| Wed 7 Mar 2007, 10:59 | | MVG - Mvelaphanda Group - Unaudited interim result |
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MVG MVGP
MVG
MVG - Mvelaphanda Group - Unaudited interim results for the six months ended 31
December 2006
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
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
The following are the unaudited results of Mvela Group and its subsidiaries
("the Group") for the six months ended 31 December 2006 with comparative
figures:
HIGHLIGHTS
* Compound annual growth in intrinsic net asset value per ordinary share of 38%
since December 2004
* Intrinsic net asset value per ordinary share up 20% to R14.07 at 23 February
2007 from R11.77 at 30 June 2006
* Net profit attributable to ordinary shareholders up 89% to R738 million
compared to the six months ended 30 June 2006
* Acquisition of a further effective interest of 4% in Life Healthcare
* Fully diluted headline earnings per ordinary share up 22% to 169.4 cents
* Net profit before taxation exceeds R1.0 billion
SUMMARISED GROUP BALANCE SHEET
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Assets
Non-current assets 5 177 672 4 738 128 5 216 779
Property, plant and 393 853 327 598 349 468
equipment
Intangible assets 770 637 727 473 763 329
Investments in associates 11 845 1 134 379 1 174 396
Other investments 3 976 227 2 522 655 2 898 614
Deferred taxation 25 110 26 023 30 972
Current assets 2 089 517 893 971 1 092 872
Liquid funds 1 422 482 323 456 525 412
Other current assets 667 035 570 515 567 460
TOTAL ASSETS 7 267 189 5 632 099 6 309 651
EQUITY AND LIABILITIES
Capital and reserves 5 550 889 4 409 685 4 793 810
Share capital and reserves 5 259 593 4 192 071 4 576 270
Outside shareholders` 291 296 217 614 217 540
interest
Non-current liabilities 837 322 641 487 710 822
Interest bearing 319 199 317 123 325 402
liabilities
Non-interest bearing 2 801 15 258 7 066
liabilities
Deferred taxation 515 322 309 106 378 354
Current liabilities 878 978 580 927 805 019
Interest bearing 151 679 58 058 127 676
liabilities
Non-interest bearing 727 299 522 869 677 343
liabilities
TOTAL EQUITY AND 7 267 189 5 632 099 6 309 651
LIABILITIES
Fully diluted net number of
ordinary
shares in issue (000)* 497 045 494 760 497 020
Net asset value per 1 058.2 847.3 920.7
ordinary share (cents)
Net tangible asset value 898.1 695.0 760.9
per ordinary share (cents)
* Calculated on the basis that all preference shares will be converted into
ordinary shares after 4 November 2009.
SUMMARISED GROUP INCOME STATEMENT
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Revenue 1 688 458 1 512 367 3 102 432
Profit from operations 121 570 131 725 262 204
Fair value adjustments and 917 698 540 575 853 352
net profit from investments
Income from associates 838 224 474 279 716
Net interest 39 856 (12 272) (9 726)
received/(paid)
Net profit before taxation 1 079 962 884 502 1 385 546
Taxation expense (253 859) (118 019) (223 246)
Normal, deferred, capital (252 178) (112 906) (213 965)
gains and foreign tax
Secondary tax on companies (1 681) (5 113) (9 281)
Net profit after taxation 826 103 766 483 1 162 300
Attributable to:
Ordinary shareholders 737 847 754 758 1 144 933
Other shareholders 88 256 11 725 17 367
- Preference shareholders 14 919 - 4 781
- Minority interests 73 337 11 725 12 586
826 103 766 483 1 162 300
Net number of ordinary 442 345 440 060 442 320
shares in issue (000)
Weighted average number of 442 333 406 277 423 407
ordinary shares in issue
(000)
Fully diluted weighted 497 033 460 977 478 107
average number of ordinary
shares in issue (000)*
Earnings per ordinary share 166.8 185.8 270.4
(cents)
Headline earnings per 187.0 157.9 322.1
ordinary share (cents)
Fully diluted earnings per 151.5 163.7 239.5
ordinary share (cents)
Fully diluted headline 169.4 139.2 285.3
earnings per ordinary share
(cents)
Distribution/dividend per 6.0 5.0 18.0
ordinary share (cents)
- Interim 6.0 5.0 5.0
- Final - - 13.0
Dividends per preference 27.7 8.7 36.0
