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Audited year end results for 30 June 2012
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
Ordinary share code: MVG
Preference share code: MVGP
Ordinary share ISIN: ZAE 000060737
Preference share ISIN: ZAE 000073540
("Mvela Group", "the Company" or "the Group")
Audited year end results for 30 June 2012
- Major progress with value unlocking strategy
- R61.9 million proceeds on sale of investment in Vox Telecoms
- R377.8 million proceeds on sale of investment in Life Healthcare
- R93.7 million proceeds on sale of its remaining investment in Mvelaserve
Summarised Group Statement of financial position Audited Reviewed
30 June 30 June
R'000 2012 2011
ASSETS
Non-current assets 444 2 298 006
Property, plant and equipment 444 1 252
Investments in associates - 635 385
Strategic investments - 1 661 369
Current assets 2 415 700 468 140
Investments in associates 531 341 -
Strategic investments 1 363 995 355 069
Other current assets 6 669 24 786
Cash and cash equivalents 513 695 88 285
Total assets 2 416 144 2 766 146
EQUITY AND LIABILITIES
Capital and reserves 2 099 224 2 357 323
Owners of the parent 1 922 235 2 160 241
Non-controlling interests 176 989 197 082
Non-current liabilities - 382 524
Interest bearing liabilities - 333 078
Deferred tax liabilities - 49 446
Current liabilities 316 920 26 299
Interest-bearing liabilities 310 143 -
Bank overdraft - 24 366
Other current liabilities 6 777 1 933
Total equity and liabilities 2 416 144 2 766 146
Net number of ordinary shares in issue (000) 520 708 529 139
Diluted net number of ordinary shares in issue (000) 520 708 529 139
Net asset value per ordinary share (cents) 369 409
Net tangible asset value per ordinary share (cents) 369 409
Summarised Group Statement of changes in equity Audited Reviewed
30 June 30 June
R'000 2012 2011
Balance at the beginning of the year 2 357 323 4 894 283
Disposal of subsidiaries - (12 422)
Cost of BEE transaction - 15 501
Issued BEE shares - 151
Treasury shares disposed 1 -
Buy-back of ordinary shares (33 756) -
Redeemable option-holding shares lapsed (276) -
Total comprehensive loss for the year (223 871) (69 039)
Dividends/distributions (197) (2 471 151)
Balance at the end of the year 2 099 224 2 357 323
Summarised Group Statement of comprehensive income Audited Reviewed
30 June 30 June
R'000 2012 2011
Continuing operations
Revenue - 1 886 411
Loss from operations (25 502) (39 837)
Loss from operations pre-exceptional items (25 502) (25 596)
Exceptional items - (14 241)
Net interest expense (14 398) (24 464)
Interest income 13 722 15 482
Interest expense (28 120) (39 946)
Share of loss from associates (104 044) (7 942)
Dividend income 16 316 72 256
Fair value adjustments and net loss on disposal of
investments (96 061) (229 505)
Cost of BEE transaction - (15 501)
Loss before taxation from continuing operations (223 689) (244 993)
Taxation (182) 140 250
Normal, deferred, capital gains and securities transfer tax 625 145 921
Secondary Tax on Companies (807) (5 671)
Loss after taxation (223 871) (104 743)
Discontinued operations
Profit for the year from discontinued operations - 35 704
Total comprehensive loss for the year (223 871) (69 039)
Total comprehensive loss attributable to:
Owners of the parent (203 975) (124 471)
Other shareholders (19 896) 55 432
- Preference shareholders 197 14 790
- Non-controlling interests (20 093) 40 642
(223 871) (69 039)
Weighted average net number of ordinary shares in issue
(000) 527 106 491 217
Diluted weighted average net number of ordinary shares in
issue (000)# 527 106 491 217
Continuing operations
Basic and diluted loss per ordinary share (cents) (38.7) (32.0)
Basic and diluted headline (loss)/earnings per ordinary
share (cents) (13.2) 36.0
Discontinued operations
Basic and diluted earnings per ordinary share (cents) - 6.0
Basic and diluted headline earnings per ordinary share (cents) - 7.0
Dividends per preference share (cents) 74.2 30.0
Interim 36.1 30.0
Final 38.1 -
# The dilutive effect of the 265 362 preference shares as at 30 June 2011 is considered immaterial and
thus has not been taken into account in the prior year. The preference shares were redeemed during the
current financial year.
