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STA - StratCorp Limited - Unaudited Condensed Consolidated Interim
financial results for the 6 months ended 31 August 2011 and notice of
general meeting
StratCorp Limited
(Registration number: 2000/031842/06)
(Incorporated in the Republic of South Africa)
JSE Code: STA ISIN ZAE 000034294
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE 6
MONTHS ENDED 31 AUGUST 2011 AND NOTICE OF GENERAL MEETING
Statement of comprehensive Six months Six months Year
income ended ended Ended
31 August 31 August 28 February
2011 2010 2011
(unaudited)) (reviewed)) (audited)
Figures in ZAR thousand
Continuing operations
Revenue* 31 342 *38 048 *81 565
Profit from operations 14 *712 *572
before:*
Reversal of impairment of - 378 378
loans receivable
Income from equity accounted 1 003 244 817
investments
Fair value adjustments - (3) (4)
Profit before finance charges 1 017 1 331 1 763
Net finance cost* (1 669) *(1 528) *(3 163)
Loss before taxation (652) (197) (1 400)
Taxation 184 (395) 148
Net loss for the period from (468) (592) (1 252)
continuing operations
Discontinued operations
Loss from discontinued (89) (381) (236)
operations
Loss for the period (557) (973) (1 488)
Other comprehensive income:
Exchange differences on 88 (119) (15)
translating foreign operations
Net loss on financial assets - - (6 027)
at fair value through other
comprehensive income
Taxation related to components (27) 33 848
of other comprehensive income
Total comprehensive loss for (496) (1 059) (6 682)
the period
Loss attributable to:
Owners of the parent:
Loss for the period from (468) (592) (1 252)
continuing operations
Loss for the period from (89) (381) (236)
discontinued operations
Loss for the period (557) (973) (1 488)
attributable to owners of the
parent
Total comprehensive loss
attributable to:
Owners of the parent:
From continuing operations (407) (678) (6 446)
From discontinued operations (89) (381) (236)
Total comprehensive loss for (496) (1 059) (6 682)
the period attributable to
owners of the parent
*Contains reclassifications
Weighted average number of:
Ordinary shares in issue `000 180 296 180 296 180 296
Treasury shares in issue `000 (21 984) (21 984) (21 984)
Total weighted average number 158 312 158 312 158 312
of shares in issue `000
Basic loss per share (cents) (0.35) (0.61) (0.94)
Basic loss per share (cents) - (0.05) (0.24) (0.14)
discontinued operations
Basic loss per share (cents) - (0.30) (0.37) (0.80)
continuing operations
Headline loss per share (0.37) (0.62) (0.94)
(cents)
Reconciliation of headline loss
Basic loss (557) (973) (1 488)
- Loss on disposal of - - 44
investment properties
- Tax effect on profit on - - (6)
disposal of investment
properties
- Profit on disposal of (24) (16) (48)
property, plant & equipment
- Tax effect on profit on 3 2 7
disposal of property, plant &
equipment
Headline loss (578) (987) (1 491)
Statement of financial At At At
position 31 August 31 August 28 February
2011 2010 2011
(unaudited)) (reviewed) (audited)
Figures in ZAR thousand (restated)
25 714 *26 963 24 419
Non-current assets
Investment property 395 877 395
Property, plant & equipment 5 817 5 984 5 688
Goodwill 1 318 1 318 1 318
Intangible assets 3 461 2 482 3 106
Investment in associate 2 796 1 220 1 794
Other financial assets* 43 *6 091 46
Deferred tax assets 11 531 8 391 11 588
Finance lease receivables 353 600 484
Current assets 44 666 *44 687 45 892
Inventories 37 738 38 143 37 525
Loan to associate - 77 -
Other financial assets* 919 *1 208 1 033
Finance lease receivables 378 375 406
Trade and other receivables 5 234 4 233 6 566
Cash and cash equivalents 397 651 362
Assets of discontinued 27 39 24
operations
Total assets 70 407 71 689 70 335
Capital and reserves 31 123 37 242 31 619
Issued capital 43 641 43 641 43 641
Reserves 50 (86) (11)
Accumulated loss (12 568) (6 313) (12 011)
Non-current liabilities 14 960 1 410 13 612
Other financial liabilities 11 842 - 10 633
Finance lease obligations 914 592 587
Deferred tax liabilities 2 204 818 2 392
Current liabilities 24 095 32 943 25 028
Other financial liabilities 2 258 11 843 329
Current tax payable 23 3 23
Finance lease obligations 393 1 002 494
Operating lease liability 688 149 450
Trade and other payables 12 008 12 228 14 678
Bank overdrafts 8 725 7 718 9 054
Liabilities of discontinued 229 94 76
operations
Total liabilities 39 284 34 447 38 716
Total equity and liabilities 70 407 71 689 70 335
* Restated due to change in accounting policy
