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Reviewed Condensed Consolidated Statements of Financial Position for the six months ended 31 August 2012
AFRICAN DAWN CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/020520/06)
JSE code: ADW
ISIN: ZAE000060703
"the Company" or "the Group"
Reviewed Condensed Consolidated Statements of Financial Position for the six
months ended 31 August 2012
Six months Six months Year
ended ended ended
31-Aug-12 31-Aug-11 29-Feb-12
R`000 R`000 R`000
(Reviewed) (Unaudited) (Audited)
Non-current assets 2,327 2,556 1,439
Property, plant and equipment 979 1,844 770
Intangible assets 729 - -
Other financial assets 619 712 669
Current assets 120,160 114,920 120,849
Property in possession 25,560 25,304 25,662
Other financial assets 300 300 300
Current tax receivable 1,639 6,961 9,713
Trade and other receivables 247,256 269,882 246,902
Impairment on trade receivables (174,362) (196,055) (177,179)
Net trade and other receivables 72,894 73,827 69,723
Cash and cash equivalents 19,767 8,528 15,451
Non-current assets held for sale - 1,013 -
Total assets 122,487 118,489 122,288
Capital and reserves 65,609 29,899 65,361
Share capital 284,634 256,107 284,634
Reserves - 113 97
Accumulated (loss) (219,025) (226,321) (219,370)
Non-current liabilities 24,862 17,901 21,608
Borrowings 24,443 17,901 21,590
Finance lease obligation 419 - 18
Current liabilities 32,016 70,689 35,319
Finance lease obligation 111 134 35
Borrowings 4,544 31,294 5,484
Current tax payable 18,148 18,166 20,064
Trade and other payables 9,213 10,008 9,736
Provisions - 11,087 -
Total liabilities 56,878 88,590 56,927
Total equity and liabilities 122,487 118,489 122,288
Ordinary shares in issue (`000) 508,184 222,926 508,184
Net asset value per share (cents) 12.9 13.41 12.9
Net tangible asset value per share 12.8 13.41 12.9
Reviewed Condensed Consolidated Statements of Comprehensive Income for the
six months
ended 31 August 2012
Six months Six months Year
ended ended ended
31-Aug-12 31-Aug-11 29-Feb-12
R`000 R`000 R`000
(Reviewed) (Unaudited) (Audited)
Revenue 16,342 19,136 31,472
Cost of sales (464) (399) (407)
Gross profit 15,878 18,737 31,065
Other income 1,557 10,339 22,622
Operating and other expenses (16,490) (22,234) (39,962)
Operating profit 945 6,842 13,725
Investment revenue 348 49 309
Fair value adjustment - (187) -
Finance cost (990) (2,799) (3,151)
Profit before taxation 303 3,905 10,883
Taxation (55) (85) (478)
Profit for the period 248 3,820 10,405
Weighted number of shares 508,184 222,926 332,838
Basic earnings per share 0.05 1.71 3.23
Diluted earnings per share 0.10 1.71 2.79
Headline earnings per share 0.05 1.80 3.06
Diluted headline earnings per share 0.11 1.80 2.72
Reconciliation of headline earnings
Basic earnings 248 3,820 10,763
Non-recurring adjustments
Profit on sale of subsidiary - - (1,021)
Loss on disposal of property
Plant and equipment 16 3 2
Impairment of property, plant and equipment - - 249
Impairment of non current
asset held for sale - 187 188
Headline earnings 264 4,010 10,181
Reviewed Audited Condensed Consolidated Statements of Comprehensive Income
for the six months ended 31 August 2012
Six months Six months Year ended
ended ended
31-Aug-12 31-Aug-11 29-Feb-12
R`000 R`000 R`000
(Reviewed) (Unaudited) (Audited)
Profit for the year 248 3,820 10,763
Other comprehensive income: - - -
Total comprehensive income 248 3,820 10,763
Attributable to
Profit from continuing operations 248 3,820 10,405
Profit from discontinued operation - - 358
Owners of the parent 248 3,820 10,763
Reviewed Condensed Consolidated Statements of Changes in Equity for the six
months
ended 31 August 2012
Share Share Reserves+ Retained Ordinary
Capital Premium Other NDR Earnings Share-
holders
Equity
Balance at 28 Feb 2011 2,221 253,886 105 (230,133) 26,079
Total comprehensive income
for the year - - - 10,763 10,763
Transfer from insurance reserves - - (8) - (8)
Issue of ordinary share during
Rights Issue 2,853 25,674 - - 28,527
Balance at 29 Feb 2012 5,074 279,560 97 (219,370) 65,361
Total comprehensive income
for the six months - - - 248 248
Transfer to insurance reserves - - (97) 97 -
Balance at 31 Aug 2012 5,074 279,560 - (219,025) 65,609
Reviewed Consolidated Statements of Cash Flows for the six months
ended 31 August 2012
Six months Six months Year
ended ended ended
31-Aug-12 31-Aug-11 29-Feb-12
R`000 R`000 R`000
(Reviewed) (Unaudited) (Audited)
Cash inflow from
operating activities 4,283* 5,851 9,448
Cash inflow/(outflow) from
investing activities (826) (55) 2,694
Cash inflow/(outflow) from
financing activities 859 (5,146) (4,569)
Net cash inflow for period 4,316 650 7,573
Cash and cash equivalents at
beginning of period 15,451 7,878 7,878
Cash and cash equivalents at
end of period 19,767 8,528 15,451
*Note: Please note that included in cash from operating activities is a
receipt from SARS of R 8,2 million on a completed subsidiary assessment.