share (cents)
- Interim 27.7 8.7 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
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Profit from operations 121 570 131 725 262 204
Non-cash items 60 909 52 787 97 728
Working capital changes (123 955) (157 111) (23 357)
Cash generated from 58 524 27 401 336 575
operations
Net interest 39 856 (12 272) (9 726)
received/(paid)
Investment income 85 - 3 575
Taxation paid (46 602) (63 805) (80 660)
Dividends paid (14 919) (40 516) (67 316)
Cash available from 36 944 (89 192) 182 448
operating activities
Cash effects of investing 929 498 (284 699) (375 877)
activities
Cash effects of financing (69 372) 519 971 541 465
activities
Net movement in liquid 897 070 146 080 348 036
funds
Net liquid funds at the 525 412 177 376 177 376
beginning of the period
Net liquid funds at the end 1 422 482 323 456 525 412
of the period
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Balance at the beginning of 4 793 810 2 670 430 2 670 430
the period
Acquisitions of
investments, subsidiaries
and businesses - 476 425 478 923
Shares issued/bought back 3 067 537 297 553 339
Net profit after taxation 826 103 766 483 1 162 300
Distributions/dividends (72 091) (40 950) (71 182)
paid
Balance at the end of the 5 550 889 4 409 685 4 793 810
period
RECONCILIATION BETWEEN NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS AND
HEADLINE NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Net profit attributable to 737 847 754 758 1 144 933
ordinary shareholders
Goodwill impaired/written - - 356
off
Disposal/impairment of 91 016 - 336 185
investments
Negative goodwill - (111 733) (111 733)
(discount) on acquisition
of subsidiaries
Profit on sale of property, (1 609) (1 562) (5 788)
plant and equipment
Headline net profit 827 254 641 463 1 363 953
attributable to ordinary
shareholders
SEGMENTAL INFORMATION
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
NET ASSETS
Operations 1 067 412 1 098 969 1 210 090
Investments 4 483 477 3 310 716 3 583 720
5 550 889 4 409 685 4 793 810
NET PROFIT AFTER TAXATION
Operations 87 470 91 041 180 526
Investments 738 633 675 442 981 774
826 103 766 483 1 162 300
COMMENTARY
Overview
Mvela Group is pleased to report excellent overall results for the six months
ended 31 December 2006.
Significant transactions concluded in the current period include the disposal of
Mvela Group`s 22.9% interest in Mvelaphanda Resources Limited ("Mvela
Resources") ("the Mvela Resources interest") in August 2006 for R1.183 billion
in cash and the acquisition of a further effective 4% interest in Life
Healthcare in September 2006.
Intrinsic net asset value per ordinary share, which is considered to be the most
insightful measure of the Group`s overall performance, increased by 11%, from
R11.77 at 30 June 2006, to R13.05 at 31 December 2006. Details of the
calculation of the intrinsic net asset value per share are set out below:
31 December 2006 30 June 2006
Intrinsic Intrinsic
net net
asset Per share asset Per share
value value
Rm (1) R (2) Rm (1), R (2),
(3) (3)
Absa 1 675 3.37 1 256 2.53
Life Healthcare 1 223 2.46 812 1.63
Group Five 240 0.48 102 0.21
Other investments 20 0.04 26 0.05
Operations 1 956 3.94 2 081 4.19
Net cash 1 372 2.76 1 571 3.16
Total 6 486 13.05 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 preference
shares will be converted into ordinary shares after November 2009.
(3) Calculated on the assumption that the disposal of the Mvela Resources
interest had been implemented on 30 June 2006 and the net cash proceeds
received on that date.
Based on the Mvela Group ordinary share price on the JSE Limited ("JSE") of
R10.27 on 31 December 2006, Mvela Group ordinary shares were trading at a
discount of 21% to Mvela Group`s intrinsic net asset value at that date. If the
cash component of the intrinsic net asset value is excluded, the discount at
which Mvela Group ordinary shares traded to the intrinsic net asset value at 31
December 2006 increases to 27%.