Ordinary shares in issue (`000) 180 296 180 296 180 296
Treasury shares** (`000) (21 984) (21 984) (21 984)
Total number of shares in issue 158 312 158 312 158 312
(`000)
Net asset value per share (cents) 19.7 24.0 20.0
Net tangible asset value per 16.6 21.0 17.2
share (cents)
** Including Share Incentive scheme shares of 20 703 531 shares
Statements of Changes in Equity
Share Foreign Fair value
capital currency adjustment
translatio assets at
n reserve fair value
through OCI
Reserve
Figures in ZAR thousand
Balance at 28 February 2010 43 641 - -
Total comprehensive loss - (86)
Balance at 31 August 2010 43 641 (86) -
Total comprehensive loss - 75 (5 183)
Transferred to accumulated loss 5 183
Balance at 28 February 2011 43 641 (11) -
Total comprehensive loss - 61 -
Balance at 31 August 2011 43 641 50 -
Total Accumulate Total
reserves d loss equity
Figures in ZAR thousand
Balance at 28 February 2010 - (5 340) 38 301
Total comprehensive loss (86) (973) (1 059)
Balance at 31 August 2010 (86) (6 313) 37 242
Total comprehensive loss (5 108) (515) (5 623)
Transferred to accumulated loss 5 183 (5 183) -
Balance at 28 February 2011 (11) (12 011) 31 619
Total comprehensive loss 61 (557) (496)
Balance at 31 August 2011 50 (12 568) 31 123
Statement of cash flows 6 Months 6 Months 12 Months
ended ended ended
31 August 31 August 28 February
2011 2010 2011
Figures in ZAR thousand (unaudited) (reviewed)) (audited)
Cash flows - operating activities (173) 2 669 5 141
Cash flows - discontinued 60 - (114)
operations
Taxation paid - (248) (461)
Cash flow from investing (1 334) (1 129) (1 784)
activities
Cash flow from financing 1 811 (2 917) (6 041)
activities
Net cash flow for period 364 (1 625) (3 259)
Cash and cash equivalents at (8 692) (5 433) (5 433)
beginning of period
Cash and cash equivalents at end (8 328) (7 067) (8 692)
of period
Condensed segment report 6 Months 6 Months 12 Months
ended ended ended
31 August 31 August 28 February
Figures in ZAR thousand 2011 2010 2011
(unaudited) (reviewed) (audited)
) )
Revenue
Health and wellness 12 745 12 076 33 312
Asset management 17 323 23 053 43 334
Property development 1 078 2 688 4 665
Corporate services 9 533 8 682 16 102
General financing 196 205 371
Other - - -
Intersegment revenues eliminated (9 533) (8 656) (16 237)
Revenue as per Statement of 31 342 *38 048 81 547
comprehensive income*
Reportable segment profit /
(loss) before taxation
Health and wellness (3 220) (1 536) (1 493)
Asset management 2 270 4 901 5 500
Property development (1 447) (1 310) (1 715)
Corporate services 1 902 (674) (10 148)
General financing (157) (790) (1 110)
Other - 161 406
Discontinued operations (89) (381) (236)
Inter segment profits eliminated - (949) 7 160
Loss before taxation as per (741) (578) (1 636)
Statement of comprehensive income
after discontinued operations
Reportable segment assets
Health and wellness 6 067 5 570 6 015
Asset management 5 695 10 455 5 051
Property development 41 165 40 732 41 084
Corporate services 59 345 64 788 55 429
General financing 1 635 1 907 1 888
Other 27 58 24
Assets of discontinued operations 27 39 24
Intergroup elimination (43 527) (51 821) (39 156)
Total assets as per Statement of 70 407 71 689 70 335
financial position
*Contains reclassifications
Nature of business
StratCorp is an investment holding company listed on AltX. StratCorp`s
business through its subsidiaries is divided into four distinct segments,
namely Asset (Investment) Management, Distribution of Health and Wellness
products, General Financing and Property Development and Corporate
Services.
Overview
During the period under review, trading conditions initially showed
improvement in March and April 2011, but the subsequent four months were
again difficult. The current economic climate affected the client base`s
ability to continue subscribing for the products and services offered by
the Group. An operational loss before taxation ("net operating loss") of
R557 000 were recorded for the period under review, which is an
improvement to the net operating loss of R973 000 for the period to 31
August 2010.
The Group is constantly looking at ways to improve the efficiencies of
its operations and the distribution of its products to its client base.
Various new channels of distribution have been identified and are in the
process of implementation. This includes direct marketing of some of the
products to its client base, as well as distributing some of the products
through wholesale channels.