Basis of preparation
The reviewed condensed interim financial statements are prepared in South
African Rands thousands (‘000) on the historical-cost basis, except for
certain assets and liabilities which are carried at amortised cost, and
derivative financial instruments which are stated at their fair value. The
financial statements have been prepared in accordance with the framework
concepts and measurement and recognition requirements of International
Financial Reporting Standards (IFRS), IAS 34 as well as the AC 500 standards
as issued by the Accounting Practices Board, the requirements of the South
African Companies Act (Act No 71 of 2008), as amended, and the JSE Listings
Requirements. The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the
Company’s accounting policies.
The reviewed condensed interim financial information for the six-month
period ended 31 August 2012 was reviewed by the Group`s auditors, Grant
Thornton. A copy of their unqualified review opinion is available on request
at the company’s registered office. Any reference to future financial
performance included in this announcement, has not been reviewed or reported
on by the Company`s auditors.
The reviewed condensed consolidated interim financial statements was
prepared by E Nel B.Compt(CTA) and supervised by the acting financial
director, T Kruger CA(SA).
Notes to the reviewed condensed consolidated financial statements
1. Reporting entity:
African Dawn Capital Limited is a Company domiciled in the Republic of South
Africa. The reviewed condensed consolidated financial statements of the
Company for the six months ended 31 August 2012 comprise the Company and its
subsidiaries and the Group`s interests in associates and jointly controlled
entities.
2. Statement of compliance:
The reviewed consolidated interim financial information for the six months
ended 31 August 2012, has been prepared in accordance with International
Financial Reporting Standards (IFRS), the interpretations adopted by the
International Accounting Standards Board (IASB) and the requirements of the
South African Companies Act. These condensed interim financial statements
are presented in compliance with IAS 34 - Interim Financial Reporting as
well as AC 500 standards, and should be read in conjunction with the annual
financial statements for the year ended 29 February 2012. The reviewed
results were approved by the Board on 1 November 2012.
3. Significant accounting policies:
The accounting policies adopted in the preparation of the reviewed condensed
interim financial information are consistent with those of the annual
financial statements for the year ended 29 February 2012. For a full list of
standards and interpretations which have been adopted we refer you to the 29
February 2012 annual financial statements.
4. Accounting Estimates:
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities,
income and expense. Actual results may differ from these estimates. Except
as described below, in preparing these condensed consolidated financial
statements, the significant judgements made by management in applying the
Group`s accounting policies and the key sources of estimation certainty were
the same as those that applied to the reviewed consolidated financial
statements for the six months ended 31 August 2011 and year ended 29
February 2012. During the six months ended 31 August 2012 management
reassessed its estimates in respect of the recoverable amount of investments
in subsidiaries, the recoverable amount of trade and other receivables (in
conjunction with the current economic climate) and deferred tax assets.
5. Impairments of trade and other receivables
The majority of the impairment of trade receivables is based on the
underlying security value at the time of reporting. The security values were
reassessed at 31 August 2012 and provisions were adjusted accordingly.
Impairment
31-Aug-12 31-Aug-11 29-Feb-12
R`000 R`000 R`000
Movement in impairment provision (2,817) (4,610) (23,486)
6. Property in possession
The Company perfected its security over properties in order to protect its
capital advances in terms of its loans, by taking transfer of ownership. The
properties will be developed, where it is considered economically viable,
and sold when favourable market conditions exist in order to realise the
carrying value thereof.
7. Segmental information
Figures in ZAR thousands
31 Aug 2012 Bridging Personal & Other Total
Finance Short Term
Revenue 1,291 12,738 2,313 16,342
Net profit/(loss) (10,341) 2,217 8,372 248
Net asset value (33,178) (3,687) 102,474 65,609
31 Aug 2011 Bridging Personal & Other Total
Finance Short Term
Revenue 830 13,387 4,919 19,136
Net profit/(loss) (5,837) 7,125 2,532 3,820
Net asset value (33,985) (9,122) 73,006 29,899
Please note:
The Bridging Finance segment is still in the process of collecting on
historical debts and recoveries are currently covering their operational
costs. The new mandate of Debt Management Services originates out of
Bridging Finance and will form a new segment in future. The loss of R 10,3
million (2011: Loss R 5,8 million) includes an impairment of intercompany
loans with its subsidiaries. The measurable loss in control of the segment’s
management accounted to R 0,6 million (2011: Loss R 5,8 million).
