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NCS - Nictus Limited - Abridged report relating to the audited financial

Release Date: 30/06/2011 09:00
Code(s): NCS
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NCS - Nictus Limited - Abridged report relating to the audited financial results for the year ended 31 March 2011 and details of the notice of annual general meeting NICTUS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1981/001858/06) JSE Share code: NCS NSX Share code: NCT ISIN Code NA0009123481 ("Nictus" or "the company") ABRIDGED REPORT RELATING TO THE AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011 AND DETAILS OF THE NOTICE OF ANNUAL GENERAL MEETING ABRIDGED SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2011 Audited Audited 2011 2010
R`000 R`000 Revenue 494 109 384 587 Cost of sales (401 407) (301 497) Gross profit 92 702 83 090 Other operating income 10 793 3 758 Administrative expenses (46 502) (41 547) Other operating expenses (66 979) (60 008) Investment income from operations 27 828 26 606 Operating profit 17 842 11 899 Investment income 6 722 5 071 Finance expenses (5 090) (5 229) Profit before taxation 19 474 11 741 Taxation (3 991) (1 661) Profit for the year 15 483 10 080 Other comprehensive income: Gains on property revaluation - 16 358 Taxation related to components of other - (2 929) comprehensive income Other comprehensive income for the year net of - 13 249 taxation Total comprehensive income 15 483 23 509 Profit attributable to: Equity holders of the parent 15 483 10 080 Non-controlling interest - - Total comprehensive income attributable to: Equity holders of the parent 15 483 23 509 Non-controlling interest - - Profit for the year 15 483 23 509 Basic earnings per share (cents) 28.97 18.96 Diluted earnings per share (cents) 28.97 18.86
ABRIDGED SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2011 Audited Audited 2011 2010
R`000 R`000 Assets Non-current assets Investment property 17 840 16 217 Property, plant and equipment 89 378 73 109 Goodwill 1 647 1 647 Intangible assets 544 435 Investments 38 296 31 036 Loans and receivables 252 184 242 037 Deferred tax asset 13 391 14 535 Current assets Inventories 64 088 45 887 Trade and other receivables 178 164 128 199 Cash and cash equivalents 280 522 255 434 Current tax assets 4 84 Total assets 936 058 808 620 Equity Share capital 26 722 26 589 Revaluation reserve 30 431 30 431 Contingency reserve 17 083 21 282 Retained earnings 37 198 20 856
Non-current liabilities Interest bearing loans and borrowings 11 748 11 936 Deferred tax liability 14 131 11 309
Current liabilities Bank overdraft 7 189 17 452 Interest bearing loans and borrowings 42 835 45 142 Insurance contract liabilities 690 216 574 148 Trade and other payables 58 189 49 018 Current tax liabilities 316 457 Total equity and liabilities 936 058 808 620 ABRIDGED SUMMARISED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2011 Audited Audited 2011 2010 R`000 R`000
CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 19 474 11 741 Adjustment for: Investment income from operations received (10 516) (9 850) Dividend income (17 312) (16 756) Investment income (6 722) (5 071) Finance expenses 5 090 5 229 Depreciation of property, plant and equipment 1 949 1 924 Amortisation of intangible asset 354 267 Loss on disposal of property, plant and 81 50 equipment Fair value adjustment on property, plant and (138) - equipment Revaluation of investment property (1 623) (2 120) Profit on transfer of property, plant and - (38) equipment Working capital changes: Increase in inventories (18 201) (5 192) Decrease /(Increase) in trade and other (49 965) 2 303 receivables Increase in insurance contract liabilities 116 068 161 017 Increase in trade and other payables 9 171 9 142 Cash generated by operations 47 710 152 646 Investment income from operations received 10 516 9 850 Finance expenses (5 090) (5 229) Dividend income 17 312 16 756 Taxation paid (86) (2 689) Net cash flow from operating activities 70 362 171 334 CASH FLOWS FROM INVESTING ACTIVITIES Expansion of property, plant and equipment (18 767) (3 709) Proceeds from disposal of property, plant and 606 268 equipment Acquisition of investment property - (14 097) Purchases of intangible assets (463) (186) Investment income received 6 722 5 071 Proceeds from disposal of investments - - Acquisition of investments (7 260) (10 366) Loans and receivables advanced (10 147) (55 494) Net cash flow from investing activities (29 309) (78 513) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) / increase in interest bearing (2 495) (15 139) loans and borrowings Movement in treasury shares 133 133 Dividends paid (3 340) (3 340) Net cash flow from financing activities (5 702) (18 346)