Reconciliation between loss attributable to owners of the
parent and headline (loss)/profit attributable to owners
of the parent Audited Reviewed
30 June 30 June
R'000 2012 2011
Loss attributable to owners of the parent (203 975) (124 471)
Loss on disposal of investments and subsidiaries - 283 557
Non-headline items of associate company (4 684) -
Impairment to investment in associate 138 108 50 337
Loss/(profit) on sale of property, plant and equipment 113 (1 415)
Tax effects 607 396
Headline (loss)/profit attributable to owners of the
parent (69 831) 208 404
Summarised Group Statement of cash flows Audited Reviewed
30 June 30 June
R'000 2012 2011
Loss before taxation (223 689) (188 204)
Non-cash items 198 768 262 761
Working capital 20 557 (95 762)
Cash utilised by operations (4 364) (21 205)
Interest income received 13 722 26 011
Interest expense paid (852) (51 435)
Investment income received 11 191 74 301
Normal taxation refunded/(paid) 577 (14 565)
Cash available from operating activities before the
payment of capital gains tax 20 274 13 107
Capital gains tax paid (47 801) (46 833)
Cash effects of operating activities (27 527) (33 726)
Cash effects of investing activities 561 734 196 021
Cash effects of financing activities (84 234) (609 729)
Dividends paid (197) (14 790)
Net increase/(decrease) in cash and cash equivalents 449 776 (462 224)
Cash and cash equivalents at the beginning of the year 63 919 526 143
Cash and cash equivalents at the end of the year 513 695 63 919
Segmental information
Audited Reviewed
30 June 30 June
R'000 2012 2011
NET ASSETS
Financial activities 1 365 278 -
Consumer services - 996 342
Financial services - 826 689
Construction and infrastructure 30 000 83 646
Telecoms, media and technology 703 946 450 646
2 099 224 2 357 323
REVENUE
Revenue from discontinued operations - 1 886 411
- 1 886 411
NET LOSS AFTER TAXATION
Financial activities (56 718) -
Consumer services - (260 502)
Financial services - 254 259
Construction and infrastructure (53 646) (46 905)
Telecoms, media and technology (113 507) (36 094)
Cost of BEE transaction - (15 501)
Profit from discontinued operations - 35 704
(223 871) (69 039)
COMMENTARY
Introduction
During the year, the Group has continued with the implementation of its investment strategy to unlock value for
Mvela Group shareholders.
In January 2012, Blackstar acquired 28% of the Company, becoming the single largest investor. In addition, two
of Blackstar's executives were appointed to the Mvela Group Board and assumed the roles of interim Chief
Executive Officer and interim Financial Director with a view to unbundle and continue realising the value of Mvela
Group's remaining investment portfolio in the most efficient manner.
Prior to the Blackstar transaction, Mvela Group disposed of its 135 500 000 ordinary shares in Vox Telecom for
R61.9 million and 2 700 000 ordinary shares in Life Healthcare for R49.7 million.
Post the Blackstar transaction, the Group has made significant progress in implementing its value unlocking
strategy with the disposal of its remaining investments in Life Healthcare and Mvelaserve. The Group disposed of 7
749 921 ordinary shares in Life Healthcare on the open market and effected its collar option transaction entered
into in July 2011 with a financial institution in respect of 7 000 000 ordinary shares in Life Healthcare, realising a
total cash consideration of R328.1 million.The Group disposed of its remaining interest in Mvelaserve for a total
cash consideration of R93.7 million.
