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TRT
TRT
Tourvest - Group Results For The 12 Months Ended 25 June 2006
Tourism Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/008144/06)
Share code: TRT
ISIN: ZAE000012472
TOURVEST GROUP RESULTS FOR THE 12 MONTHS ENDED 25 JUNE 2006
* Operating income grows by 24%
* Headline earnings increased by 12%
* Group focused on growing organically and by acquisition
GROUP BALANCE SHEET at 25 June
2006 2005
R000 Reviewed Restated
ASSETS
Non-current assets
Property, plant and equipment 108 639 98 190
Goodwill 127 734 78 637
Trademarks 6 032 3 851
Deferred taxation 17 921 28 683
Financial assets 34 484 2 715
Current assets
Inventories 205 832 162 893
Trade and other receivables 294 082 237 265
Cash and bank balances 90 115 96 347
Taxation paid in advance 1 305 14 247
Foreign notes held 41 899 43 690
Total current assets 633 233 554 442
Total assets 928 043 766 518
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 13 755 10 593
Non-distributable reserves 20 813 26 180
Accumulated profits 326 211 292 877
Minority interest 37 662 27 254
Total equity 398 441 356 904
Non-current liabilities
Interest-bearing borrowings 14 831 6 933
Deferred taxation 4 065 1 641
Current liabilities
Trade and other payables 391 285 319 274
Provisions 14 407 21 585
Taxation payable 57 124 7 947
Dividends payable 321 1 209
Current portion of
interest-bearing borrowings 2 792 1 279
Loans relating to foreign
notes held 44 777 49 746
Total current liabilities 510 706 401 040
Total equity and liabilities 928 043 766 518
GROUP SEGMENTAL ANALYSIS at 25 June
% 2006 2005
R000 Change Reviewed Restated
Revenue
Inbound Tourism
Services 11 191 359 171 978
Outbound Travel
Services 4 264 727 253 595
Financial Services (5) 103 340 108 531
Retail Merchandising 15 755 618 658 494
10 1 315 044 1 192 598
Operating income
Inbound Tourism
Services 77 24 527 13 832
Outbound Travel
Services 25 64 443 51 662
Financial Services (23) 20 337 26 464
Retail Merchandising 31 77 561 59 260
24 186 868 151 218
Net operating assets
Inbound Tourism
Services 68 50 904 30 315
Outbound Travel
Services 60 50 975 31 922
Financial Services 116 29 857 13 794
Retail Merchandising 28 192 917 151 183
43 324 653 227 214
GROUP INCOME STATEMENT for the 12 months ended 25 June
% 2006 2005
R000 Change Reviewed Restated
Revenue 10 1 315 044 1 192 598
Operating income 24 186 868 151 218
Net interest paid 22 (8 389) (6 855)
Income before
taxation 24 178 479 144 363
Taxation 27 (63 023) (49 438)
Profit for the
period 22 115 456 94 925
Attributable to:
Shareholders 97 597 88 662
Minority
shareholders 185 17 859 6 263
Profit for the
period 22 115 456 94 925
Earnings per share
(cents) 10 12.8 11.6
Diluted earnings
per share (cents) 10 12.5 11.4
Reconciliation of
attributable income
to headline earnings
Attributable to
Shareholders 97 597 88 662
Capital loss/(profit) 479 (3 770)
Impairment provision - (500)
Impairment of
intangibles 830 4 194
Headline earnings 12 98 906 88 586
Secondary taxation
on companies (STC) 240 8 578 2 523
Effective taxation
Rate 35% 34%
Headline earnings
per share (cents) 12 12.9 11.5
Headline earnings
per share excluding
STC (cents) 18 14.1 11.9
Weighted average
shares (000) 764 426 767 273
Closing number of
shares (000) 830 350 830 350
Net asset value per
share (cents) 12 47.98 42.98
Dividend per
share (cents) 92 5.75 3.00
Capital Commitments 74 030 57 773
Authorised and
contracted 2 076 5 500
Authorised but
not yet contracted 71 954 52 273
GROUP CASH FLOW STATEMENT for the 12 months ended 25 June
2006 2005
R000 Reviewed Restated
Cash flows from operating
activities 102 978 110 701
Cash generated by
operations 188 819 199 187
Net interest paid (5 289) (6 855)
