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DEC
DEC
Decillion - Interim Results for the six months ended 31 August 2006
Decillion Limited
(Registration number: 1998/011692/06)
(Incorporated in the Republic of South Africa)
("Decillion" or "the Company" or "the Group")
JSE code: DEC & ISIN: ZAE000017612
KEY FEATURES
Diluted earnings for the period of 1.8 cents per share as compared to a
diluted loss of 0.6 cents per share for the comparative period.
As published in the press in 2005, the group has embarked upon a process to
convert its assets into cash, with the objective of delisting the company.
All operating divisions have been disposed of, other than the London
operations, which have been wound down in an orderly manner.
Irrevocable undertakings for the approval of the disposals have been
obtained from a majority of Decillion"s shareholders and all the transactions
have been implemented.
Decillion will become a cash shell with approximately R25 million cash.
The directors of Decillion are in the process of aggressively pursuing
various opportunities, including reverse listing opportunities, with the
intention of maximising shareholder value.
ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2006
INCOME STATEMENT
Six months ended 31 August 2006
Unaudited Unaudited Audited
six months to six months to 12 months to
31 August 31 August 28 February
2006 2005 2006
R"000 R"000 R"000
Revenue 32 535 115 569 204 429
Operating income:
Proprietary returns 4 223 2 234 35 004
Operating expenses (59 564) (115 829) (219 205)
Operating income/(loss) (22 806) 1 974 20 228
Finance income 1 413 1 826 4 196
Finance expense - (1 330) (2 250)
Net (loss)/income
before disposals (21 393) 2 470 22 174
Disposal of subsidiary
undertakings 24 529 1 100 11 312
Net income after disposals 3 136 3 570 33 486
Goodwill impaired - (3 460) (16 598)
Net income before taxation 3 136 110 16 888
Taxation (97) (1 122) (5 938)
Net income/(loss)
after taxation 3 039 (1 012) 10 950
Attributable to:
Equity holders of
the company 3 039 (1 012) 10 950
Determination of
headline earnings
Income/(loss) attributable
to equity holders
of the company 3 039 (1 012) 10 950
Loss on disposal of
property, plant
and equipment - - 657
Goodwill impaired - 3 460 16 598
Disposal of subsidiary
undertakings (24 529) (1 100) (11 312)
Headline earnings/(loss) (21 490) 1 348 16 893
Weighted number of
shares in issue ("000) 164 913 164 913 164 913
Basic earnings/(loss)
per share (cents) 1.8 (0.6) 6.6
Headline (loss)/earnings
per share (cents) (13.0) 0.8 10.2
Diluted weighted number
of shares ("000) 164 913 164 913 164 913
Diluted (loss)/earnings
per share (cents) 1.8 (0.6) 6.6
Diluted headline (loss)/
earnings per share (cents) (13.0) 0.8 10.2
CASH FLOW STATEMENT
Six months ended 31 August 2006
Unaudited Unaudited Audited
six months to six months to 12 months to
31 August 31 August 28 February
2006 2005 2006
R"000 R"000 R"000
Cash flows from
operating activities
Operating (loss)/income (22 806) 1 974 20 228
Elimination of non-cash
items (1 484) (1 677) 151
Increase in working capital (47 594) (24 607) (32 292)
Cash utilised in operations (71 884) (24 310) (11 913)
Finance income 1413 1 826 4 196
Finance expense - (1 330) (2 250)
Taxation received/(paid) 426 (247) (3 461)
(70 045) (24 061) (13 428)
Cash flows from investing
activities
Additions to property,
plant and equipment - (1 405) (1 495)
Proceeds on disposal of
property, plant
and equipment 322 - 2 079
Additions to goodwill - (11 496) (10 874)
Disposal/(acquisition)
of investments 10 252 (486) 24 225
Net cash inflow on disposal
of subsidiaries 25 012 1 587 11 799
35 586 (11 800) 25 734
Cash flows from
financing activities
Decrease in long-term
liabilities - (12 077) (12 077)
Purchase of treasury shares - (66) (66)
- (12 143) (12 143)
Net (decrease)/increase
in cash and cash
equivalents (34 459) (48 004) 163
Effects of exchange
rate changes 2 945 3 214 2 598
Cash and cash equivalents
at beginning of period 96 690 93 929 93 929
Cash and cash equivalents
at end of period 65 176 49 139 96 690
BALANCE SHEET
As at 31 August 2006
Unaudited Unaudited Audited
31 August 31 August 28 February
2006 2005 2006
R"000 R"000 R"000
ASSETS
Non-current assets 387 56 084 12 256
Investments - 35 003 10 252
Property, plant and equipment 385 6 379 2 002
Deferred taxation 2 1 229 2
Goodwill - 13 473 -
Current assets 80 626 224 922 269 347
Cash 65 176 49 139 96 690
Tradable securities - 29 954 1 248
Accounts receivable 12 806 142 863 168 541
Taxation 2 644 2 966 2 868
81 013 281 006 281 603
EQUITY AND LIABILITIES
Capital and reserves 51 063 36 690 47 963
Share capital 1 649 1 649 1 649
Share premium 149 871 149 870 149 871
Non-distributable reserves (5 520) (4 891) (5 581)
