To view the PDF file, sign up for a MySharenet subscription.

FCPD - Foord Compass Limited - Reviewed preliminary report for the year ended

Release Date: 19/01/2012 13:16
Code(s): JSE FCPD
Wrap Text

FCPD - Foord Compass Limited - Reviewed preliminary report for the year ended 31 December 2011 and interest payment and election FOORD COMPASS LIMITED JSE Code: FCPD ISIN: ZAE000054466 Registration Number: 1987/003591/06 REVIEWED PRELIMINARY REPORT FOR THE YEAR ENDED 31 DECEMBER 2011 AND INTEREST PAYMENT AND ELECTION CONDENSED STATEMENT OF FINANCIAL POSITION at 31 December 2011 Reviewed Audited Notes 2011 2010 Rm Rm
ASSETS Current assets Investments 3 1,480.5 1,474.5 Income receivables and unsettled sales 3.0 24.5 Taxation receivable 0.1 0.1 Cash and deposits 528.6 468.6 Total assets 2,012.2 1,967.7 EQUITY AND LIABILITIES Capital and reserves 42.3 35.7 Ordinary share capital 0.1 0.1 Accumulated profits 42.2 35.6 Non-current liabilities 1,163.3 1,093.1 Unsecured debentures 4 1,151.9 1,081.6 Deferred taxation 11.4 11.5 Current liabilities 806.6 838.9 Accounts payable 2.9 2.7 Short investment positions 3 720.8 753.9 Unsettled purchases 6.6 2.9 Debenture interest payable 76.3 79.4
Total equity and liabilities 2,012.2 1,967.7 Number of debentures in issue 153,719,105 147,475,338 Number of ordinary shares in issue 8,800,070 8,800,070 Cents Cents Net attributable asset value per debenture (cum 799.0 787.3 interest) Net attributable asset value per debenture (ex 749.4 733.4 interest) Net attributable asset value per ordinary share 480.7 405.7 CONDENSED STATEMENT OF COMPREHENSIVE INCOME Reviewed Audited Notes 2011 2010 Rm Rm
Investment income 86.0 93.9 Realised trading profits 65.8 43.8 Operating expenditure (16.3) (15.5) Net distributable profit 135.5 122.2 Capital profits on sale of investments 8.4 26.5 Revaluation of investments 19.1 15.5 Net portfolio income before debenture 163.0 164.2 interest Debenture interest (122.0) (110.0) Increase in carrying value of debentures 4 (24.3) (30.2) Profit before taxation 16.7 24.0 Taxation expense 5 (4.7) (11.0) Profit attributable to ordinary 12.0 13.0 shareholders
Weighted average number of debentures in 152,268,432 146,291,597 issue Cents Cents
Interest per debenture (weighted) 80.1 75.2 Earnings per debenture (weighted) 96.1 95.8 Earnings per ordinary share 136.4 147.7 CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY Ordinary Accumulated Total share profits capital Rm Rm Rm
Balance at 31 December 2009 (audited) 0.1 31.4 31.5 Dividend paid - (8.8) (8.8) Profit for the year - 13.0 13.0 Balance at 31 December 2010 (audited) 0.1 35.6 35.7 Dividend paid - (5.4) (5.4) Profit for the year - 12.0 12.0 Balance at 31 December 2011 (reviewed) 0.1 42.2 42.3 CONDENSED STATEMENT OF CASH FLOWS Reviewed Audited 2011 2010 Rm Rm
Net cash inflow from trading activities 149.3 1.6 Interest, dividends and taxation paid (135.3) (111.6) Net cash inflow (outflow) from operating activities 14.0 (110.0) Net cash received from issue of debentures 46.0 13.9 Net change in cash and deposits 60.0 (96.1) Cash resources at beginning of year 468.6 564.7 Cash resources at end of year 528.6 468.6 AUDITOR`S REVIEW REPORT These results have been reviewed in terms of International Standard on Review Engagements (ISRE) 2410 by our auditors, Deloitte & Touche, whose unmodified review report is available for inspection at the registered office of the company. NOTES TO THE CONDENSED FINANCIAL STATEMENTS 1. Basis of preparation and significant accounting policies The condensed financial statements have been prepared in accordance with the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board and the information as required by International Accounting Standards (IAS) 34 Interim Financial Reporting and the requirements of the Companies Act of South Africa. The condensed financial statements have been prepared under the historical cost convention, except for the revaluation of financial instruments. The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were applied in the preparation of the company`s financial statements for the year ended 31 December 2010. 2. Operating segments The company has one principal operating segment and accordingly additional segmental disclosures have not been made. 3. Investments Investments comprise both long and short positions in listed and unlisted securities. The investment objective is to achieve a total return of 10% per annum above the annual change in SA CPI on a rolling five-year basis. In managing the investment portfolio, securities may be held for trading within twelve months or may be realised over longer periods as deemed appropriate by the investment manager. Reviewed Audited 2011 2010 4. Unsecured debentures Rm Rm