StratEquity (now Virtus Financial Services), under current conditions,
delivered satisfactory results for the period under review, producing a
profit of R2 270 000 before tax. This business does however faces
challenges in maintaining and growing its client base as the current
economic climate contributes to the affordability problem of clients, and
therefore various new product options are being investigated and
implemented. StratEquity is in the process of closing its Swaziland
operation as it is not profitable to operate in this country anymore, as
member levels declined over the last two years.
I-Cura did not meet expectations as the current economic climate forced
clients to reconsider their spending priorities. This division incurred
a loss of R3 220 000 before tax for the period under review. The Kenya
operations of I-Cura have again delivered disappointing results and the
business model there is being reviewed to assess the way forward to
include a wholesale or retail distribution channel.
The Property division has not been able to sell completed units as
expected due to an over-supply of similar units in the market and
competitors cutting prices to offload excess units. The Property
division is however in the fortunate position that nearly all its units
are being rented and therefore the division generates an operating profit
for the group. Although it is the stated objective of StratCorp to sell
the property assets, it will only do so if it is profitable. The Group
has been approached by various parties to acquire its property assets,
including the vacant pieces of land it owns, and are considering these
offers.
StratFin, the lending business in the Group, maintained its business at
current levels. The Group is looking at various options to grow this
business in the medium term to become a meaningful contributor to the
Group`s results.
Cash flow remains tight and is monitored on a daily basis. Net cash
utilised in the operations for the period under review amounted to R173
000. The focus on improving working capital management contributed to
the low level of cash utilisation for the period when compared to the
operating loss. Capital expenditure of R1 334 000 were incurred, mostly
relating to software development and the acquisition of vehicles for the
sales division and training officers in I-Cura, the latter being funded
through debt facilities from various banks. No further material capital
expenditure, apart from the continued software development, is planned
for the remainder of the financial year.
Prospects
The Group has seen some positive change in general market conditions
since end September 2011, but it is still too early to confirm if it will
be sustainable until year end. Constant changes to the various business
operations are being implemented in order to increase revenue streams.
Strategy
The board`s decision to concentrate most of its expansion and management
efforts in the current financial year towards ensuring that the two main
operating subsidiaries, StratEquity (now Virtus Financial Services) and I-
Cura, become long term sustainable, highly profitable business units, are
continuing and all efforts are concentrated thereon.
Aside from the fact that the property division`s activities is on only
selling off the land and units, no other new activities were or will be
implemented in the near future. The residential property market however
remains very difficult and the selling of the properties is extremely
slow.
Subsequent events
The Company disposed of its interest in StratCol Limited ("StratCol"), an
associated company in which StratCorp held a 31.11% interest. StratCorp
invested R250 000 in StratCol at the time it was established. The
interest was sold on 28 September 2011 for a cash consideration of R 5
500 000. The carrying amount of the investment in associate amounted to
R2 796 000 at 31 August 2011. Other than the facts and developments
reported on in these results, there have been no material changes in the
affairs, financial or trading position of the group since 31 August 2011.
Basis of preparation and changes in accounting policy
The results of the Group for the six months ended 31 August 2011 have
been prepared in accordance with the Group`s accounting policies which
comply with the recognition and measurement principles of International
Financial Reporting Standards and the disclosure requirements of IAS 34 -
Interim Financial Reporting as well as the AC 500 standards as issued by
the Accounting Practices Board or its successor for interim reporting.
The standards are subject to ongoing review and may change.
The accounting policies are consistent with those applied in the
financial statements for the year ended 28 February 2011, however there
has been a change in the accounting policy for the accounting for
Financial Instruments when compared to August 2010.
IFRS 9 Financial instruments: Classification and measurement
IFRS 9, `Financial instruments: Classification and measurement`,
effective 1 January 2013. IFRS 9 was issued in November 2009. It replaces
the parts of IAS 39 that relate to the classification and measurement of
financial assets. IFRS 9 requires financial assets to be classified into
two measurement categories: those measured as at fair value and those
measured at amortised cost. The determination is made at initial
recognition. The classification depends on the entity`s business model
for managing its financial instruments and the contractual cash flow
characteristics of the instrument.
The group has adopted IFRS 9 from 1 March 2010, as well as the related
consequential amendments to other IFRS, because this new accounting
policy provides reliable and more relevant information for users to
assess the amounts, timing and uncertainty of future cash flows. In
accordance with the transition provisions of the standard, comparative
figures have not been restated.
The group`s management has assessed the financial assets held by the
Group at the date of initial application of IFRS 9 (1 March 2010). The
main effects resulting from this assessment were: Equity investments held
for trading that were previously measured at fair value and classified as
at fair value through profit and loss have been designated as at fair
value through other comprehensive income. The effect of this change in
accounting policy on earnings per share is shown below.