On 23 February 2007, being the last practicable date prior to the finalisation
of these results, Mvela Group`s intrinsic net asset value per ordinary share,
calculated on the basis set out in the table above, had increased to R14.07, an
increase of 20% from R11.77 at 30 June 2006. This increase is due to the
continued strong performance of the Group`s listed investments (Absa and Group
Five). Since December 2004 Mvela Group`s intrinsic net asset value per ordinary
share has grown at a compound rate of 38% per annum.
The Group`s operating businesses performed well, save for Coin Security which
was heavily impacted by the significant increase in costs directly associated
with the high level of attacks on its assets-in-transit vehicles. The
performance of TFMC remained solid, and in line with expectations and its
performance in the prior year. The profit from operations of the remaining
operating businesses as a whole (i.e excluding Coin Security and TFMC) increased
by 20% from the comparable period.
Net profit before taxation increased by 22% to R1 080 million, from R885 million
in the comparable period, notwithstanding the reduction in income from
associates of R224 million following the disposal of the Mvela Resources
interest. Net profit attributable to ordinary shareholders increased by 89%,
from R390 million for the six months ended 30 June 2006, to R738 million in the
current period.
The Group`s cash resources remain strong with net cash balances at 31 December
2006 of approximately R1.4 billion.
Investments
Mvela Group`s strategic investments in Absa, Life Healthcare and Group Five
performed extremely well during the current period. Fair value adjustments and
net profit from investments increased by 70%, from R541 million in the
comparable period to R918 million in the current period.
The Absa share price on the JSE increased from R100 per share at 30 June 2006 to
R125 per share at 31 December 2006. This increase of 25% in the Absa share price
resulted in an increase in the intrinsic value (net of capital gains tax and
debt) ("the intrinsic value") of Mvela Group`s effective interest in Absa, from
R1 256 million at 30 June 2006, to R1 675 million at 31 December 2006. Mvela
Group`s investment in Absa comprises 26% of Mvela Group`s intrinsic net asset
value at 31 December 2006.
On 6 September 2006 Mvela Group acquired an additional 4% effective economic
interest (net of the dilution as a result of certain doctors participating in
the equity of Life Healthcare) in Life Healthcare ("the Life Healthcare
acquisition"). This interest was acquired for a net purchase price of R182
million pursuant to the exercise of an existing option held by Mvela Group and
certain of the other shareholders in Life Healthcare, and was paid in cash from
Mvela Group`s existing cash resources. As a result of the Life Healthcare
acquisition Mvela Group`s effective interest in Life Healthcare has increased to
22%, from 18% at 30 June 2006.
Mvela Group will continue to increase its effective interests in its strategic
investments when opportunities to do so at appropriate price levels arise, as
has historically been done with the Absa and Life Healthcare investments.
The intrinsic value of Mvela Group`s investment in Group Five increased from
R102 million at 30 June 2006, to R240 million at 31 December 2006, as a result
of the increase in the Group Five share price from R29 at 30 June 2006, to R46
at 31 December 2006.
The disposal of the Mvela Resources interest resulted in a realised profit of
approximately R400 million for Mvela Group, based on the original purchase price
paid by Mvela Group for the Mvela Resources interest. The Mvela Resources
interest was accounted for by Mvela Group on the equity method in the prior
financial year and the carrying value of the Mvela Resources interest at 30 June
2006 was adjusted such that the Mvela Resources interest was carried at an
amount equal to the estimated net value to be realised (after deducting costs)
on disposal of the Mvela Resources interest, effectively recognising this profit
of R400 million in the previous financial year. A provision for capital gains
tax of approximately R70 million arising on the disposal of the Mvela Resources
interest is included in the taxation expense in the current period, and is
included in the adjustments for the calculation of headline net profit
attributable to ordinary shareholders.
Further progress was made in streamlining Mvela Group`s investment portfolio
with the disposal of Mvela Group`s effective interests of 30% in Abvest
Associates, 20% in Broll Property Group and 16.5% in Siemens Business Services.