Unsecured debentures comprise Debenture capital at issue price 1,046.5 1,000.5 Cumulative revaluation of debentures 105.4 81.1 Fair value of debentures 1,151.9 1,081.6 Reconciliation of balance Balance at beginning of year 1,081.6 1,037.5 Net proceeds on issue of debentures 46.0 13.9 Revaluation - current year 24.3 30.2 Balance at end of year 1,151.9 1,081.6 Increase in carrying value of debentures Net portfolio income before debenture interest 163.0 164.2 90% allocation to debenture holders 146.7 147.8 Less: proportionate share of taxation expense (0.4) (7.6) Less: interest distribution for year (122.0) (110.0) Revaluation - current year 24.3 30.2 5. Taxation expense Taxation comprises: Current taxation charge - current year 4.8 6.7 Deferred taxation (credit) charge - current year (0.1) 4.3 Net expense per statement of comprehensive income 4.7 11.0 Deferred taxation relates to the revaluation of investments. The debenture share of the net taxation charge, which amounts to R0.4 million (2010:R7.6 million), has been deducted from the carrying value of the debentures as set out in note 4 above. RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011 The results set out in the preliminary financial statements reflect a commendable result achieved under volatile market conditions. The board of directors has approved a final interest distribution of 49.6 cents per debenture, bringing the full year distribution to 80.1 cents per debenture on a weighted average basis (2010: 75.2 cents). The interest distribution represents an income yield of 10.9% on the opening net attributable asset value per debenture at the beginning of the year (2010: 10.5%). Net portfolio income before debenture interest was largely unchanged at R163.0 million (2010: R164.2 million). During the year, more trading profits were realised than in the previous year as the portfolio manager took advantage of higher prices in certain markets to realise gains. The level of dividends earned in the portfolio was higher than last year, while interest accruals were lower as a result of the gradual decline in cash exposure and lower average cash rates since the beginning of the reporting period last year. The net result is that distributable income was higher, lifting the interest distribution 6.5% to 80.1 cents per debenture on weighted average basis. The net attributable asset value per debenture increased from 733.4 cents to 799.0 cents, cum interest. Together with the 30 cents per debenture half- year distribution, this yielded a total return on the debentures of 13.1% for the year on a net attributable asset value basis (2010: 13.4%). Since the start of the Foord Compass Debenture ten years ago at the beginning of 2002, the debentures have returned 18.5% per annum on an annualised basis. The returns on the debentures for the major periods ended 31 December 2011 are as follows: 1 3 5 10
year years years years to 31 December 2011 (% per annum) Income 10.9% 11.2% 11.3% 13.3% Capital 2.2% 3.0% -0.7% 5.2% Total return * 13.1% 14.2% 10.6% 18.5% * Calculated with reference to opening net attributable asset values per debenture INVESTMENT RETURNS Except for the USA, all major share markets were negative in 2011, reflecting recessionary fears associated with Eurozone over-indebtedness and slowing growth in China. US share markets rose on the relative attractiveness of moderate growth in the world`s largest economy and good earnings results from US blue chip companies. Bond yields fell further in the US and UK on safe haven demand and persistently accommodative monetary policy. The dollar surged against most emerging market currencies and gained against the euro, while precious and industrial metals prices posted double digit losses with only gold gaining over the year. In SA, the dividend yield pulled the FTSE/JSE All Share Index into the black for a nominal return of 2.6% while bond yields were flat with the All Bond Index returning 8.8% for the year. The rand depreciated 18% against the US dollar. In this environment, the Foord Compass portfolio achieved a commendable return of 14.9% in ZAR on a gross of fees basis (2010: 16.5%). The return underperformed the one year CPI + 10% objective return of 16.1% but was well ahead of SA equity, bond and cash returns. Since inception from 1 January 2002, the portfolio has achieved a gross return of 22.4% per annum for ten years. This exceeds the CPI + 10% objective of 15.9% over the same period, while also outperforming the SA share, bond and cash market returns and world equity market returns in rands by a substantial margin. The current and longer period returns achieved on the portfolio are tabulated below relative to the objective and SA and world equity markets. 1 3 5 10 year years years years
