| Tue 5 Sep 2006, 12:40 | | Mvela Group - Reviewed results for the year ended |
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MVG MVGP
MVG
Mvela Group - Reviewed results for the year ended 30 June 2006, Cash
distribution and dividend
Mvelaphanda Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
("Mvela Group" or "the company")
Ordinary share code: MVG
Preference share code: MVGP
Ordinary share: ISIN: ZAE000060737
Preference share: ISIN: ZAE000073540
Reviewed results for the year ended 30 June 2006
The following are the reviewed results of Mvela Group and its subsidiaries ("the
Group") for the year ended 30 June 2006 with comparative figures:
HIGHLIGHTS
- Intrinsic net asset value per share at 1 September 2006 up 44% to R12.05
- Total assets at 30 June 2006 exceed R6 billion
- Net profit attributable to ordinary shareholders of R1.145 billion
- Profit from operations up 30% to R262 million
- Cash distribution/dividend per ordinary share up 80% to 18 cents
- R547 million capital raising successfully concluded
- Acquisition of a further 2.47% effective interest in Absa
- Disposal of interest in Mvelaphanda Resources for R1.183 billion in cash
implemented on 28 August 2006
SUMMARISED GROUP BALANCE SHEET
Reviewed Reviewed
Year Year
ended ended
30 June 2006 30 June 2005
R"000 R"000
(restated)
Assets
Non-current assets 5 216 779 3 098 329
Property, plant and equipment 349 468 315 029
Intangible assets 763 329 700 410
Investments in associates 1 174 396 899 552
Other investments 2 898 614 1 162 173
Deferred taxation 30 972 21 165
Current assets 1 092 872 668 582
Liquid funds 525 412 177 376
Other current assets 567 460 491 206
TOTAL ASSETS 6 309 651 3 766 911
EQUITY AND LIABILITIES
Capital and reserves 4 793 810 2 670 430
Share capital and reserves 4 576 270 2 669 355
Outside shareholders" interest 217 540 1 075
Non-current liabilities 710 822 379 491
Interest bearing liabilities 325 402 275 988
Non-interest bearing liabilities 7 066 10 336
Deferred taxation 378 354 93 167
Current liabilities 805 019 716 990
Interest bearing liablities 127 676 83 898
Non-interest bearing liabilities 677 343 633 092
TOTAL EQUITY AND LIABILITIES 6 309 651 3 766 911
Fully diluted net number of ordinary
shares in issue ("000)* 497 020 403 163
Net asset value per ordinary share 920.7 662.1
(cents)
Net tangible asset value per ordinary 760.9 483.1
share (cents)
* Calculated on the basis that all preference shares will be converted into
ordinary shares after 4 November 2009.
SUMMARISED GROUP INCOME STATEMENT
Reviewed Reviewed
Year Year
ended ended
30 June % 30 June
2006 2005
R"000 change R"000
(restated)
Revenue 3 102 432 (4) 3 221 310
Profit from operations 262 204 30 201 019
Fair value adjustments and 853 352 268 088
profit from investments
Income from associates 279 716 118 252
Net profit before interest,
exceptional items and taxation
1 395 272 138 587 359
Net interest paid (9 726) (10 699)
Exceptional items - (36 439)
Net profit before taxation 1 385 546 156 540 221
Taxation (223 246) (127 410)
Normal, deferred and capital (213 965) (104 901)
gains tax
Secondary tax on companies (9 281) (22 509)
Net profit after taxation 1 162 300 182 412 811
Attributable to:
Ordinary shareholders 1 144 933 403 614
Outside shareholders 17 367 9 197
1 162 300 182 412 811
Net number of ordinary shares in 442 320 403 163
issue ("000)
Weighted average number of
ordinary shares in issue ("000) 423 407 306 305
Fully diluted weighted average
number of ordinary shares in
issue ("000)*
478 107 306 305
Earnings per ordinary share 270.4 105 131.8
(cents)
Headline earnings per ordinary 322.1 124 143.5
share (cents)
Fully diluted earnings per
ordinary share (cents)
239.5 82 131.8
Fully diluted headline earnings
per ordinary share (cents)
285.3 99 143.5
Distribution/dividend per 18.0 80 10.0
ordinary share (cents)
- interim 5.0 -
- final 13.0 10.0
Dividend per preference share 36.0
(cents)
- interim 8.7 -
- final 27.3 -
* Calculated on the basis that all preference shares will be converted into
ordinary shares after 4 November 2009.