COMMENTS FROM THE BOARD
The Macro-Economic Environment
The South African economic environment has recently been dominated by the
wildcat strikes that started in the platinum belt in Rustenburg. It has
spread into other industries and together with the loss of life has
undermined investor confidence and casts serious concerns about Government’s
governance in this regard. Both Moody’s and Standard and Poor’s have cut
South Africa’s Credit rating, citing the strikes and social tension. The
Reserve Bank’s latest economic growth forecasts were for an average of 2.6%
in 2012 and 3.4% next year. Reserve Bank Deputy Governor Daniel Mminele
recently said in a post on the Central Bank’s website “Growth forecast will
most likely need to be revisited”. The global economy remains under
pressure with Europe struggling through the debt crisis. In our opinion
tough economic conditions will remain in the next 12 months.
The Economic Environment
From a South African micro finance industry perspective, the wildcat strikes
and loss of life at Marikana, over increased wages highlighted the credit
health of the consumer and the growth in the extension of unsecured credit
to those borrowers. The latest CCMR (Consumer Credit Market Report)
released in October 2012 stated that, the gross debtor book for unsecured
lending increased by 8.68% quarter-on-quarter by the end of June and by
49.25% as compared to the same quarter last year. This translates to an
amount of R131.1 billion of outstanding unsecured credit which still only
represents 9.63% of the net outstanding debt in South Africa. Interest
rates have trended lower. However, the impact of inflation, specifically all
the wage increases, will negatively impact on this downward trend.
Research reports produced in October by the large Equity Research Houses
into the unsecured lending market have all concluded that the “credit
bubble” will, for the time being, be averted. Growth in the unsecured
lending market will continue albeit at much lower levels.
Our experience has seen a significant growth in the level of credit extended
to our customer base and new customers. It is crucial for this market’s
sustainability that affordability criteria remains prudent and is in no way
compromised in the pursuit of market share. It has become a war of customer
affordability rather than price. Our strategy has been to be a responsible
lender and ensure that the credit quality of the book remains intact.
Trading and operational review
The first six months ended 31 August 2012 proved slower and at times
frustrating, yet positively rewarding. In the turnaround of Afdawn,
appropriate funding was secured through the successful recapitalisation in
November 2011. Our immediate strategy remains to focus on our personal
finance and debt management businesses and re-establish ourselves in the
market place. The fundamentals underlying our strategy are that we maintain
good governance and adopt appropriate risk mitigating strategies to ensure a
sustainable business. Management has focused on reducing costs and driving
cost synergies through our move into one office and rolling out our
centralised shared services across the group.
Re-establishing credibility in the market proved difficult as trust is
earned over time and not merely a switch that is flicked. It necessitated a
change in our approach and strategy. We have made great strides in this
regard with numerous mandates concluded with significant employer groups
during July and August 2012. This has enabled Elite to grow its customer
base from 10 000 to 25 000 in the past 3 months alone.
The challenge remains to convert the customer base into responsible loans.
In addition, National Housing Finance Corporation (“NHFC”) approved a
facility to Elite of R25 million for incremental loans showing confidence in
our operating model, which bodes well for our future. Elite returned a
profit of R 0,9 million in the six month period. In addition, Elite has
access to an additional R30 million funding via the Elite Group Two
transaction, R 10 million being available now and R 20 million by way of
conversion rights exercised by Sandown Capital. Sandown Capital owns Elite
Group Two and Elite manages Elite Group Two under a management agreement.
The envisaged loan growth of our book was much slower due to earning trust
at employer group level as mentioned earlier, together with an increased
over indebtedness of our new loan applicants. The approval rates of new
loans remain low throughout the various delivery channels. To reiterate,
Elite has not relaxed its credit criteria in assessing affordability and
would rather retain a healthy credit quality in our book, than chasing loan
growth that may ultimately result in higher bad debt in time to come. The
traditional outlets have maintained their customer base over this period.
Given the unfortunate events that transpired at Marikana and the negative
press that followed relating to the micro lending industry in general and
specifically to those operating in Rustenburg, Afdawn’s position is
clarified as follows. Elite has no traditional outlet presence in this
region nor have we contravened any provisions of the National Credit Act as
detected by the National Credit Regulator in their investigations into the
operations of the 13 micro financiers operating in this region. We subscribe
to the NCA’s vision to ensure responsible and affordable lending.