In June 2012, Mvela Group announced its offer to acquire the entire issued ordinary share capital of Avusa as
well as the renaming of Avusa to Times Media Group Limited ("TMG") and the Group's intention to unbundle all its
shares in TMG to its shareholders. The transaction was approved by shareholders in August 2012. Mvela Group shareholders
will now have direct exposure to Avusa through TMG. The transaction provides shareholders with the unique
opportunity to be invested in one of South Africa's leading media entertainment companies alongside a new CEO
and management team and is part of the Group's strategy to further unlock value for its shareholders.
The Group has also implemented a series of cost cutting initiatives, including rationalising its operations and sub-
letting of its premises.
Following the unbundling of TMG to Mvela's shareholders, Mvela's remaining investments will comprise an
effective 47.3% interest in Batho Bonke (which owns an effective 5.03% interest in Absa), and an investment in
Group Five. Both of these investments will be realised before the end of the next financial year.
Mvela Group has convened a general meeting in October 2012 to obtain shareholder approval to change its name to
New Bond Capital Limited. This will avoid any confusion with other companies who are independent of Mvela Group but
also incorporate the name Mvela.
Financial overview
Financial performance
The Group's results for the prior year include Mvelaserve for the five months prior to it's unbundling on 6
December 2010. The Group had no trading operations in the current financial year and now only comprises
investments.
Mvela Group recognised dividend income of R16.3 million during the current financial year, of which R8.0 million
was earned from Life Healthcare, R3.2 million from Mvelaserve, and R5.1 million from Group Five received in
the form of ordinary shares in Group Five. The net interest expense decreased to R14.4 million in the current
year mainly as a result of the reduction of debt.
Net fair value adjustments and profit and loss from investments amounted to a net loss of R96.1 million which
comprises a net loss from fair value adjustments on investments held at year end of R156.0 million, and a net
released gain of R61.9 million arising on investments disposed of in the current financial year.
The net loss from the associate Avusa amounted to R104.0 million which included the Group's share of Avusa's
comprehensive income for the year ended 31 March 2012 of R34.1 million offset by an impairment on the
Group's investment in Avusa of R138.1 million.
A total comprehensive loss of R223.9 million was incurred during the year resulting in a loss per share of 38.7
cents. The majority of this loss can be attributed to the net loss recognised on the associate Avusa and the net
loss arising on the investment portfolio.
Financial position
Investments in associates comprise the Group's investment in Avusa amounting to R531.3 million (2011: R635.4
million). The investment in Avusa is carried at its impaired value based on an Avusa share price of R20.07 per
share representing the 30 day volume weighted average price, prior to the publication of Mvela Group's firm
intention announcement to acquire Avusa (2011: R24 per share).
Following the disposal of the Group's investments in Life Healthcare, Mvelaserve and Vox, the Group's strategic
investments amounted to R1,364.0 million and comprised investments in Absa amounting to R1,334.0 million
and an investment in Group Five amounting to R30.0 million.
The Group's net cash position increased by R449.8 million to R513.7 million. The majority of the increase
relates to R561.5 million realised on disposal of investments, less R50.2 million on settlement of the interest
bearing liabilities, and R33.8 million on the buy back of 9 000 000 Mvela Group ordinary shares. R482.0 million of
the cash balance of R513.7 million at year end will be returned to Mvela shareholders through the unbundling of
all of its shares in TMG to shareholders.
Total interest-bearing liabilities at 30 June 2012 of R310.1 million (2011: R333.1 million) comprise the
preference share funding raised on the Group's initial acquisition of Avusa.
Capital structure
There were no changes to the number of authorised share capital during the current year. The issued
ordinary share capital of the Company decreased to 556 473 650 ordinary shares following the share buy-back.