Taxation paid (28 016) (53 062)
Dividend paid (52 536) (28 569)
Cash flow from
investing activities (95 084) (23 849)
Purchase of property,
plant and equipment (46 448) (27 503)
Proceeds on disposal of
property, plant and equipment 3 967 1 909
Increase in financial assets (6 821) 1 998
Intangibles acquired (37) (2 580)
Acquisition of subsidiaires,
net of cash acquired (46 620) -
Sale of business, net of
cash 875 2 327
Cash flow from financing
activities (17 672) (1 765)
Increase in liabilities (2 134) (1 785)
Purchase and exercise
of shares in the share
trust (15 538) 20
Net movement in cash
and cash equivalents (9 778) 85 087
Cash and cash equivalents
at beginning of year 96 347 8 735
Effect of foreign exchange
rate changes 3 546 2 525
Cash and cash equivalents
at end of year 90 115 96 347
GROUP STATEMENT OF CHANGES IN EQUITY
Accumu-
Share Share lated
capital premium profit
Balance at
25 June 2004 7 488 3 085 233 938
IFRS adjustments:
IAS16 - Plant
and equipment (3 947)
IFRS2 - Share
based payments (676)
IAS21 -
Adjustment to foreign
currency translation
reserves (8 639)
Restatements - (572)
IFRS restated
balance at
25 June 2004 7 488 3 085 220 104
Attributable
12 months income
to 25 June 2005 88 662
Dividend paid (24 911)
Dividend accruing to
treasury stock 1 618
Exercise of
shares in share
trust 109 (89)
Deferred tax
reversing on
trademark 7 404
Foreign exchange
transaction
differences -
IFRS restated
balance at
25 June 2005 7 597 2 996 292 877
Opening retained
earnings adjustment
resulting from the
reversal of foreign
currency embedded
derivatives (1 140)
Attributable
12 months income
to 25 June 2006 97 597
Dividend paid (45 303)
Dividend accruing
to treasury stock 1 607
Deferred tax
reversing on trademark (25 676)
Purchase of
treasury shares (111) (17 387)
Sale of treasury
shares 162 18 537 6 249
Exercise of shares
in share trust 1 961 -
Foreign exchange
transaction
differences
IFRS restated
balance at
25 June 2006 7 648 6 107 326 211
Group statement of changes in equity (continued)
Non-distribu- Total
table reserve Minority equity
Balance at
25 June 2004 20 858 26 024 291 393
IFRS adjustments:
IAS16 - Plant and
equipment 165 (3 782)
IFRS2 - Share based
payments 676 -
IAS21 - Adjustment
to foreign currency
translation reserves 8 639 -
Restatements (572)
IFRS restated balance
at 25 June 2004 30 173 26 189 287 039
Attributable 12
months income to
25 June 2005 676 6 263 95 601
Dividend paid (5 198) (30 109)
Dividend accruing
to treasury stock 1 618
Exercise of shares
in share trust 20
Deferred tax
reversing on
trademark (7 404) -
Foreign exchange
transaction
differences 2 735 2 735
IFRS restated
balance at
25 June 2005 26 180 27 254 356 904
Opening retained
earnings adjustment
resulting from the
reversal of foreign
currency embedded
derivatives - (1 140)
Attributable
12 months income to
25 June 2006 459 17 859 115 915
Dividend paid (7 451) (52 754)
Dividend accruing
to treasury stock 1 607
Deferred tax
reversing
on trademark (10 753) (36 429)
Purchase of
treasury shares (17 498)
Sale of treasury
Shares 24 948
Exercise of
shares in
share trust 1 961
Foreign exchange
transaction
differences 4 927 4 927
IFRS restated
balance at
25 June 2006 20 813 37 662 398 441
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS INCOME STATEMENT for the 12
months ended 25 June
2005
R000 Restated
Profit for the period as previously
reported 94 706
IFRS adjustment 219
Plant and equipment 1 026
Share based payment (676)
Other adjustments (131)
Profit for the period 94 925
COMMENTS
Operating income grew by 24% despite this being another tough trading year
for the tourism industry with overseas visitors to South Africa growing by
only 3.4% and the rand depreciating by 3%.