to 31 December 2011 (% per annum) Gross portfolio total return 14.9% 17.1% 12.5% 22.4% CPI + 10% per annum 16.1% 15.3% 16.9% 15.9% FTSE / JSE All Share Index 2.6% 17.3% 8.1% 15.2% MSCI World Index in rands 15.9% 5.8% 1.1% 0.1% COMMENT Stakeholders will recall from previous reports that while seeking to achieve the investment objective over longer periods, the primary objective is protection of capital. Capital is not guaranteed but the risk of loss is actively managed in a diversified portfolio of South African and international assets according to Foord Asset Management`s best investment view on an unconstrained basis. Given the depreciation of the rand during the year, the portfolio benefitted from the weighting to foreign assets which approximated 50% of the portfolio on an effective exposure basis at 31 December 2011. Foreign assets contributed 9.5% of the 14.9% total return. Stock selection within the SA listed share portfolio once again proved to be sound. The investment in SA listed shares returned 18.0% relative to the FTSE/JSE ALSI return of 2.6% and contributed 5.5% of the total portfolio return. The listed property counters included in the portfolio produced double-digit returns but given their relatively small weighting only contributed 1.2% of the total return. The contribution from the short SA government bond position was negative again but the portfolio benefitted from the carry position mainly into local corporate bonds and foreign assets, which performed well over the year. The returns from each major asset class and their respective contributions to the total return of the portfolio are as follows: 2011 2010
Return Contributi Return Contrib on ution JSE equities 18.0% 5.5% 36.0% 13.6% JSE property 13.7% 1.2% 17.6% 1.9% SA bonds -8.4% -3.1% -14.6% -6.1% Foreign assets 20.4% 9.5% 8.2% 4.0% SA cash 5.2% 1.8% 6.3% 3.1% Total return for year 14.9% 16.5% PORTFOLIO STRUCTURE The macro structure of the investment portfolio continues to reflect the view that equities are the asset class of choice and are likely to be the only class to deliver inflation beating returns in the medium term. The effective exposure of the portfolio to equities has decreased from 95% to 85% of portfolio. Much of the equity exposure has been obtained via the options market to protect the portfolio against downside volatility in the short term. The top five equity investments by value comprise: Anglo American, Foschini, Kenmare Resources, Steinhoff and Remgro. During the year, the overall short government bond exposure was largely unchanged, although a portion of the exposure was switched into a short US Treasury position. The listed property holding was reduced on profit taking during the year, while a gold ETF was added as an inflationary hedge to complement the short US government bond position. Effective cash exposure has increased to 27% of portfolio at year-end. The effective asset structure of the investment portfolio at 31 December is as follows: Domestic Foreign Total 2011 2010 2011 2010 2011 2010 Equities 63% 65% 22% 30% 85% 95% Listed property 6% 6% 0% 6% 6% 12% Government bonds -34% -47% -11% 0% -45% -47% Corporate debt 8% 9% 16% 13% 24% 22% Commodities 0% 0% 3% 1% 3% 1% Effective cash exposure 7% 14% 20% 3% 27% 17% 50% 47% 50% 53% 100% 100% OUTLOOK Global equities continue to offer value relative to low global interest rates and aberrationally low bond yields but also due to robust company balance sheets, low forward PE multiples and high profit margins. World corporate profit growth is expected to be positive despite an impending Eurozone recession, provided there is no disorderly break-up of the zone with consequent bank failures in that market. We expect global interest rates to remain low given the lack of fiscal capacity outside of China to boost demand through reflation. The US dollar should continue its recovery against major global currencies, reflecting relative US economic strength and competitiveness. In South Africa, equity valuations