Net movement in cash and cash equivalents 35 351 74 475 Cash and cash equivalents at beginning of year 237 982 163 507 Cash and cash equivalents at end of year 273 333 237 982 ABRIDGED SUMMARISED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2011 Audited Share Revalu- Con- Retained Total capital ation tingency earnings equity
reserve reserve R`000 R`000 R`000 R`000 R`000 Balance at 1 26 456 17 002 16 989 18 409 April 2009 78 856 Changes in equity Total comprehensive income for the year Profit for the 10 080 10 080 year Revaluation of 13 429 13 429 property Transfer from 133 133 treasury shares Transfer to 4 293 (4 293) contingency reserve Dividend to (3 340) (3 340) equity holders Balance at 1 26 589 30 431 21 282 20 856 April 2010 99 158 Changes in equity Total comprehensive income for the year Profit for the 15 483 15 483 year Transfer from 133 133 treasury shares Transfer to (4 199) 4 199 contingency reserve Dividend to (3 340) (3 340) equity holders Balance at 31 26 722 30 431 17 083 37 198 March 2011 111 434 ABRIDGED SUMMARISED SEGMENTAL ANALYSIS FOR THE YEAR ENDED 31 MARCH 2011 Business Motor Furniture Insurance Head Eliminati Consolid segment retail retail & Finance Office ons ated 2011 2011 2011 2011 2011 2011 Segment revenue
Sales of goods 357 72 684 - - 969 431 276 623 Rental income 56 793 1 063 - - 1 912 Finance income 969 6 626 28 837 - (5 910) 30 522 Management fees - - - 4 357 (4 357) - Insurance - - 30 399 - - 30 399 premium income Total revenue 358 80 103 60 299 4 357 (9 298) 494 109 from external 648 customers Inter-segment 2 834 1 639 905 - (5 378) - revenue Total segment 361 81 742 61 204 4 357 (14 676) 494 109 revenue 482
Segment result Operating 6 342 8 215 19 533 18 811 (28 337) 24 564 profit before financing costs Financing costs (2 (4 415) (485) (8 10 569 (5 090) 489) 270) Profit before 3 853 3 800 19 048 10 541 (17 768) 19 474 taxation Taxation (1 (2 020) (2 854) - 2 244 (3 991) 361)
Net 2 492 1 780 16 194 10 541 (15 524) 15 483 profit/(loss) for the year
Segment assets 161 111 225 819 544 110 (266 797) 936 058 575 511 Segment 122 66 505 750 396 65 004 (180 157) 824 624 liabilities 876 Cash flows from (30 (11 360) 177 993 21 016 (86 708) 70 362 operating 579) activities Cash flows from 30 971 22 881 (201 597) (9 128 243 (29 309) investing 807) activities Cash flows from 5 234 (4 900) 46 839 (12 (40 035) (5 702) financing 840) activities Capital (1 (1 083) (1 219) (41) 23 300 19 230 expenditure 727) Business Motor Furniture Insurance Head Eliminati Consolida segment retail office ons ted 2010 2010 2010 2010 2010 2010 Segment revenue Sales of goods 244 54 310 - - - 298 395 085
Rental income 52 1 282 534 - - 1 868 Finance income 3 939 5 949 26 276 - (3 495) 32 669 Management - - - 3 351 (3 351) - fees Insurance - - 51 655 - - 51 655 premium income Total revenue 248 61 541 78 465 3 351 (6 846) 384 587 from external 076 customers Inter-segment 2 111 1 184 1 219 - (4 514) - revenue
Total segment 250 62 725 79 684 3 351 (11 360) 384 587 revenue 187 Segment result Operating 3 034 1 053 26 949 9 881 (23 946) 16 970 profit before financing costs Financing (828) (4 416) (2 898) (8 11 375 (5 229) costs 462) Profit before 2 206 (3 363) 24 051 1 419 (12 572) 11 741 taxation Taxation (296) 340 (1 391) (1 1 586 (1 661) 900)
Net 1 910 (3 023) 22 660 (481) (10 986) 10 080 profit/(loss) for the year
Segment assets 119 92 294 728 081 112 (257 604) 794 001 119 111 Segment 84 802 61 829 667 359 79 451 (195 745) 697 696 liabilities Cash flows 683 (7 984) 208 793 (4 (25 306) 171 334 from operating 852) activities Cash flows 13 717 8 883 (236 484) 43 567 91 804 (78 513) from investing activities Cash flows (16 186 102 875 (39 (65 580) (18 346) from financing 293) 534) activities Capital 3 144 344 219 188 - 3 895 expenditure ACCOUNTING POLICIES Basis of preparation The abridged summarised consolidated annual financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS), the AC 500 series issued by the Accounting Policies Board and in the manner as required by the Companies Act of South Africa, 1973. The accounting policies are consistent with those applied in the consolidated financial statements for the year ended 31 March 2011. RELATED PARTIES The company has related party relationships with its subsidiaries, fellow subsidiaries, associates and with its directors and executive officers. RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS: Profit for the year 19 474 11 741 Loss on disposal of property, plant and equipment 81 50 net of insurance proceeds Taxation (3 991) (1 661) Headline earnings 15 564 10 130 Headline earnings per share (cents) 29.12 19.05 2011 2010
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL R`000 R`000 Short-term employee benefits 10 800 5 512