Summarised Group Cash Flow Statement
Reviewed Reviewed
Year Year
ended ended
30 June 2006 30 June 2005
R"000 R"000
(restated)
Profit from operations 262 204 201 019
Non-cash items 97 728 110 753
Working capital changes (23 357) 123 739
Cash generated from operations 336 575 435 511
Net interest paid (9 726) (7 110)
Investment income 3 575 -
Taxation paid (80 660) (75 469)
Dividends paid (67 316) (195 058)
Cash available from operating 182 448 157 874
activities
Cash effects of investing activities (375 877) (393 413)
Cash effects of financing activities 541 465 (27 874)
Net movement in liquid funds 348 036 (263 413)
Net liquid funds at the beginning of 177 376 440 789
the year
Net liquid funds at the end of the 525 412 177 376
year
Summarised group Statement of changes in equity
Reviewed Reviewed
Year Year
ended ended
30 June 2006 30 June 2005
R"000 R"000
(restated)
Balance at the beginning of the year 2 670 430 1 037 489
Acquisitions of investments, 474 142 1 429 984
subsidiaries and businesses
Shares issued/(bought back) 558 119 (13 820)
Net profit after taxation 1 162 300 412 811
Dividends/distributions paid (71 181) (196 034)
Balance at the end of the year 4 793 810 2 670 430
Reconciliation between net profit attributable to ordinary shareholders and
headline net profit attributable to ordinary shareholders
Reviewed Reviewed
Year Year
ended ended
30 June 2006 % 30 June 2005
R"000 change R"000
(restated)
Net profit attributable to 1 144 933 184 403 614
ordinary shareholders
Goodwill impaired/written off 356 34 809
Impairment of investments in 336 185 1 630
associates
Negative goodwill (discount)
on acquisition of
subsidiaries and investments
(111 733) -
Profit on sale of property,
plant and equipment, and
investments
(5 788) (511)
Headline net profit
attributable to ordinary
shareholders
1 363 953 210 439 542
Segmental information
Reviewed Reviewed
Year Year
ended ended
30 June 2006 % 30 June 2005
R"000 change R"000
(restated)
REVENUE
Operations 3 102 432 3 221 310
Investments - -
3 102 432 (4) 3 221 310
NET PROFIT BEFORE INTEREST,
EXCEPTIONAL ITEMS AND
TAXATION
Operations 262 204 30 201 019
Investments 1 133 068 193 386 340
1 395 272 138 587 359
Commentary
Overview
Mvela Group is pleased to report highly satisfactory results for the financial
year ended 30 June 2006, being the Group"s first full financial year of activity
since the merger ("the merger") of the businesses and assets of Mvelaphanda
Holdings (Proprietary) Limited ("Mvela Holdings") and Rebserve Holdings Limited
was implemented. While Mvela Group continued to refine its investment strategy
to concentrate on the industrial and financial sectors, significant strides were
made in establishing a solid base for future growth and value creation. This was
achieved through major corporate activity during the year, including the raising
of R547 million of preference share capital on favourable terms, the acquisition
of a further material interest in Absa Group Limited ("Absa"), the successful
investment in Group Five Limited, and the shedding of the Group"s investment in
the non-core resources sector.
Mvela Group"s investments comprise a range of quality companies operating in the
financial and industrial sectors. The sound performance of the underlying
companies in which Mvela Group is invested is reflected in the increase in the
value of these investments by R853 million in the year under review.
The Group"s operating businesses also performed well, increasing profit from
operations by 30%, from R201 million for the year ended 30 June 2005, to R262
million for the year under review. Cash generated by the operating businesses
remained strong at R337 million.
Following the disposal by Mvela Group of its investment in Mvelaphanda Resources
Limited ("Mvela Resources") referred to below, for a cash consideration of
R1.183 billion, Mvela Group has approximately R1.5 billion in cash, making it
one of very few companies in South Africa with strong BEE-credentials, proven
transactional and management expertise, and substantial financial resources to
conclude large scale investment transactions.
