| Fri 8 Dec 2006, 17:10 | | m Cubed - Reviewed interim financial results: six |
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MCU
MCU
m Cubed - Reviewed interim financial results: six months ended 31 August 2006
m Cubed Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1998/014568/06
Share code: MCU
ISIN: ZAE000033353
Reviewed interim financial results for the six months ended 31 August 2006
Income statement
Reviewed Unaudited
6 months 6 months Audited
ended Ended year ended
31 August 31 August 28 February
2006 Change 2005 2006
R"000 % R"000 R"000
Net revenue 46 995 158 387 263 156
Cost of revenue (19 900) (85 710) (137 070)
Gross profit 27 095 (62,7) 72 677 126 086
Operating expenditure (29 443) 50,9 (59 949) (113 901)
Results of operating (2 348) (118,4) 12 728 12 185
activities
Finance income 16 552 30,5 12 681 24 279
Finance expense - (491) -
Share of profit in - 7 852 10 590
associates
Write-off/impairment of - (27 894) (56 034)
goodwill
Profit/(Loss) before non- 14 204 191,3 4,876 (8 980)
trading items
Provision for dispute - - (90 420)
with regulator
Disposal of businesses 516 (98,6) 37 685 80 376
Net profit/(loss) before 14 720 (65,4) 42 561 (19 024)
taxation
Taxation (6 887) 60,6 (17 469) (27 445)
Net profit/(loss) for 7 833 (68,8) 25 092 (46 469)
the period
Reconciliation between
headline earnings and
net profit for the
period
Net profit/(loss) for
the period 7 833 25 092 (46 469)
Disposal of businesses (516) (37 685) (80 376)
Capital gains tax on - 3 280 6 525
disposals
Write-off/impairment of - 27 894 56 034
goodwill
Headline earnings 7 317 (60,6) 18 581 (64 286)
attributable to
shareholders
Earnings per share
(cents)
Earnings/(Loss) 1,1 (67,7) 3,4 (6,3)
Headline earnings/(loss) 1,0 (60,0) 2,5 (8,7)
Balance sheet
Reviewed Unaudited
6 months 6 months Audited
ended ended year ended
31 August 31 August 28 February
2006 2005 2006
R"000 R"000 R"000
ASSETS
Non-current assets
Property, plant and
equipment 767 8 864 2 210
Investments 10 460 298 9 607 453 10 049 010
Insurance contracts 29 167 27 352 28 043
Investment contracts 10 431 131 9 580 101 10 020 967
Deferred acquisition
cost 35 588 30 444 36 000
Goodwill 6 700 84 157 6 702
Investments in - 62 253 -
associates
Loans and advances 95 7 334 177
Deferred taxation - 3 048 200
10 503 448 9 803 553 10 094 299
Current assets
Receivables and 22 211 41 490 183 328
prepayments
Cash and cash 362 164 187 184 214 379
equivalents
Current tax asset 2 067 - -
386 442 228 674 397 707
Total assets 10 889 890 10 032 227 10 492 006
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" 304 560 365 990 293 310
funds
Non-current liabilities
Policyholder liabilities 10 403 559 9 548 780 10 000 946
Insurance contracts 29 296 27 351 29 760
Investment contracts 10 374 263 9 521 429 9 971 186
Deferred revenue 31 584 31 525 34 001
liability
10 435 143 9 580 305 10 034 947
Current liabilities
Trade and other payables 150 187 84 420 163 224
Current tax liabilities - 1 512 525
150 187 85 932 163 749
Total equity and 10 889 890 10 032 227 10 492 006
liabilities
Number of shares in 737 925 735 985 736 321
issue ("000)
Net asset value per 41,3 49,7 39,8
share (cents)
Net tangible asset value 40,4 38,3 38,9
per share (cents)
Cash flow statement
Reviewed Unaudited
6 months 6 months Audited
ended ended year ended
31 August 31 August 28 February
2006 2005 2006
R"000 R"000 R"000
Operating activities 110 669 (346 806) (621 671)
Cash 103 397 (332 361) (611 268)
generated/(utilised) by
operations
Finance income 16 552 12 681 24 279
Finance expense - (491) -
Taxation paid (9 280) (15 643) (23 690)
Dividends paid - (10 992) (10 992)
Investing activities 36 918 379 159 681 906
Additions to property, - (1 384) (424)
plant and equipment
Proceeds on disposal of 468 - 99
property, plant and
equipment
Disposal of businesses 155 885 60 485 53 168
(Increase)/Decrease in
investments (119 517) 319 538 627 421
Decrease in loans 82 520 1 642
receivable
Financing activities 198 3 245 2 558
Sale of shares by share 198 3 245 2 558
incentive trust
Net movement in cash and 147 785 35 598 62 793
cash equivalents
Net cash and cash 214 379 151 586 151 586
equivalents at beginning
of period
Net cash and cash 362 164 187 184 214 379
equivalents at end of
period
Statement of changes in equity
Foreign
currency
Share Share translation Accumulated
capital premium reserve profit Total
R"000 R"000 R"000 R"000 R"000
Balance at 1 7 363 226 878 (1 447) 60 516 293 310
March 2006
Increase in - - 3 220 - 3 220
foreign currency
translation
reserve
Net profit for - - - 7 833 7 833
the period
Shares sold by 16 804 - (623) 197
share incentive
trust