Distributable reserves (94 937) (109 938) (97 976)
Non-current liabilities
Tradable securities - 75 000 -
Current liabilities 29 950 169 316 233 640
Accounts payable 27 389 153 911 177 946
Tradable securities - 13 419 53 432
Taxation 2 561 1 986 2 262
81 013 281 006 281 603
Net actual number of
shares ("000) 164 913 164 913 164 913
Net asset value per
share (cents) 31.0 22.2 29.1
Tangible net asset value
per share (cents) 31.0 14.1 29.1
Diluted number of shares
in issue ("000) 164 913 164 913 164 913
Diluted net asset value
per share (cents) 31.0 22.2 29.1
Diluted tangible net asset
value per share (cents) 31.0 14.1 29.1
STATEMENT OF CHANGES IN EQUITY
Six months ended 31 August 2006
Unaudited Unaudited Audited
six months to six months to 12 months to
31 August 31 August 28 February
2006 2005 2006
R"000 R"000 R"000
Share capital
Opening balance 1 649 1 655 1 655
Treasury shares - (6) (6)
Closing balance 1 649 1 649 1 649
Share premium
Opening balance 149 871 149 932 149 932
Treasury shares - (62) (61)
Closing balance 149 871 149 870 149 871
Non-distributable reserves
Opening balance (5 581) (6 200) (6 200)
Currency translation
differences for period 61 1 309 619
Closing balance (5 520) (4 891) (5 581)
Distributable reserves
Opening balance (97 976) (108 926) (108 926)
Attributable income/(loss)
for period 3 039 (1 012) 10 950
Closing balance (94 937) (109 938) (97 976)
Total equity
Opening balance 47 963 36 461 36 461
Changes in equity 3 100 229 11 502
Closing balance 51 063 36 690 47 963
FINANCIAL RATIOS
Unaudited Unaudited Audited
six months to six months to 12 months to
31 August 31 August 28 February
2006 2005 2006
Income statement:
- Net income before
taxation R"m 3.1 0.1 16.9
- Headline
(loss)/earnings R"m (21.5) 1.3 16.9
- Attributable
(loss)/earnings R"m 3.0 (1.0) 11.0
- Diluted headline
(loss)/earnings
per share cents (13.0) 0.8 10.2
- Diluted
earnings/(loss) per
share cents 1.8 (0.6) 6.6
Capital:
- Total share capital
and reserves R"m 51.1 36.7 48.0
- Tangible share
capital and reserves R"m 51.1 23.2 48.0
- Diluted tangible net
asset value
per share (excluding
treasury shares) cents 31.0 14.1 29.1
- Diluted tangible net
asset value
per share (including
treasury shares) cents 25.1 11.4 23.5
- Market capitalisation R"m 21.4 33.0 18.1
Share statistics:
- Share price cents 13 20 11
- Number of shares
(excluding
treasury shares) million 164.9 164.9 164.9
- Number of shares
(including
treasury shares) million 203.7 203.7 203.7
- Diluted weighted
number of shares million 164.9 164.9 164.9
FINANCIAL REVIEW
The group recorded a profit attributable to ordinary shareholders for the
period of R3.0 million (2005: R1.0 million attributable loss).
The only operating division for the first half of the 2006/2007 financial
year was Capital Markets, as all the other operating entities were disposed of
prior to the 2005/2006 financial year end. By 31 August 2006, both the local
and the international Capital Markets operating entities were disposed of or
closed-down.
The loss of R5.0 million attributable to the Capital Markets division was
mainly due to the loss incurred in the close down of the operations in London.
The profit on disposal of subsidiary undertakings of R24.5 million is
attributable to the disposal of the business assets of Cedef SA and Decillion
AG in Switzerland, the last remaining operating entities of the group world
wide.
The group"s tangible net asset value per share (including treasury and the
share incentive trust shares) as at 31 August 2006 is 25.1 cents per share
(2005: 11.4 cents per share) and 31.0 cents per share (2005: 14.1 cents per
share) excluding treasury and the share incentive trust shares.
SEGMENTAL ANALYSIS
Unaudited Unaudited
six months to six months to
31 August 2006 31 August 2005
R"000 % R"000 %
Capital markets (4 996) 23.4 (17 183) (695.7)
Funds management - - 8 576 347.2
Corporate and institutional
finance - - 11 172 452.3
Head office (16 397) 76.6 (95) (3.8)
Net (loss)/income before
disposals (21 393) 100.0 2 470 100.0
Onshore (11 704) 54.7 3 934 159.3
Offshore (9 689) 45.3 (1 464) (59.3)
Net (loss)/income before
disposals (21 393) 100.0 2 470 100.0
Audited
12 months to
28 February 2006
R"000 %
Capital markets (836) (3.8)
Funds management 16 093 72.6
Corporate and institutional finance 15 661 70.6
Head office (8 744) (39.4)
Net (loss)/income before
disposals 22 174 100.0
Onshore 32 685 147.4
Offshore (10 511) (47.4)
Net (loss)/income before
disposals 22 174 100.0
REVIEW OF OPERATIONS
Capital Markets
The Capital Markets division comprises all of the group"s trading and
securities distribution activities in the domestic and offshore markets. The
division incurred an operating loss of R5.0 million (2005: loss of R17.2
million).