Intrinsic net asset value per ordinary share, which is considered to be the most
insightful measure of the Group"s overall performance, increased by 41%, from
R8.35 at 30 June 2005, to R11.77 at 30 June 2006. Details of the calculation of
the intrinsic net asset value per ordinary share at 30 June 2006 are set out in
the table below:
Before Before the After the After the
the Mvela Mvela Mvela Mvela
Resources Resources Resources Resources
disposal disposal disposal disposal
Intrinsic Per Intrinsic Per
net asset ordinary net ordinary
value share asset value share
Rm (1) R (2) Rm (1), (3) R (2), (3)
Absa 1 256 2.53 1 256 2.53
Mvela Resources 1 097 2.21 - -
Life Healthcare 812 1.63 812 1.63
Group Five 102 0.21 102 0.21
Other investments 26 0.05 26 0.05
Operations 2 081 4.19 2 081 4.19
Net cash 474 0.95 1 571 3.16
Total 5 848 11.77 5 848 11.77
1 Intrinsic net asset value is calculated based on the market value or
directors" valuation of investments, net of capital gains tax and
associated debt.
2 Based on 497 million ordinary shares assuming that all the preference
shares will be converted into ordinary shares after 4 November 2009.
3 Calculated on the assumption that the Mvela Resources disposal had been
implemented on 30 June 2006 and the net cash proceeds received on that
date.
Mvela Group"s intrinsic net asset value per ordinary share at 1 September 2006,
being the last practicable date prior to the publication of these results, and
calculated on the basis set out above, increased by 44%, from R8.35 at 30 June
2005, to R12.05.
The intrinsic net asset value per ordinary share of R11.77 at 30 June 2006
includes 95 cents in cash. Following the disposal of Mvela Group"s shareholding
in Mvela Resources, the cash component of the Group"s intrinsic net asset value
per ordinary share has increased to R3.16 subsequent to year end. This implies
that the discount to intrinsic net asset value (excluding the cash component
thereof) at which Mvela Group ordinary shares trade on the JSE has increased to
approximately 40%, calculated with reference to the Mvela Group ordinary share
price of R8.55 on 1 September 2006 (being the last practicable date prior to the
publication of these results).
Net profit attributable to ordinary shareholders increased by R741 million, from
R404 million for the year ended 30 June 2005, to R1.145 billion for the year
under review, mainly as a result of the performance of the Group"s investments.
Investments
Mvela Group"s investments performed extremely well in the year under review.
Profit from investments, including the unrealised gains on the revaluation of
investments (net of costs relating to the investment activities), increased by
218% from R268 million for the year ended 30 June 2005 to R853 million for the
year under review. This performance was largely as a result of the performance
of the Group"s strategic investments in Absa, Life Healthcare and Group Five.
In December 2005 Mvela Group acquired a further 2.47% effective interest in 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% (equivalent in value to R200 million) to the market value of
the Batho Bonke shares at the time of concluding the acquisition.
Life Healthcare continues to deliver strong operational results and this has
resulted in a significant increase in the value of this investment during the
year under review.
In November 2005 Mvela Group acquired an effective interest of 10.8% in Group
Five Limited, a leading construction group listed on the JSE. This investment
has performed well as a result of the increase in the Group Five share price
from R20 in November 2005 to R29 at 30 June 2006.
On 30 June 2006 Mvela Group received and accepted a written offer from Mvela
Holdings to dispose of its 22.9% interest in Mvela Resources to Mvela Holdings
("the Mvela Resources disposal"). The purchase consideration paid by Mvela
Holdings to Mvela Group amounted to R1.183 billion in cash. The Mvela Resources
disposal was approved by Mvela Group ordinary shareholders at a general meeting
on 28 August 2006 and has been implemented.
The results for Mvela Resources have been equity accounted in the period under
review and comprise the major portion of the income from associates of R280
million. This amount is net of a provision for impairment of the carrying value
of the investment in Mvela Resources at 30 June 2006 amounting to R334 million,
such that the investment in Mvela Resources is carried at an amount equal to the
net value realised (after deducting costs) in terms of the Mvela Resources
disposal.
Operations
Revenue for the year under review decreased by 4%, from R3.221 billion in the
prior year to R3.102 billion as a result of the disposal of the JIC Mining
Services business in the second half of the 2005 financial year. Profit from
operations increased by 30%, from R201 million for the year ended 30 June 2005,
to R262 million for the year ended 30 June 2006. The operating margin increased
to 8.5% from 6.2% in the prior year.
TFMC continued to perform well notwithstanding the anticipated flat earnings
profile of its ten year facilities management contract with Telkom.
The performance of the security services businesses, namely Coin Security and
Protea Security, was impacted by the three month strike by security guards
between April 2006 and June 2006, and the increase in the number of armed
attacks on assets-in-transit vehicles.
The other operating businesses performed in line with expectations.
Cash generated from operations of R337 million was in line with expectations and
confirms the highly cash generative nature of the Group"s operations. Net
capital expenditure was R150 million and was funded largely from operating cash
flow.