Elite has significantly up skilled the sales and collections functions, most
notably the appointment of Andy Turner as marketing director of Elite. The
Elite collections have secured significant mandates in August, which amounts
to R3 million a month legal collection book.
Elite Medical Finance experienced some delays during our pilot testing
phase, which required more IT development to ensure that we have a
comprehensive product offering to the medical practitioner which covers the
entire practice and not merely the general aspect thereof. The feedback from
medical practitioners remains extremely positive and we envisage rolling out
our product in the latter half of this year. The opportunity remains
immense for this product.
The debt management business remains involved in the collection of number of
distressed books, including our own books and returned a loss of R 0,6
million. We are cognisant of the commercial imperatives as regards the
costs and benefits. The collection of our own books is proceeding well,
albeit not without difficulty. The debt management team has also been
actively marketing our service and expertise to independent third parties to
collect their distressed debt under management agreement. We are confident
of securing a minimum of two separate mandates totalling at least R200
million in the next two months, which we anticipate will increase revenue.
Shareholder Support
We have shared our progress with our major shareholders, vendors and
funders, and they remain positive and supportive toward Afdawn’s business
and aspirations.
SARS
Afdawn management has worked closely with SARS on all aspects relating to
our tax position. Significant progress has been made in terms of the agreed
action plan. There are only a few returns that need be assessed by SARS,
which will then enable us to settle the matter with SARS. We envisage this
process to be concluded by year-end at the latest. The SARS liability has
been fully provided for in our accounts.
Allegro status
Afdawn has engaged with the Curators of Allegro to explore the possibility
that the matter can be settled in some form as the uncertainty impedes
Afdawn in sourcing alternative funding outside our regular funders. We are
in the process of concluding Memorandum of Understanding that will set out
the rules of engagement that will enable us to determine the facts which in
turn will facilitate a conclusion to the matter. Thus far we have not become
aware of any information during our deliberations that will alter our
conclusion reached previously.
As mentioned in the 2010, 2011 and 2012 Annual Reports, a former subsidiary
company, Allegro Holdings Proprietary Limited (“Allegro”) was placed in
curatorship in 2009 and was therefore deconsolidated. At the time Allegro
was indebted to Afdawn in the amount of R3.8 million. A curator has
repeatedly made verbal statements regarding a possible claim that he claims
to have against Afdawn and/or its subsidiaries. This has been ongoing since
early 2010 and, notwithstanding written requests to the curators, no formal
claim has been forthcoming, nor have we been advised of the basis of any
claim. The latest CMM curators’ reports to the Financial Services Board
(“FSB”) in November 2011 and March 2012, contained no indication of a formal
claim against Afdawn.
On 17 April 2012 the curators lodged a formal claim against Absa and
directors within the Allegro group at the time at which the alleged claim
arose. To the date of signing this report no claims have been received by
Afdawn, nor have we been able to establish any basis for a potential claim
against Afdawn and therefore no provisions have been made for any such
contingency.
Corporate governance
Management embrace the principles set by KING III and strive to comply in
all material aspects. The current governance structures remain in place. The
publication of our first integrated report for the year ended 29 February
2012, drives new initiatives and outlook on areas regarding social,
environmental and sustainability of the Group.
Human Resources
The consolidation of the Group under one roof was successfully completed
. The consolidation gave way to new and exciting positions, that were filled
with excited, driven and qualified individuals. The management remains
committed to grow and enable individuals to contribute at a micro and macro
level, this is achieved through training and performance initiatives.
Dividends
No dividends are contemplated for the 2013 financial year.
Changes to the board of directors
The company appointed Dr GE Stoop as an executive member on 23 May 2012 and
his expertise in personal finance is already contributing to the Group as a
whole.
Afdawn is in the interim actively pursuing the appointment of a permanent
financial Director. Having regard to investor assurance we have opted for
reviewed interim results for the six months ended 31 August 2012.
Appreciation
The board wants to emphasise its appreciation of the support and inputs
received from its shareholders, suppliers, customers and staff. The
continued support has ensured that Afdawn is on the path to realise its
dream and achieve its purpose of creating shareholders value in a
responsible manner that also improves the lives of our customers through the
provision of finance and services.
Directors: TF Kruger (chief executive officer), Dr GE Stoop
(executive)(appointed 23 May 2012), L Taylor (independent non-executive), CF
Wiese (independent non-executive chairman), HH Hickey (independent non-
executive), WJ Groenewald (non-executive)
Company secretary: W Somerville (on behalf of Corporate Statutory Service
Proprietary Limited)
Auditors: Grant Thornton
Designated Advisor: Sasfin Capital, a division of Sasfin Bank Limited
Transfer secretaries: Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
Date: 6 November 2012
Date: 06/11/2012 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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