and
dynamic executive team. At times it went exceptionally well, but this is still
an area in the total make-up of the group that needs attention and energy. A
number of middle management positions were filled over the past year which
ensures that the operations are managed at an acceptable level. There is
however a current drive to search and place specialists that will fit into our
company culture and vision of the current executive team, in order to
strengthen the operational ability. It is important to note that this
"limitation" was manageable up to know, but with the aggressive growth phase
experienced, this situation needs urgent attention.
Corporate governance
A detailed report on the past year"s compliance is given in the annual report
sent to shareholders. The report has not been audited or reviewed by the
Company"s auditors.
It is, and has always been a major concern that in certain aspects the company
is still to comply. Unfortunately infrastructure maintenance and Human Resource
costs for compliance, have a sizable cash flow affect on any company. There is
also no differentiation between small and big companies on the levels of
compliance. Regulators should take cognisance of the cash flow limitations on
developing companies. However, the board fully supports this code and is
serious in its approach (taking in account the increasingly positive cash flow
position) that the company must now apply the necessary resources to be fully
compliant.
Subsidiaries
StratEquity (Pty) Ltd (100% subsidiary) The StratEquity model was moulded
around lump sum investors when the company was established. The company
introduced a subscription based concept/product to the market in February 2003
through a unique marketing model.
StratEquity"s subscription client base has increased from 12 004 to 22 113 (
84%) over the reporting period. The monthly premium has increased from R 2.17
million to R3.959 million (82%). StratEquity has supplied funding for
developing companies over the past year totaling R27.04 million. The company
was approved as a Financial Services Provider by the Financial Services Board
(FSB) on 16 August 2005.
In addition to the existing lump sum client base of approximately 4 000
clients, the client base, through this model, have increased as follows:
Administration
Investment Fees earned
Total funds from from clients
Subscription investor (excludes
investor clients (total corporate
Year end clients % growth for year) fees)
February
2004: 4,873 - 2,858,966 587,400
February
2005 12,004 146% 12,576,737 3,372,580
February
2006 22,113 84% 23,014,399 6,043,330
ICI Marketing (Pty) Ltd (100%)
ICI was previously a division of StratEquity and was responsible for the
marketing of StratEquity"s Wealth Creator Subscription Plan product ("the
product"). On 1 March 2005, the operations of this division, was sold to ICI
and commenced operations as a separate entity. ICI distributes the product
through a unique referral marketing concept. The company has also empowered
approximately 17 000 individuals who became ICI business owners.
The company has also trained and appointed 15 accredited presenters on a
contractual basis who present the product and business opportunity in the
entire main centers of the country at least three times a week. ICI has also
established venues/branches in Centurion, Sunnyside, Johannesburg and Witbank
with support offices in Van der Bijl Park and Swaziland. The company has
identified Cape Town, Polekwane and Bloemfontein as immediate areas to
establish branches/venues during the current financial year.
StratFund Portfolio Managers (Pty) Ltd (100%)
Due to the license obtained from the FSB in StratEquity, this subsidiary was
sold with effective date 01 October 2005.
Prospects
Some future prospects have already been addressed in the five year review. The
company is continuing with the process of establishing company owned venues in
identified growth areas in South Africa and Swaziland to further increase the
client base. Various negotiations are also taking place on an ongoing basis
with groups (financial services companies and empowerment groups) to expand the
client base through joint ventures in South Africa and identified countries in
Africa, and/or to utilise the company"s technology platform.
Other matters
StratCorp issued 11 642 539 shares for cash at 32 cents per share to
independent shareholders in July 2005. Mr. P de W Louw resigned as director
effective 31 August 2005 and Mr. JN de Beer was appointed as Group Financial
Director on 1 September 2005.
Events subsequent to year end
The company concluded an Issue for Cash through which 10 480 744 ordinary
shares of no par value were placed at 32 cents each. This increased the issued
share capital of the company to 99 740 208.
Cautionary Announcement
Shareholders are also advised that StratCorp has entered into negotiations,
which, if successfully concluded, may have a material effect on the price of
the Company"s securities. Accordingly, shareholders are advised to exercise
caution when dealing in the Company"s securities until a full announcement is
made.
General
On behalf of the board, I wish to thank our management team, personnel,
stakeholders and shareholders for their valuable input and support over the
past year.
Dividends
No dividends have been declared.
On behalf of the board
D B Harington
CEO
25 May 2006
Registered Offices Transfer Secretaries
Suite 1001 Ultra Registrars (Pty) Ltd
267 West Avenue 11 Diagonal Street
Centurion Johannesburg, 2001
Pretoria
Directors : P J de Jongh* (Chairman); D B Harington (CEO); JN de Beer;
JJ Steynberg* (*Non-executive)
Company Secretary: PH van Zyl
Date: 26/05/2006 05:15:39 PM Produced by the JSE SENS Department