During the current financial year, the Company re-purchased 9 000 000 of its own ordinary shares at R3.45 per
share in terms of a share buy-back. These ordinary shares were subsequently cancelled. Subsequent to year
end, the Company repurchased 35 765 285 of its own ordinary shares from its wholly owned subsidiary,
Mvelaphanda Treasury and Financial Services (Pty) Limited. These shares were cancelled.
All issued shares have been fully paid up.
On 31 December 2011 the Group redeemed its 265 362 perpetual preference shares of 0.10 cents each. On 3
January 2012, preference shareholders were paid for each perpetual preference share held, at the deemed value
of R10.00, plus the preference dividend for the six month period ended 31 December 2011 (No.13) of 36.1 cents
and the arrear preference dividend for the six month period ended 30 June 2011 (No.12) calculated up to
31 December 2011 of 38.14 cents, calculated on 80% of the ruling prime overdraft rate, which equates to
R3 million.
The latest redemption date / final option exercise date for the BEE shares was 9 June 2012 by which date none
of the redeemable option-holding shareholders had exercised their option. The BEE shares therefore lapsed and
the par value was re-imbursed to the shareholders post year end.
During the current financial year the Share Incentive Scheme sold all of its ordinary shares in Mvela Group
(2011: 569 746). No further incentive schemes were created or required in light of the Group's current strategy.
Investment overview
Absa
Mvela Group owns an effective 47.3% interest in Batho Bonke, which in turn owns ordinary shares in Absa,
equating to an effective 5.03% of the issued share capital of Absa. Mvela Group therefore owns an effective
2.38% interest in Absa.
In the prior year, the Group advanced a loan of R51.6 million to a third party. The security provided for the
transaction was additional shares in some of the original Special Purpose Vehicles ("SPVs") in which Mvela invested
as well as shares in other similar SPVs. On default of this loan, Mvela took ownership of the shares in the SPVs in
March 2012. These additional shareholdings resulted in Mvela's effective shareholding being increased from 44.7% at
30 June 2011 to 47.3% in the current financial year.
Absa reported a 6% decline in headline earnings as a result of impairment losses incurred mainly on the
mortgage legal book. Despite this, the underlying performance remained solid and Absa's Core Tier 1 capital
adequacy ratio improved and is well above regulatory requirements. The Absa intrinsic net asset value is based
on an Absa share price of R141.20 per share at 30 June 2012 compared to an Absa share price of R134.81 per
share at 30 June 2011.
Mvela Group has convened a general meeting of Mvela Group ordinary shareholders on 2 October 2012 to
consider and approve the disposal by Batho Bonke of the Absa ordinary shares held in the open market, by way
of a private placement. The disposal forms part of Mvela Group's value unlocking strategy in order to realise
value for Mvela Group shareholders. Absa comprises 61% of the intrinsic net asset value of Mvela Group and the
sale proceeds will be utilised in the most appropriate manner as determined by the Board.
Avusa
In June 2012, Mvela Group announced its offer to acquire, through its wholly owned subsidiary TMG, the entire
issued ordinary share capital of Avusa that it does not already beneficially own, as well as its intention thereafter
to unbundle all its shares in TMG to its shareholders.
On 16 August 2012, at the general meeting of Avusa shareholders, the ordinary and special resolutions were
successfully passed to approve the offer, being a cash offer of R24.00 per Avusa ordinary share and/or a share
alternative of 1.47707 TMG shares for every one Avusa ordinary share. All conditions of the transaction have
been fulfilled and the transaction becomes operative on 25 September 2012.
Post the unbundling, Mvela Group shareholders will have direct exposure to Avusa through TMG. The
transaction provides shareholders with the unique opportunity to be invested in one of South Africa`s leading
media entertainment companies and to partner with a new CEO and a strong management team in pursuing an
encouraging growth strategy. The transaction also facilitates the injection of gearing into Avusa in an efficient
manner and will enable Avusa to operate with a more efficient capital structure and to provide investors with a
leveraged return on their investment.