Financial information
The weighted average number of ordinary shares in issue increased from 306
million ordinary shares for the year ended 30 June 2005, to 423 million ordinary
shares, as a result of the inclusion of the ordinary shares issued pursuant to
the merger for the year, and the issue of 33.9 million new ordinary shares in
partial settlement of the purchase consideration for the acquisition of the
additional effective interest of 2.47% in Absa in December 2005.
In November 2005, Mvela Group issued 54.7 million convertible perpetual
cumulative preference shares ("the preference shares"), raising R547 million
(before costs) of permanent capital for Mvela Group on market-related terms,
without prejudicing Mvela Group"s BEE-credentials.
The net profit attributable to outside shareholders of R17 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 in terms of IFRS, and 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. The comparative
amounts for the year ended 30 June 2005 have been restated, and 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 of
approximately R128 million at 30 June 2005.
Accounting policies and International Financial Reporting Standards ("IFRS")
The reviewed results for the year ended 30 June 2006 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
have been restated accordingly.
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, trade marks 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
Reviewed IFRS
Year transition
ended date
30 June 2005 1 July 2004
R"000 R"000
Capital and reserves
As previously reported under SA GAAP 2 610 185 1 004 072
Consolidation of special purpose 33 445 -
entities
Trademarks previously written off 42 600 42 000
Property, plant and equipment (12 737) (8 583)
Investments in associated companies (3 063) -
Capital and reserves (restated) 2 670 430 1 037 489
Reviewed
year
ended
30 June 2005
R"000
Net profit after taxation
As previously reported under SA GAAP 385 983
Consolidation of special purpose entities 33 445
Trademarks previously written off 600
Property, plant and equipment (4 154)
Investments in associated companies (3 063)
Net profit after taxation (restated) 412 811
Audit review opinion
These results have been reviewed by Mvela Group"s auditors, PKF (Jhb) Inc., and
their unqualified review opinion is available for inspection at the company"s
registered office.
Cash distribution and dividend
Ordinary shares
The directors of Mvela Group have resolved to declare a cash distribution out of
share premium in lieu of a final ordinary dividend, of 13.0 cents per ordinary
share to ordinary shareholders. The last day to trade "cum" the cash
distribution in order to participate in the cash distribution is Friday, 3
November 2006. The ordinary shares of Mvela Group will commence trading "ex" the
cash distribution from the commencement of business on Monday, 6 November 2006
and the record date will be Friday, 10 November 2006. The cash distribution will
be paid to ordinary shareholders on Monday, 13 November 2006. Ordinary share
certificates may not be dematerialised or rematerialised between Monday, 6
November 2006 and Friday, 10 November 2006, both days inclusive.
The cash distribution is subject to shareholder approval of an ordinary
resolution authorising the return of share premium. A circular and notice of
general meeting regarding the cash distribution will be posted to shareholders
on or about 9 October 2006.
Preference shares
The directors of Mvela Group have resolved to declare a cash preference dividend
(No. 2) of 27.27397 cents per preference share to preference shareholders. The
last day to trade "cum" the preference dividend in order to participate in the
preference dividend is Friday, 6 October 2006. The preference shares of Mvela
Group will commence trading "ex" the preference dividend from the commencement
of business on Monday, 9 October 2006 and the record date will be Friday, 13
October 2006. The preference dividend will be paid to preference shareholders on
Monday, 16 October 2006. Preference share certificates may not be dematerialised
or rematerialised between Monday, 9 October 2006 and Friday, 13 October 2006,
both days inclusive.
Prospects
A solid platform has now been established to nurture and grow an industrial and
financial group of magnitude. The Group, while possessing impeccable BEE-
credentials which afford the Group a competitive advantage, should nevertheless
be measured on its investment merits.
The Group"s cash resources of R1.5 billion will provide the necessary financial
resources to allow Mvela Group to conclude major BEE and other corporate
transactions in pursuit of Mvela Group"s strategy of investing in quality
investments and cash generative businesses.
Provided that the current favourable market conditions persist, Mvela Group is
confident of its ability to continue to achieve sound and steady growth in its
intrinsic net asset value per share.
T M G Sexwale S M Levenberg
Chairman Chief Executive Officer
5 September 2006
Sandton
Executive Directors:
TMG Sexwale (Chairman), MSM Xayiya (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 Mpofu*, 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 (Proprietary) Limited
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: 05/09/2006 12:40:40 PM Produced by the JSE SENS Department