TRANSACTIONS WITH RELATED PARTIES PREMIUMS RECEIVED 2 245 2 833 RESPONSIBILITY FOR CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Accounting policies have been applied consistently with those of prior year. The annual consolidated financial statements for the year ended 31 March 2011 have been audited by KPMG Inc., and their unqualified audit opinion is available for inspection at the registered office of the company. CHAIRMAN`S REPORT OVERVIEW It is a pleasure to report on the exceptional performance achieved during the 2011 financial year. The Group`s primary performance goal is to optimize shareholders value by maximizing the return on the Groups` equity value per share. The twelve month period since our last annual report has been a very exciting time for the Nictus Group with the following milestone achievements: Surpassing of the previous years` record performance to reach a profit attributable to shareholders of more than R 15 million. Reaching our goal of almost R 1 billion assets under management. Accepting total responsibility for General Motors in Namibia. Opening a furniture outlet in Soweto in South Africa. The Furniture and Motor Segments showed a 30% and 44 % growth in revenue respectively, which is remarkable when compared to similar industries in South Africa and Namibia. 54% of the growth in the Motor segment came from the increased market share through the GM Agencies in Namibia. In the past year, Auas Motors became one of the sixth biggest accounts of GM in Southern Africa. The past year`s upgrading of our Furniture outlets, the opening of the first outlet in Soweto and the sound management of specially the debtors book have eventually culminated in this performance of the furniture segment. The Insurance and Finance segment maintained its profitability in line with the consolidation that took place in this industry during the past year. Corporate Guarantee Namibia has grown its insurance fund to the largest of similar companies in Namibia. Corporate Guarantee South Africa established a sure footing in South Africa, with its performance and strengthening its structure. The appointment of further capable senior staff and opening an office in Cape Town will enhance the growth potential. The dedication and exceptional performance, of the Group Chief Executive, executive directors, management and staff, are summarized by the following: Revenue increased by 28% to R 494 million; Profit before taxation for the year increased by R 7,7 million to R 19,4 million; Return on equity of 13.9% was achieved; The Group`s asset base increased by 16%; The cash position of the Group improved by 15% to R 273 million; The equity of the Group grew by R 12 million to R111 million; and The net asset value per share increased by 12% to 208.51 cents. Nictus has reached a stage where the Group`s success is no longer dependent on one or two persons, but on a solid asset base and the remarkable team of executive directors and top management, which lead from the front. THE FUTURE VIEW The growth and performance of the Nictus Group in the past 3 years, the size of the asset base and insurance funds have propelled the Group through a ransition phase to a higher level. The South African Financial Services Board`s (FSB) application of the new Solvency Assessment and Management model, for future implementation, will necessitate demanding changes in the Nictus Annual Report capital requirements and reporting by Insurance companies. The afore-said, the two different economies we operate in as well as several other factors, which are not foreseen for Namibia have already necessitated the Board of Directors to discuss different strategies around future capital requirements, possible structural changes and different management approaches to take us into the future. As in the past, we are committed to approach all changes and growth within the capabilities, and with consideration given to sustainability, of the Group. The recovery of the motor trade in South Africa, and the after effects of the tsunami in Japan, are bound to have a negative impact on availability of stock of new vehicles and spares. The supply issues from Japan, with respect to Isuzu vehicles and spares, may fortunately only be for a short period during the year. However, the fairly free supply of vehicles experienced during the downturn in South Africa may be reversed in future due to continued demand. This could be more significant to the performance of this segment than the anticipated rise in the interest rate during the coming year. With the cautious recovery in the South African economy and the continued strength of the Namibian economy, we do not expect that the envisaged 1% rise in interest rates during the coming year will have an effect on our Furniture segment. The good debt management and low write-off in our debtors book also allow us to upscale our risk profile in this regard, which will further offset a possible rise in the interest rate in the coming year. The anticipated rise in the interest rates and the performance of stock markets will however have a positive impact on the bottom line of the Insurance and Finance