Operations
Revenue for the current period increased by 12% overall. Revenue of the Group`s
operating businesses other than TFMC (in which revenue has grown at a rate
slightly below the rate of inflation for several years as a result of the nature
of its facilities management contract with Telkom) increased by 16% from the
comparable period.
Profit from operations decreased by 8% from R132 million in the comparable
period to R122 million in the current period. This decrease is attributable
almost entirely to the "cost of crime", being the additional costs (including
cash losses, damage to security equipment and vehicles, additional and back-up
vehicles, vehicle repairs and non-recoverable insurance excesses) of
approximately R20 million incurred by Coin Security in the current period as a
result of, and/or in combating, the substantial increase in the number of armed
attacks on its assets-in-transit vehicles and bases. The level, frequency and
ferocity of these attacks has reached unprecedented levels, and urgent,
concentrated and drastic action will be required from all assets-in-transit
industry participants, and the authorities, to curb this growing trend.
As anticipated, profit from operations of TFMC remained flat and in line with
the comparable period, given the nature of TFMC`s facilities management contract
with Telkom. Strong growth in profit from operations was achieved by Protea
Security, Zonke Monitoring Systems and Trollope Mining Services. The other
operating businesses performed in line with expectations. Profit from
operations, excluding TFMC and Coin Security, increased by 20% from the
comparable period.
In January 2007 TFMC acquired a 90% interest in the business of LGM South
Africa, a provider of facilities management services to approximately 30
corporate customers in South Africa, including South African Airways and
DaimlerChrysler. The acquisition will broaden TFMC`s client base and is a
positive step in transforming TFMC into a more diversified facilities management
operation.
Cash generated from operations of R58 million, although impacted by the December
holiday period, was in line with expectations. Net capital expenditure in the
current period increased to R105 million as a result of the increased rate of
replacement of vehicles in Coin Security and the replacement of plant and
machinery in Trollope Mining Services. Asset-based finance liabilities increased
accordingly.
Financial information
Net interest received increased to R40 million due to the Group`s increased cash
balances as a result of investment activities, including specifically the cash
proceeds of R1.183 billion (before transaction costs and capital gains tax)
received on the sale of the Mvela Resources interest.
The net profit attributable to outside shareholders of R73 million includes the
net profit attributable to the outside shareholders of the Batho Bonke
consortium and the outside shareholders in certain of the operating
subsidiaries.
The outstanding capital balances in respect of non-recourse funding contained in
special purpose vehicles (which are not classified as subsidiaries of Mvela
Group) relating to the original acquisition of certain investments by Mvela
Group, decreased from R535 million at 30 June 2006, to R442 million at 31
December 2006.
The weighted average number of ordinary shares in issue increased by 9% from 406
million ordinary shares for the six months ended 31 December 2005 to 442 million
ordinary shares for the current period, as a result of the inclusion for the
full period of the ordinary shares issued in partial settlement of the purchase
consideration for the acquisition of the additional effective interest of 2.47%
in Absa in December 2005. This increase in the weighted average number of
ordinary shares in issue from the comparable period comprised the main reason
for the decrease in earnings per ordinary share from 185.8 cents for the six
months ended 31 December 2005, to 166.8 cents for the current period.
Headline earnings per ordinary share and fully diluted headline earnings per
ordinary share increased by 18% and 22% respectively from the comparable period.
The headline net profit attributable to ordinary shareholders for the six months
ended 31 December 2006 of R753 million as previously reported, has been adjusted
for the negative goodwill (discount) of R111 million arising on the acquisition
of the additional 2.47% effective interest in Absa, in line with the accounting
treatment of this discount in the audited results for the year ended 30 June
2006. The headline net profit attributable to ordinary shareholders, headline
earnings per ordinary share and fully diluted headline earnings per ordinary
share for the comparable period have been restated accordingly.