The Avusa intrinsic net asset value is based on an Avusa share price of R20.07 per share representing the 30
day volume weighted average price, prior to the publication of Mvela Group's firm intention announcement to
acquire Avusa.
Avusa reported a 16% decrease in operating profit for the year ended 31 March 2012 as a result of adverse trading
conditions in the current global economic slowdown. Post the transaction, the management and operational
structure of Avusa is to be restructured to focus on the operational turnaround and to improve its performance.
Further growth, cost saving and efficiency initiatives, including restructurings, will continue to be implemented in
the new financial year to grow revenues, enhance margins and contain costs.
Group Five
Subsequent to year end, pursuant to the strategy of unlocking shareholder value for the benefit of Mvela Group
shareholders, Mvela Group has entered into advanced discussions to dispose of its entire investment in Group
Five, for an aggregate sale consideration of R30 million. Group Five has accordingly been valued at R30 million
in the intrinsic net asset value calculation.
Intrinsic net asset value
The Group's intrinsic net asset value per share increased from R3.65 to R3.74 at 31 August 2012, mainly due to
an increase in the value of the investment in Batho Bonke and additional value realised on disposal of Life
Healthcare, which offset the decrease in the value of Avusa. The intrinsic net asset value per ordinary share net
of capital gains tax and debt is set out in the table below.
Based on Mvela Group's ordinary share price listed on the JSE of R3.30 on 31 August 2012, the ordinary shares
were trading at a discount of 12% to the Group's intrinsic net asset value per ordinary share of R3.74 at that date.
31 August 2012 30 June 2011
Intrinsic gross Intrinsic Intrinsic
asset value net asset Per net asset Per
(after CGT) Debt value share (1) value share (1)
Rm Rm Rm R Rm R
Absa 1 186 - 1 186 2.27 1 053 1.99
Avusa 531 (314) 217 0.42 302 0.57
Group Five 30 - 30 0.06 82 0.15
Life Healthcare - - - - 270 0.51
Mvelaserve - - - - 99 0.18
Vox Telecom - - - - 48 0.09
Other Investments - - - - 26 0.04
Net Cash 515 - 515 0.99 64 0.12
Total 2 262 (314) 1 948 3.74 1 944 3.65
(1) Based on the net number of ordinary shares in issue on 30 June 2012 of 521 million (2011: 529 million).
(2) The intrinsic net asset value provides a measure of the underlying value of the Group's assets and does
not indicate when the investments will be realised, nor does it guarantee the value at which the
investments will be realised.
(3) For the purposes of determining the intrinsic values, listed investments on recognised stock exchanges
are valued using quoted bid prices (or offer provided by a willing buyer if relevant) and unlisted
investments are shown at directors' valuation.
(4) The investment in Avusa is held at R20.07 per share representing the 30 day volume weighted average
price, prior to the publication of Mvela Group's firm intention announcement to acquire Avusa.
(5) The intrinsic net asset value is unaudited and unreviewed.
Changes to the Board
As at 30 June 2012, the Board comprised of three executive directors and three independent non-executive
directors.
Andrew Bonamour was appointed as interim Chief Executive Officer, William Marshall-Smith was appointed as
interim Financial Director and Patrick Ntshalintshali was appointed as independent non-executive director with
effect from 19 January 2012.
Bryan Hopkins, independent non-executive director, and Ernst Röth, Chief Financial Officer, resigned from the
Board with effect from 18 January 2012. The Mvela Board would like to thank both of them for their contribution
to the Mvela Group including overseeing the restructuring and unbundling of assets over the last two years.
Governance
Mvela Group is committed to sound corporate governance and the building of a sustainable business. Mvela Group
strives to maintain the highest standards of corporate governance and recognises that corporate governance is a
developing process. For this reason compliance with the applicable code is reviewed on an ongoing basis.