The aggregate effect of the changes in accounting policy on the company
and group financial statements for the period ended 31 August 2010 is as
follows:
Statement of financial position
Figures in R`000
New policy Previously
reported
Non-current assets 26 963 20 936
Current assets 44 687 50 714
Assets of 39 39
discontinued
operations
Total assets 71 689 71 689
Statement of Comprehensive Income, Earnings per share and Statement of
Changes in Equity
There was no effect on the Statement of Comprehensive Income or on the
Statement of Changes in Equity for the period ended 31 August 2010.
Earnings and headline earnings per share was unaffected by the change in
accounting policy for the period ended 31 August 2010.
Reclassification of comparative figures
Certain comparative figures have been reclassified. The most important
reclassifications are as follows:
Revenue for the period 31 August 2010 has been increased with R171 901
and interest received decreased with R171 901. For the period 28
February 2011, Revenue increased with R295 374 and interest income
decreased with R295 374. Interest earned by StratFin is now reported as
part of Revenue for the group.
Discontinued operations
As was previously reported in the 2011 Annual Report, the group has
decided to discontinue its StratEquity operations in Botswana, Lesotho
and Namibia. The group has also decided to discontinue and to deregister
Menlyn Taxi Association Finance Administration (Pty) Ltd, PoolCop
Marketing (Pty) Ltd and Silver Meadow Trading 263 (Pty) Ltd.
Poolcop Marketing (Pty) Ltd has been sold during September 2011 and
Menlyn Taxi Association Finance Administration (Pty) Ltd has been
deregistered on 5 October 2011.
All other companies are in the process of being winded down and to be
deregistered.
Statement of cashflows
Included in Cash flow from financing activities of R1.811m are net
proceeds from other financial liabilities of R3.140m and finance cost of
(R1.688m) (August 2010: (R1.386m)). The Group obtained a R2.45m loan from
Kose-Kose Investments Limited during the period repayable in full by
November 2012. At 31 August 2011 R1.2m remained outstanding.
Information about reportable segments
The reportable segments are the segments regularly reported to the chief
operating decision maker. There were no material reconciling items
between the profit before taxation for the segments and the profit before
tax for the group.
Admin and management fees and finance charges charged from corporate
services to other segments in the group are eliminated upon
consolidation.
General financing is a new reportable segment and as a result the
comparative figures for the General financing segment for the period
ended 31 August 2010 have been reclassified between "Other" and General
financing.
Significant related party transactions
The group obtained a R2.45m loan from Kose-Kose Investments Limited
(Major shareholder (34.98%) during the period repayable in full by
November 2012. At 31 August 2011 R1.2m of the loan remained outstanding.
The loan carries interest at a fixed 15% per annum.
The group also obtained a loan from DB Harington (Director) amounting to
R0.8m. The loan is repayable on demand and carries interest at a fixed
10% per annum.
Corporate Governance
The Group is striving towards maintaining the highest standards of
governance as embodied in the King III Report on Corporate Governance.
The Risk and Audit committee functions have been split and together with
the Nomination and Remuneration committees are fully functional and
independent.
Changes to the board
Tumelo Given Ratau was appointed as a non-executive director to the Board
with effect from 16 August 2011. Mr Ratau was appointed as a member of
the Risk and Audit Committee in October 2011. Mr. Ratau also serves on
the Board of Kose-Kose Investments Limited, where he is the chairman of
the Risk and Audit Committee. There were no other changes to the Board
during the period under review.
Dividends
No interim dividend was proposed.
Notice of general meeting
Shareholders are advised that the Company has convened a general meeting
of shareholders to be held at 10:00 on Wednesday, 7 December 2011 at the
registered office of the Company to consider and approve directors`
remuneration as required by sections 66(8) and 66(9) of the Companies Act
71 of 2008.
On behalf of the board
DB Harington JHP Engelbrecht
Chief Executive Officer Group Financial Director
4 November 2011
Registered Offices Transfer Secretaries
3rd Floor, Lakeside Building A Computershare Investor
Services (Pty) Ltd
2004 Gordon Hood Drive Ground Floor, 70 Marshall Street,
Centurion Johannesburg, 2001
Pretoria
Designated Adviser Auditors
Vunani Corporate Finance SAB&T Incorporated
Directors: PJ de Jongh* (Chairman); DB Harington (CEO); JHP Engelbrecht
(GFD); IM Wright (CIO); MM Patel*; SR Firer*; TG Ratau*
(*Non-executive)
Company Secretary: JPJ Louw
Date: 04/11/2011 17:00:01 Supplied by www.sharenet.co.za
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