Appointment of new Chief Executive Officer ("CEO")
It was announced on SENS on 4 December 2006 that Stephen Levenberg had, after a
period of ten years` service to Mvela Group, decided to step down as CEO of the
company and that he would accordingly resign as CEO of the company on and with
effect from 30 June 2007, being the end of the current financial year of Mvela
Group. It was also announced that Mvela Group had initiated a process of
evaluating appropriate candidates for the position of CEO to succeed Stephen
Levenberg with effect from 1 July 2007. Stephen Levenberg had agreed, inter
alia, to co-operate in ensuring an orderly handover of the duties of CEO to his
successor, and to make himself available as a consultant to the company for a
period of six months from 1 July 2007.
The board of Mvela Group is accordingly pleased to announce the appointment of
Yolanda Cuba as CEO of Mvela Group with effect from 1 July 2007. Yolanda Cuba
has served as Deputy CEO of Mvela Group since December 2004, and has more than
four years experience with Mvela Group and/or Mvelaphanda Holdings, including
having been involved in the merger of Mvela Group with Mvelaphanda Holdings in
2004, as well as in the negotiation of certain of Mvela Group`s major
investments and in the ongoing management thereof. Yolanda Cuba is a chartered
accountant and currently serves on the boards of directors of Mvela Group`s two
largest investments, namely Absa and Life Healthcare, and has had extensive
exposure to all of Mvela Group`s investments and operations since her
appointment as Deputy CEO in December 2004.
Mvela Group has always considered its impeccable BEE credentials to be one of
its most important competitive advantages, and the Group is fortunate to have
amongst its executive directors a person of the calibre of Yolanda Cuba. The
appointment of Yolanda Cuba as CEO demonstrates the commitment of Mvela Group to
the process of transformation in South Africa at all levels. Mvela Group
continues to possess considerable depth in its management team, and accordingly
the new CEO will be well supported in her new role.
Mvela Group appreciates the contribution which Stephen Levenberg has made to the
establishment of the solid platform for growth which is now in place for Mvela
Group. The company wishes him well in his future endeavours.
Accounting policies
The unaudited interim results for the six months ended 31 December 2006 have
been prepared in accordance with International Financial Reporting Standards.
The accounting policies used are consistent in all respects with the accounting
policies applied in the financial statements for the year ended 30 June 2006.
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 an interim dividend, of 6 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 Thursday, 29 March 2007. The
ordinary shares of Mvela Group will commence trading "ex" the cash distribution
from the commencement of business on Friday, 30 March 2007 and the record date
will be Thursday, 5 April 2007. The cash distribution will be paid to ordinary
shareholders on Tuesday, 10 April 2007. Ordinary share certificates may not be
dematerialised or rematerialised between Friday, 30 March 2007 and Thursday, 5
April 2007, both days inclusive.
Preference shares
The directors of Mvela Group have resolved to declare a cash preference dividend
(No.3) of 27.72603 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 Thursday, 29 March 2007. The preference shares of Mvela
Group will commence trading "ex" the preference dividend from the commencement
of business on Friday, 30 March 2007 and the record date will be Thursday, 5
April 2007. The preference dividend will be paid to preference shareholders on
Tuesday, 10 April 2007. Preference share certificates may not be dematerialised
or rematerialised between Friday, 30 March 2007 and Thursday, 5 April 2007, both
days inclusive.
Prospects
Mvela Group`s results for the current period again demonstrate that the strategy
of combining quality investments with cash generative operations is succeeding
and is increasing shareholder value.
Mvela Group remains in a strong financial position with a strong balance sheet,
healthy cash flows and cash resources, and depth of management which will enable
the Group to continue to nurture and grow an industrial and financial group of
magnitude.
In the context of the current favourable economic and investment environment,
Mvela Group is confident of its ability to conclude value-enhancing investment
and other transactions, including acting as a consolidator of BEE groups, and to
continue to deliver strong growth in its intrinsic net asset value per ordinary
share.
T M G Sexwale S M Levenberg
Chairman Chief Executive Officer
7 March 2007
Sandton
Executive Directors:
TMG Sexwale (Chairman), MSM Xayiya (Executive 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, 200
A copy of these results are available on the Mvelaphanda Group website at:
www.mvelagroup.co.za
Date: 07/03/2007 10:59:56 Produced by the JSE SENS Department.