The growth in operating income was achieved from the groups" focus on
operational efficiencies over the past three years and acquisitions made.
The growth in operating income would have been higher had it not been for a
provision of R5 million for a supplier dispute which we thought had been
resolved and a R2.5 million charge relating to the method of accounting for
a new lease agreement, the benefits of which will be seen in future years.
Headline earnings per share grew by 12% compared to the 24% increase in
operating income as the group had a higher STC charge from larger dividends
being paid, increased interest charges and the increased minority charge
relating to the acquisitions at Victoria Falls and Cumming Travel.
The group has provided R3.1 million for interest relating to the
disallowance of previously claimed trade mark write-offs with the deferred
tax asset and non-distributable reserves having been adjusted by
R10.9 million and R36.4 million respectively as a consequence. This could
have a negative cash flow impact of R25.9 million. Tourvest has objected
to the disallowances.
The group is now focused on growing the business both organically and by
acquisition and in line with this, the Cumming Travel acquisition was
concluded during the year. The following transactions have been concluded
since the year end, but are still subject to regulatory approval:
Ganzee - a retail chain in the Caribbean
The Adderley - a boutique hotel in central Cape Town
Vintage Africa - a tour operator in East Africa
Makalali Game Reserve - a game lodge in Limpopo
The Tank - a destination restaurant in Cape Town
Relais Hotels - a hotel management group
Touchdown Nigeria - a retail travel agency
REVIEW OF OPERATIONS
Inbound Tourism Services
The inbound tour operator business (TIO) performed well compared to the
previous year. The previous year"s results, however, included a VAT refund
of R5.8 million which will not be repeated. TIO is capable of producing
better returns in the future as the infrastructure is now in place to
handle larger volumes. Tourvest Inbound Products (TIP) performed below
expectation. The division benefited from the acquisitions at Victoria
Falls.
Outbound Travel Services
The retail travel businesses (TRT) delivered a good performance despite
difficult trading conditions created by the reduction in airline
commissions and high internet direct sales by airlines. TRT introduced an
internet booking tool in order to counter the increased direct internet
bookings.
Cumming Travel was purchased with effect from
1 December 2005 to grow our market share and support the expansion of our
business into tour groups.
TRT expanded into Africa with the appointment of a franchisee in Ghana.
The outbound tour operator business"s results improved materially from the
previous year but it still produced a loss. We expect it to be profitable
in 2007.
The GSA for Singapore Airlines produced another set of good results.
Financial Services
The financial services division"s results suffered from a reduction in
inbound US dollar volumes of 13% as foreign visitors switched to credit
cards and bank cards.
We believe that the level of use of notes and travellers cheques by foreign
visitors is now at the same level as in other countries and do not expect
any further decline in volumes. Tight control of costs and good management
of risks reduced the effect of the decline in volumes.
Retail Merchandising
The duty free operation had an outstanding year with operating income
growing in excess of 90% from higher sales on airlines and achieving
shrinkage controls better than international norms.
The jewellery division again performed below expectation with lower margins
being realised. The Forma Viva and Lorraine Efune brands performed well
but other brands reduced the division"s earnings. Other brands" margins
are still lower than expected due to stock purchased in the past at higher
than current prices. The brands have been restructured and the division is
expected to produce better results in 2007.