segment. We will need to remain vigilant to what changes in the world and regional economies to capture the benefit or to take the necessary corrective actions where necessary. DIRECTORATE I have been on the board of one of the affiliated Nictus Companies since 1985, and on the Holding Company`s board since 1989. I have been Chairman of the Board for the past 7 years, and the Board has acceded to my request to hand over to the younger generation after the Annual General Meeting in August 2011. I will however remain on the board for the foreseeable future. We announced in the previous report that the board will be strengthened on the 15th of June 2010 with the appointment of a further independent non- executive director. We welcome Prof Johan Willemse who is a well-known economist. CORPORATE GOVERNANCE This report complies with the Johannesburg Securities Exchange and Namibian Stock Exchange requirements and reflects the various International Financial Reporting Standards. The Board also remains committed to all aspects of Corporate Governance, and to managing the Group in a transparent and accountable manner. APPRECIATION With the end of my tenure as Chairman of the Group at the Annual General Meeting in August 2011, I wish to thank the Board and all involved in Nictus for their constant and loyal support. The journey during the past years was exciting and full of challenges and successes, which would not have been achieved without the perseverance, vision and dedication of my fellow Board members and management team. I wish the incoming Chairman all the success as we enter the next and exciting era of the Group. He will have my full support for the time I will still be on the Board. What we achieved during this year and in the past was only through the Grace of God Almighty. JL Olivier Chairman: Nictus Group GROUP CHIEF EXECUTIVE`S REPORT Overview The explanation of the word sustainability in my dictionary is the following: "sustainability is the capacity to endure." The Nictus Group proved its endurance through its results, not only over the past year, but also during the five years since 2006. The South African economy recovered to such an extent during the year under review that we maintained our profitability in both the furniture and insurance segments. Disposable income increased positively and the indicees on the Johannesburg Securities Exchange performed in favour of our investments. The Namibian economy showed a strong recovery,especially in the mining sector. It was also an outstanding rainy season with the best rainfall in 108 years. The Namibian economy is to a large extent dependent on the agriculture sector and the sector is benefitting tremendously from the good rain. Both economies are under pressure to increase interest rates for various reasons. With the unemployment rate very high and increasing in Namibia, the government will be very reluctant to increase interest rates. The Group has performed exceptionally well in all areas during the preceding years, taking into account the difficult economic circumstances. Segmental performance The Group strategy is closely linked to the vision of the Group. Strategically it is important to grow the segments in such a manner that each segment contributes equally to profitability. In addition, where a segment is represented in both South Africa and Namibia, the ideal is that the operations from each country contribute equally to the segment contribution of the Group`s profitability. We are satisfied with the performance of all the segments under the circumstances during the year under review. Organisational profile The extent of our operations is set out on the geographical spread. Furniture retail segment The segment operates in South Africa and Namibia with four outlets in each country. Revenue in the furniture segment increased satisfactorily by 30%. Operating profit increased by 680%, due to increased focus and effective marketing campaigns resulting in a higher throughput during the year. We expect sustainable growth in revenue and operating profit for the coming year in this segment. Motor retail segment The vehicle segment only operates in Namibia, and distributes Chevrolet, Opel and Isuzu products, which are General Motors brands. In the year under review operations were expanded to Northern Namibia, where the Group opened a new dealership in Otjiwarongo. The Otjiwarongo dealership also has a branch in Oshakati, and both operate profitably. We also acquired the General Motors dealership in Walvis Bay with a branch in Swakopmund. Revenue in the motor segment increased by 44%, mainly due to the opening and takeover of dealerships. Operating profit increased by 109%, due to higher throughput during the year as well as additional profits from the acquired dealerships. We expect a more moderate performance in this segment during the coming financial year. Insurance