Outlook going forward
Mvela Group will continue to focus on its value unlocking strategy and remains committed to realising value for
shareholders in the most efficient manner.
Accounting policies and international financial reporting standards
The audited summarised consolidated financial statements for the year ended 30 June 2012 have been prepared in
accordance with International Financial Reporting Standards ("IFRS") including IAS 34, AC 500 standards as issued by
the Accounting Practices Board or its successor, the JSE Listings Requirements, and in the manner required by the
Companies Act of South Africa.
The accounting policies adopted are consistent with the accounting policies applied in the audited annual financial
statements for the previous year ended 30 June 2011.
The audited financial results for the year end 30 June 2012 were compiled under the supervision of William
Marshall-Smith, interim Financial Director.
Events subsequent to the reporting date
On 16 August 2012, at the general meeting of Avusa shareholders, the ordinary and special resolutions were
successfully passed to approve the offer by Mvela Group to acquire, through its wholly owned subsidiary TMG,
the entire issued ordinary share capital of Avusa that it does not already beneficially own, being a cash offer of
R24.00 per Avusa ordinary share and/or a share alternative of 1.47707 TMG shares for every one Avusa ordinary
share.
Mvela Group intends to unbundle all its shares in TMG to its shareholders. Post the unbundling, Mvela Group
shareholders will have direct exposure to Avusa through TMG. The transaction provides shareholders with the
unique opportunity to be invested in one of South Africa's leading media entertainment companies and to partner
with a new CEO and a strong management team in pursuing an encouraging growth strategy.
On 16 August 2012, the Company was authorised, by way of a specific authority, in terms of the Companies Act,
the JSE Listings Requirements and the Company's Memorandum of Incorporation, to repurchase by way of a
specific repurchase 35,765,285 of its own ordinary shares from its wholly owned subsidiary, Mvelaphanda
Treasury and Financial Services (Pty) Limited, for a consideration of R3.26 per share, being the 30 day volume weighted
average price up to the last practicable date. These shares have subsequently been cancelled.
Mvela Group has convened a general meeting of Mvela Group ordinary shareholders on 2 October 2012, to
consider and approve the disposal by Batho Bonke of the Absa ordinary shares held in the open market, by way
of a private placement. The disposal forms part of Mvela Group's value unlocking strategy in order to realise
value for Mvela Group shareholders. Absa comprises 61% of the intrinsic net asset value of Mvela Group and the
sale proceeds will be utilised in the most appropriate manner as determined by the Board.
The Board has proposed changing the name of Mvelaphanda Group Limited to New Bond Capital Limited. A
general meeting of shareholders has been convened on 2 October 2012 to pass the resolution, to approve the
name change.
Summarised audit opinion
These results have been audited by Mvela Group's auditors PKF (JHB) Inc., Registered Auditors. The unqualified
audit opinion is available for inspection at the Company's registered office.
Dividend
Ordinary shares
The directors of the Group have resolved not to declare a final dividend for the year ended 30 June 2012
following the cash preservation policy followed by the Group until the effect of its value unlocking strategy has
been completed.
Preference shares
On 21 December 2011, preference shareholders received a preference dividend of 36.1 cents per preference
share for the six month period ended 31 December 2011 and the arrear preference dividend of 38.14 cents for
the six month period ended 30 June 2011.
MSM Xayiya
Executive Chairman
12 September 2012
Executive directors: MSM Xayiya (Executive Chairman), AD Bonamour (Interim CEO), W Marshall-
Smith (Interim FD)
Non-executive directors: KD Dlamini (lead independent), OA Mabandla (independent), ZP Ntshalintshali
(independent)
Registered office: 2nd Floor, 11 Crescent Drive, Melrose Arch, 2076
Sponsor: PSG Capital (Pty) Limited, 1st Floor, Ou Kollege, 35 Kerk Street,
Stellenbosch, 7600
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001
Date: 12/09/2012 08:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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