International operations
The international operations contributed a loss of R8.3 million (2005: R9.4
million). The loss is mainly attributable to the closing-down cost of the
London operations, which includes rental cost, employee termination cost,
legal and other external advisory cost. The Swiss operation operated close to
break-even prior to its disposal at the end of May 2006.
Local operations
The local operations contributed a profit of R3.3 million (2005: R7.8 million
loss). By the end of the reporting period all the trading positions were
cancelled and/or settled with counter parties or transferred to ABSA Corporate
and Merchant Bank (ABSA) as part of the settlement between Decillion and ABSA.
The group therefore has no remaining proprietary trading positions.
Head Office
Following the disposal of all the operating entities other than Capital
Markets prior to the 2005/2006 financial year end, all the remaining overheads
and costs were allocated to Head Office. By the end of the reporting period,
the overhead cost structure has been reduced to the level that will be
required for the ongoing maintenance and integrity of historical financing
transactions and the wind-down of the remaining structures in the group.
DISPOSALS
Disposals comprise the disposal of the Cedef SA and Decillion AG assets, which
were concluded during the period under review.
GROUP RESTRUCTURING AND STRATEGIC INITIATIVES
In 2005 the group embarked upon a strategy to convert its assets into cash,
following major adjustments and impairments in its previous financial
statements. This process was initiated as a measure of last resort having
regard to the disproportionate risk in its trading book relative to the
diminishing size of the group"s balance sheet and the ongoing losses in its
international operations. Eventualities which came to the knowledge of the
board subsequent to embarking on the process reconfirm that these drastic
steps was the only way to protect the remaining shareholders" interest in the
group.
Since its first announcement in this regard, the group successfully concluded:
the disposal of the Decillion Fund Management (Proprietary) Limited
operations;
the disposal of the Agricultural and Commodities broking business;
the Cedef SA and Decillion AG business asset disposal;
the settlement of all exposures in respect of the trading book;
the closure of the London operations; and
the creation of the Decillion Realisation Trust to run down the remaining
transactions and liabilities of the Decillion Group.
A detailed announcement with regard to the disposals and future corporate
action was published in the press on 11 August 2006.
Irrevocable undertakings of support have been obtained from a majority of
Decillion"s shareholders for all the disposals and the creation of the
Realisation Trust.
Following the above, Decillion will retain approximately R25 million in cash
and will have no liabilities. The directors of Decillion are in the process of
aggressively pursuing various opportunities, including reverse listing
opportunities, with the intention of maximising shareholder value.
All the remaining liabilities and contingent liabilities within the group will
be transferred to the Realisation Trust, which will have adequate resources to
indemnify Decillion Limited against the remaining claims in the group.
The former CEO of the group, Mr Alwyn Smit, has instituted an action against
Cedef SA, Decillion AG, Decillion Limited and Kepler Equities (Suisse) SA. The
total value of the claim is CHF 883,174 (R5.1 million) plus interest at 5% per
annum to be calculated from 27 July 2006. The Company has throughout the
process of disposal of the Swiss business and in its dealings with Mr Smit
acted on advice from its Swiss legal council having specific regard to the
threats made at that time by Mr Smit. The Company has been advised by its
Swiss legal counsel that there are no merits in Mr Smit"s claim and no
provision has therefore been made with regard to this claim. The group is in
the process of formulating a counter claim, against Mr Smit for the repayment
of amounts owing to the group from various causes. No amount receivable has
been accrued in respect of the counter claim.
The group is in the process of finalising its circular to shareholders to
formalise the approval of the disposals and the creation of the Realisation
Trust. Although all these transactions are irrevocably supported by a majority
of shareholders, the process with regard to the circular has been delayed due
to the requirement for the group to produce three years reviewed financial
statements to be included in the circular. Both the group"s current auditors
(PKF Inc.) (in respect of 2006) and its previous auditors (Deloitte) (in
respect of 2004 and 2005) have been engaged to provide these review opinions.
ACCOUNTING POLICIES
Accounting policies adopted for purposes of this interim reporting period
comply with International Financial Reporting Standards (IFRS) applicable to
interim financial reporting, as well as with applicable legislation and are
consistent with those adopted in the prior financial year.
By order of the Board
27 November 2006
Directors:
JF Marais* (Chairman), Dr M Mostert, Prof NI Morgan*, J Molobela* (*non-
executive)
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall
Street, Johannesburg, 2001
Registered office:
5th Floor, Jowell Glyn & Marais House, 72 Grayston Drive, Sandton, 2196
Company Registration:
Decillion Limited
(Registration number: 1998/011692/06)
(Incorporated in the Republic of South Africa)
("Decillion" or "the Company" or "the Group")
JSE code: DEC ISIN: ZAE000017612
Telephone: +27 11 217 9000
Facsimile: +27 11 783 1687
Company Secretary email: corneb@decillion.net
Date: 06/12/2006 04:00:16 PM Produced by the JSE SENS Department
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