Balance at 31 7 379 227 682 1 773 67 726 304 560
August 2006
Segmental reporting
Net revenue
Recurring Initial
Reviewed Unaudited Audited Reviewed Unaudited Audited
6 months 6 months year 6 months 6 months year
ended ended ended ended ended ended
31 Aug 31 Aug 28 Feb 31 Aug 31 Aug 28 Feb
2006 2005 2006 2006 2005 2006
R"m R"m R"m R"m R"m R"m
Wealth Management 46 87 130 - 2 3
Asset Management - - 3 - 52 83
Specialised 1 9 35 - 8 9
Investments,
Lending and
Treasury
47 96 168 - 62 95
Headline earnings
Reviewed Unaudited
6 months 6 months Audited
ended ended Year ended
31 August 31 August 28 February
2006 2005 2006
R"m R"m R"m
Wealth Management 5 14 7
Asset Management - 6 10
Specialised Investments, Lending
and Treasury
3 (1) (81)
8 19 (64)
Basis of preparation
These interim results have been prepared in accordance with the International
Financial reporting Standards ("IFRS") which were adopted with effect from
1 March 2004, as well as the South African Companies Act of 1973 and the
Long-term Insurance Act of 1998. Although an actuarial valuation is not
performed at half-year the directors consider the assumptions utilised in
the actuarial valuation at 28 February 2006 to continue to be appropriate
for these financial results.
AUDITORS" REVIEW REPORT
These results have been reviewed by PKF (Jhb) Inc. The auditors" modified
review report is available for inspection at the registered office of the
company.
The report is modified by placing `emphasis of matter" on:
* The fact that the directors" valuation of policyholder liabilities is not
confirmed by an independent actuarial valuation.
* The uncertainty in respect of the completeness of policyholder liabilities
and related assets referred to below under the heading "Divisional Review -
Wealth Management"
* The contingent liability referred to below under the heading "Dispute with
Regulator"
Nature of business
m Cubed Holdings Limited ("m Cubed" or "the company") historically owned a
number of focused investment services businesses. The company is in the
process of unlocking value for its shareholders by disposing of and/or
winding down its businesses and has now disposed of all its major operating
subsidiaries except for m Cubed Life Limited and its associated divisions,
m Cubed Specialised Lending (Proprietary) Limited, m3 Capital Management
(Guernsey) Limited and AOS Fund Services Limited.
Corporate activity update
The agreement reached to dispose of m Cubed Life Limited and its associated
divisions to Fidentia Holdings (Proprietary) Limited ("Fidentia") was
subject to Fidentia obtaining unconditional approval for the acquisition
from the Financial Services Board by 31 July 2006. The approval was not
however obtained on or before 31 July 2006, at which time the agreement
lapsed and was of no further force or effect.
The board has taken action to stabilise the business and provide existing and
prospective policyholders with greater security by, amongst other actions,
providing m Cubed Life Limited with a further capital injection of R18
million.
The disposals of m3 Capital Management (Guernsey) Limited and AOS Fund
Services Limited to Fidentia were subject to Fidentia obtaining the
unconditional approval of the Guernsey Financial Services Commission
("GFSC") on or before 30 September 2006. The approval of the GFSC was not
obtained prior to 30 September 2006. The agreements in respect of these
disposals have also consequently lapsed and are of no further force or
effect. The board is considering its position in relation to these
businesses.
The following businesses have been disposed of to date:
* Corporate Money Managers (Proprietary) Limited for R5,5 million on 1 March
2005
* m Cubed Investment Life Limited for R20 million on 1 March 2005
* Escher UK Asset Management (Proprietary) Limited for R40 million on 29 July
2005
* m Cubed Employee Benefits (Proprietary) Limited for R2 million on 1 October
2005
* Policy Exchange (Proprietary) Limited for R10 million on 17 November 2005
* m Cubed Unit Trust Management Company Limited for R16,5 million on 6
December 2005
* Advantage Asset Managers (Proprietary) Limited - 50% stake for R140 million
on 1 January 2006
* Automated Outsourcing Services Limited for R16 million on 23 February 2006
* Vision Healthcare and Employee Benefits (Proprietary) Limited for R1 million
on 1 March 2006
* m Cubed Specialised Investments (Proprietary) Limited for R36 000 on 1 March
2006
Dispute with regulator
The company is still in negotiations regarding the dispute, referred to in the
audited financial results for the year ended 28 February 2006 and in
subsequent cautionary announcements.