The curio and craft businesses grew operating income by 7.6% through
improved efficiencies and continue to produce good results.
PROSPECTS
The volatility of the rand makes forecasts difficult. We expect good
growth in earnings at the current exchange rate levels.
The acquisitions subsequent to year end are expected to contribute to
earnings in 2008.
ORDINARY DIVIDENDS
An ordinary dividend of 5.75 cents was paid on
23 September 2005.
An ordinary dividend of 6.4 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 register cum
dividend Friday 8 September 2006
Date trading commences
ex dividend payment Monday 11 September 2006
Record date Friday 15 September 2006
Date of payment Monday 18 September 2006
Share certificates may not be dematerialised or rematerialised from Monday
11 September 2006 to 15 September 2006, both dates inclusive.
BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE
Ian Meltzer resigned from the board and executive committee on 1 October
2005.
Imperial restructured its appointments to the Tourvest board when Carol
Scott relinquished her executive role at Imperial. Accordingly, Tak
Hiemstra was appointed deputy chairperson on 30 June 2006 replacing Osman
Arbee who resigned at the same time.
SUBSEQUENT EVENTS
There are no subsequent events to report with the exception of the
aquisitions that have been concluded after year end as noted earlier.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The preliminary condensed financial statements are prepared in accordance
with IAS 34 Interim Financial Reporting and Schedule 4 of the South African
Companies Act, 1973, as amended and should be read in conjunction with the
25 June 2005 financial statements. All IFRS and IFRIC interpretation
issued and effective as at 25 June 2006 have been applied. The accounting
policies adopted and method of computation are consistent with those
applied in the financial statements for the year ended at 25 June 2005
except for the changes noted below.
The group has adopted IFRS with effect from 26 June 2005. In accordance
with the accounting standard IFRS 1 (revised 2004), 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 impact of adoption of IFRS on
EPS was not material. 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.
IFRS 2 - 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 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.
IAS 16 - 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.
IFRS 3 - 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.
IAS 39 - FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
Gains or losses arising from trading in different foreign currencies 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 th
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 with the Japanese business on the basis
that the US$ is the commonly used trading currency in local business
transactions with Japanese business 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
According to recent accounting developments in accounting for rebates,
revenue and purchases these should be accounted for net of rebates received
or granted. This had no other effect on the profit for the period or
balance sheet. The impact of the restatement of revenue is set out below:
R000 25 June 2006 25 June 2005
Revenue - old method 1 246 725 1 134 065
Revenue - new method 1 315 044 1 192 598
Depreciation
IAS 16 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.
Comparative information
Comparative information has been restated for the reclassification of
credit accounts receivables balances to accounts payable. The effects of
the restatements as a result of new accounting developments on the new
interpretation of revenue are noted above. The reclassifications of
accounts receivable have no income statement effect. The credit accounts
receivable balances reclassified to accounts payable amounted to R65
million (June 2005: R61 million).
REVIEWED BY THE AUDITORS
The results have been reviewed by Tourvest"s auditors Deloitte & Touche.
Their unmodified review opinion is available for inspection at Tourvest"s
registered office.
For and behalf of the board.
CE SCOTT RT EDMOND
Chairperson Chief executive
23 August 2006
Registered Office: 33 West Street, Houghton, Johannesburg, 2198
Transfer Secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg, 2001, PO Box 61051,
Marshalltown, 2107
Sponsor: Investec Securities Limited
Directors: CE Scott(Chairperson), T Hiemstra(Deputy Chairperson), RT
Edmond(Chief Executive)*+, E de Jager*, WG Lynch**, P Maisel, JF Roesch*
(*Executive, +British **Irish)
Company Secretary: CG Mortimer
Investor and media relations: For further information contact Helen McKane
on Tel +27 (11) 728-4701, Fax +27 (11) 728-2547, e-mail: tourvest@dpapr.com
Date: 23/08/2006 12:15:16 PM Produced by the JSE SENS Department
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