and finance segment The insurance and finance segment operates in South Africa and Namibia. The Group`s insurance product is unique as we provide innovative risk management solutions as an alternative to conventional insurance. Our focus is to build sound relationships with our clients. Our products and services are developed and structured to meet our clients` specific needs. The optimisation process in the insurance segment went as expected, which creates a good foundation for growth. Lower interest rates impacted negatively on this segment, and we had a decrease of 23% in premium income and 28% in operating profit. We appointed more staff and opened an office in Cape Town. Our customer base in South Africa and Namibia is still expanding. The South African subsidiary is still building momentum. Training of the staff is a priority in order to maintain sustainability. We expect to maintain moderate growth in this segment during the coming year. Growth strategy Strategically the Group`s objectives remain unchanged, and we will strive to increase sales and profits from profit centres. The Group is driving customer acquisition and retention, and will maintain the quality of all debtors` books. Product sourcing will be expanded as we aim to optimise diversity of our product offering as a competitive advantage. Gains in growth will however be matched to our ability to develop capacity. Human capital Focus on human resource management is paying off. Management monitor the development of human capital in the Group on an ongoing basis. Competition for skilled and experienced people is fierce in the operating environment, but the Group was able to secure the services of more highly skilled people within its various segments. The Group has a policy of preserving its human capital and growth of human resources must be matched by prudence in allocation for remuneration. Corporate governance Nictus Limited is committed to the highest standard of corporate governance. In our opinion, good corporate governance cannot be dictated only by set rules and regulations. Information, provided to management, that is relevant, transparent, timely and accurate will serve in the best interest of the Group. This will ultimately benefit all relevant stakeholders. Good corporate governance is driven from board level and applied throughout the Group. The responsibility for ensuring compliance with good corporate governance is entrusted to the management in charge of each segment. Outlook Trading conditions are expected to remain difficult, while external factors such as oil prices and food inflation affect our target markets. However, we have an experienced and focused management team that is committed to maintain sustainability of our whole Group. Brand loyalty plays an increasingly important role in tough times, and the Group has a portfolio of well established brands with a loyal customer base. Appreciation I would like to express my gratitude to the dedication and contribution of our Board, our management and staff, in achieving the excellent results. I would like to thank our suppliers and manufacturers, our business partners, the investment and financial community and the media for their support. We are committed to serving our customers and thank them for the loyalty they continue to show towards our brands. N.C. Tromp Group Chief Executive DECLARATION OF ORDINARY DIVIDEND The board has declared a final dividend of 9.5 cents per share to ordinary shareholders of the Company for the year ended 31 March 2011. The salient dates of this dividend are: Last day to trade "cum" the dividend Friday, 15 July 2011 Shares commence trading "ex" the dividend from the commencement of business on Monday, 18 July 2011 Record date Friday, 22 July 2011 Payment date Monday, 25 July 2011 Share certificates may not be dematerialised or rematerialised between Monday 18 July 2011 and Friday 22 July 2011 both days inclusive. Shareholders are furthermore advised that a 10% non-resident shareholder`s tax on the declared dividend will be applicable to all shareholders with addresses outside of Namibia. By order of the board ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING As the annual report for the year ended 31 March 2011 ("the annual report") was posted to shareholders within 3 months of Nictus`s year end, this announcement is not required to appear in the press and will not be sent to shareholders. The annual report contains a notice convening the annual general meeting of Nictus shareholders for the year ended 31 March 2011 ("the AGM"). The AGM will be held in the boardroom at the Nictus Building, corner of Pretoria and Dover Street, Randburg, Gauteng on Monday 24th of August 2011 at 15h00. J L Olivier Chairman 30 June 2011 Date: 30/06/2011 09:00:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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