In relation to the abovementioned dispute, m Cubed"s shares in m Cubed Life
Limited, as well as an amount of R196,6 million, have been placed as a
deposit in trust for the benefit of m Cubed with the regulator"s attorneys.
The board has been advised that the amount and/or value of the deposits are
not necessarily an accurate reflection of the amount that might be settled,
forfeited or become the subject matter of litigation.
The process is currently one of settlement and, although the matter has not
been finally settled a provision of R90,4 million is included in these
financial statements in relation thereto.
The final conditions of settlement are currently being negotiated by m Cubed
with the regulator and there is thus an unquantifiable contingent liability
in respect of any additional costs that may arise as a consequence of any
final conditions that may be agreed upon.
Financial review
Due to the disposal of several businesses since the publication of the results
for the six months ended 31 August 2005, which has resulted in a
significantly different group structure compared to the prior year, these
results are not comparable to the results for that period.
Headline earnings were R7,3 million (2005: R18,6 million) and headline
earnings per share was 1,0 cents (2005: 2,5 cents) for the year. Earnings
were R7,8 million (2005: R25 million) and earnings per share was 1,1 cents
(2005: 3,4 cents). Recurring income declined to R47 million (2005: R96
million) while initial income was Rnil (2005: R62 million). Operating
expenditure declined to R29,4 million (2005: R59,9 million).
Divisional review
Wealth Management
The division distributes the group"s range of local and international non-
discretionary (life) products and services through m Cubed Life Limited and
a network of independent financial advisors and other complementary
distribution channels.
As stated in the group audited financial results for the year ended 28
February 2006, the opening balances at 1 March 2005 for policyholder
liabilities and related investments were restated by R184 million in
respect of certain policies previously omitted in error.
Investigations in order to establish whether any additional adjustments are
required are substantially completed and the directors are of the opinion
that there is no indication of material misstatement and no evidence
whatsoever of mismatch of policyholder liabilities and related assets.
This division"s results have been negatively impacted compared to the same
period in the prior year as a result of the market uncertainty created by
the corporate activity of the last year as well as the significant effect
of material increases in reinsurance and administration costs. Furthermore,
the results for the prior year comparative period included m Cubed Unit
Trust Management Company Limited and Automated Outsourcing Services
(Proprietary) Limited which have since been disposed of.
Headline earnings decreased to R5 million (R14 million) while recurring income
was also lower at R46 million (2005: R87 million). Initial income was Rnil
(2005: R2 million).
Specialised Investments, Lending and Treasury
m Cubed Specialised Lending (Proprietary) Limited focuses primarily on
providing bespoke lending solutions (generally prime-linked interest-
bearing advances) to high net worth individuals and corporates who invest
with m Cubed, while Treasury performs a treasury and funding function for
the group and earns interest income on shareholder funds. Both these
divisions performed in line with expectations. m Cubed Specialised
Investments (Proprietary) Limited was sold at the beginning of the year.
Headline earnings for the period was R3 million (2005: R1 million headline
loss). Recurring revenue was R1 million (2005: R9 million) while initial
revenue was nil (2005: R8 million).
Asset Management
This business provided multimanager asset management, structured products and
other services, primarily to the institutional sector, through the
investment in Advantage Asset Managers (Proprietary) Limited and was
disposed of in the previous financial year.
Prospects
Our focus remains on unlocking value for shareholders. Pending resolution
and/or finalisation of the dispute with the regulator, which may be
protracted, available cash resources will be distributed to shareholders
from time to time.
For and on behalf of the board of directors
J de Vos du Toit
Chairman
8 December 2006
Registered office: 1st Floor PSG House, Alphen Park, Constantia Main Road,
Constantia. Private Bag X3, Constantia, 7848. Telephone: Johannesburg: 011
340 2300, Cape Town: 021 799 8000, Facsimile Johannesburg: 011 880 2019,
Cape Town: 021 794 4647
E-mail: postmaster@mcubed.co.za
Transfer offices:
Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street,
Johannesburg 2001. PO Box 61051, Marshalltown, 2107.
Telephone: 011 370 5000, Facsimile: 011 370 5487
Directors: J de V du Toit (Chairman)*, CMB Bothner*, W Roux*, M Smith*
*Non-executive
Auditors: PKF (Jhb) Inc. Chartered Accountants (SA), Registered Accountants
and Auditors
Company secretary: Probity Business Services (Pty) Limited
Bankers: Standard Bank South Africa
Sponsors: PSG Capital Limited
Attorneys: Jan S de Villiers Attorneys, Webber Wentzel Bowens
Date: 08/12/2006 05:10:24 PM Produced by the JSE SENS Department