do not appear to be stretched and corporate earnings growth should continue. South African government bond valuations remain excessively expensive and capital values remain at risk of permanent loss. The portfolio is positioned to benefit from this macro view but remains globally diversified across economic sectors, bond markets and currencies. Optionality within the portfolio provides additional protection and flexibility to change exposures rapidly if required. INTEREST PAYMENT AND ELECTION Notice is hereby given that a debenture interest payment (number 49) of 49.606 cents per debenture in respect of the six months ended 31 December 2011 is payable to debenture holders recorded in the debenture register of the company on the record date. In compliance with the JSE Listings Requirements, the following dates are applicable: Last date to trade Friday, 3 February 2012 Debentures trade ex-interest Monday, 6 February 2012 Record date Friday, 10 February 2012 Payment date Monday, 13 February 2012 IMPORTANT: ELECTION TO RECEIVE DEBENTURES IN LIEU OF A CASH INTEREST PAYMENT As provided for in section 6.4 of the Debenture Trust Deed, the board has resolved that debenture holders recorded in the debenture register at the close of business on the record date may elect to receive new fully paid Foord Compass Limited Variable Rate debentures in lieu of a cash interest payment ("the debentures"). The motivation for this decision is to retain cash and build capital for debenture holders. The tax implications of the settlement of the debenture interest payment by the issue of debentures or by the payment of cash should be the same. However, debenture holders are encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take. Certificated debenture holders who wish to elect to receive debentures in respect of all or a part of their interest entitlement, must complete the Form of Election (mailed under separate cover) in accordance with the instructions therein and return such election form to the company`s transfer secretaries to be received by no later than 12:00 on the record date, being Friday, 10 February 2012. Dematerialised debenture holders who wish to elect to receive debentures in respect of all or a part of their interest entitlement must, in terms of the agreement between themselves and their Central Securities Depository Participant ("CSDP") or broker, instruct their CSDP or broker accordingly. If the election to receive debentures is not made by dematerialised debenture holders by the cut-off time stipulated by their CSDP or broker, or by 12:00 on Friday, 10 February 2012 in the case of certificated debenture holders, debenture holders will be deemed to have elected to receive a cash interest payment. As indicated above, the last day to trade in the company`s debentures on the JSE to ensure that a purchaser appears as an owner on the record date will be Friday, 3 February 2012. The number of debentures to be issued ("the ratio") will be determined with reference to the ex-interest net attributable asset value per debenture as at 31 December 2011 of 749.4 cents. Accordingly, the ratio is 6.619 interest debentures for each 100 debentures held on the record date. Only rounded numbers of interest debentures will be issued based on conventional rounding principles. No fractions will be paid. The right to receive debentures may not be traded on the JSE. Subject to JSE approval of the debenture election, application will be made to the JSE Limited for a listing of the maximum number of debentures to be issued with effect from the commencement of business on Monday, 13 February 2012. An adjustment to the number of debentures listed will be made on or about Tuesday, 14 February 2012 in accordance with the actual number of debentures issued having regard to the elections made. Cheques and/or new debenture certificates will be posted to certificated debenture holders and the accounts updated and/or credited by CSDPs or brokers of dematerialised debenture holders on or about Monday, 13 February 2012. This reviewed preliminary report was prepared under the supervision of PE Cluer. Signed on behalf of the board JC GREYLING PE CLUER 18 January 2012 Directors: JC GREYLING (Chairman), PE CLUER, AD COWELL*, D FOORD**, JC VAN DER HORST, JC VAN NIEKERK, DG WEST * Australian ** British Company secretary: L GREVLER Sponsor: One Capitalwww.foordcompass.co.za Date: 19/01/2012 13:16:11 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.

Share This Story