Wrap Text
Audited results for the year ended 31 December 2012
Blackstar Group SE
(Company number SE 4)
(Registered as an external company with limited liability in the
Republic of South Africa under registration number 2011/008274/10)
Share code: BCK
ISIN: GB00B0W3NL87
("Blackstar" or "the Company" or "the Group")
Audited results for the year ended 31 December 2012
Key highlights
During the review period
- Blackstar disposed of half its interest in the Litha Healthcare Group Limited, resulting in a 4.6 times return on
investment
- The successful realisation of value in New Bond Capital Limited ("NBC") allowed for a return of capital to NBC
shareholders. The calculated return on investment was 27.5% (in South African Rands) and 12.9% (in Pounds
Sterling) over the 10-month period that the investment was held by Blackstar
- With the realisation of the NBC investment, Blackstar also repaid the Investec Bank acquisition facility
- The disposal of services derivatives resulted in a 2.28 times return on investment
- Blackstar generated R22.1 million (GBP1.7 million) in corporate finance and monitoring fees
- Successful launch of the Blackstar Special Opportunities Fund in October 2012
Post the review period
- During 2013, Blackstar increased its interest in Times Media Group Limited to 18.3%
- On 4 March 2013, Blackstar launched an offer to acquire the entire share capital of NBC
- Blackstar bought back 5.9 million shares at 79 pence (R11.07). These shares will be reissued at 91 pence
(R12.47) for the purposes of the NBC transaction
- As at 31 March 2013, the intrinsic Net Asset Value ("NAV") per share was R14.72 (GBP1.05)
- In April 2013, Blackstar Global Opportunity Fund was launched focusing on global markets
- Blackstar announces its intention to declare a final dividend of 17 South African cents (1.21 pence) per ordinary
share
Directors' statement
Introduction
The period under review has in many ways been a watershed year for Blackstar Group SE ("Blackstar" or "the
Company" or "the Group"), one which we believe has set a solid foundation for the Company.
We concluded three large transactions during the year, including the sale of 50% of Blackstar's shareholding in Litha
Healthcare Group Limited ("Litha") at a significant premium relative to its cost.
In November 2012, Blackstar disposed of its listed services derivative investment via a series of on-market sales for
cash consideration of R151.6 million (including dividends received), generating a 2.28 times return on investment in
South African Rand and 2.04 times money on investment in Pounds Sterling, which equates to a 16% IRR and a 14%
IRR, respectively, over the six year and four month holding period.
In January 2012, the Company acquired a significant shareholder interest in the South African investment company New Bond
Capital Limited ("NBC"), formerly Mvelaphanda Group Limited ("MVG"). Following this acquisition we assumed the
day-to-day management control of NBC in February 2012. We successfully realised NBC's assets within the year,
and the proceeds of the sale were paid out to NBC shareholders. The NBC investment also enabled Blackstar to
conclude a transaction for Times Media Group Limited ("TMG"), formerly Avusa Limited, whereby TMG shares were
distributed in the form of a dividend in specie to NBC shareholders. We arranged, structured, led and concluded this
transaction in October 2012 which saw Blackstar receive a direct shareholding in TMG.
In May 2012, the Company completed the transfer of its registered office from the United Kingdom to Malta and its
tax residency from Luxembourg to Malta. The move to Malta has already delivered improved efficiencies and
reduced the administrative and legal costs which arise from being present in two jurisdictions.
In January 2013 I took over as the hands-on CEO of TMG. Having conceived the opportunity and executed the deal,
it made sense for Blackstar to drive the changes required for repositioning TMG.
During 2012, Blackstar generated corporate finance and monitoring fees of R22.1 million (GBP1.7 million) compared to
R5.2 million (GBP0.4 million) in the prior year. By the end of the year we managed to increase our intrinsic NAV from
R1.0 billion (GBP82.0 million) in December 2011, to R1.1 billion (GBP82.6 million) as at end December 2012.
Annexure A includes a breakdown of the intrinsic NAV of Blackstar as at 31 March 2013. This provides shareholders
with a useful analysis of the current, true inherent value of each investment held.
Investment and Market Review
NBC
In January 2012, Blackstar acquired 28% of NBC (formerly MVG) for a total cash consideration of R470.0 million
(GBP37.4 million), equivalent to R3.21 (GBP0.26) per NBC share. With this, Blackstar became the largest single investor
in NBC.
To fund the acquisition, Blackstar utilised R150.0 million (GBP12.0 million) of its own cash resources together with
R320.0 million (GBP25.9 million) from a debt facility provided by Investec.
William Marshall-Smith and I were appointed to the NBC Board and assumed the roles of Interim Financial Director
and Interim Chief Executive Officer, respectively. Our specific objective was to unbundle and further realise the value
of NBC's remaining investment portfolio in the most efficient manner possible. Blackstar subsequently realised all the
investments and returned the capital to shareholders in January 2013.
Prior to this in November 2012, Blackstar had sold its investment in NBC for a total return of R194.8 million
(GBP13.7 million). However, Blackstar continues to manage NBC, recovering the costs to do this directly from NBC in
the form of fees and salaries.
NBC became a cash shell following the special dividend payment to shareholders in January 2013. NBC continues to
retain capital in order to fund liabilities and contingencies which may arise. On 4 March 2013, Blackstar launched an
offer to acquire all of the shares in NBC via an issue of Blackstar shares. The terms of the offer are 1.12 Blackstar
shares in return for every 100 NBC ordinary shares held. NBC has a NAV of R80.6 million (GBP5.9 million), which
comprises entirely of cash.
We view this transaction as essentially a placing, to enable Blackstar to get additional cash into the Company on an
attractive basis. Blackstar will reissue the shares it recently bought back at 79 pence (R11.07), currently held as
treasury shares, at a higher price of 91 pence (R12.47).
The transaction, which is expected to close in early June 2013, will increase Blackstar's asset base whilst reducing
the cost base as a percentage of assets. In light of these benefits, Blackstar intends to try and identify similar
acquisitions in the future.
Steel investments
Blackstar's steel and infrastructure interests include Global Roofing Solutions (Pty) Limited ("GRS"), Stalcor (Pty)
Limited ("Stalcor"), and Robor (Pty) Limited ("Robor"). These businesses represent 22.4% of Blackstar's current
gross intrinsic asset value as at 31 March 2013.
We remain conservative in the intrinsic NAV valuation of our steel interests. However, I maintain that these assets
will prove very valuable should the promise of increased infrastructure spend become a reality.
GRS
Blackstar currently holds 100% of GRS, with its principle businesses being HH Robertson ("HHR") and Brownbuilt
Metal Sections ("Brownbuilt"). These companies have been in existence since 1958 and 1964, respectively. GRS is
the largest steel roofing and cladding company in South Africa.
The 2012 financial year was one of rapid change for GRS with the closure of the coil-to-coil coating line, and the
consolidation of the Gauteng operations into a single facility. Both events resulted in abnormal costs totalling
R14.3 million (GBP1.1 million) being incurred. We do however expect substantial cost-savings and streamlining of
management as a result, and we look forward to improved efficiencies and greater productivity.
The recent Arcelor Mittal breakdown and the Medupi Power Station strike placed pressure on GRS with regard to
meeting delivery requirements. However, the recent consolidation of operations has created improved controls and
cost-efficiencies which mitigate some of the issues. I remain confident that the numbers will move in the right
direction.
GRS's Namibian business continues on its path of strong growth. In 2012 we installed manufacturing facilities in
Windhoek to enable a shorter and more cost-effective route to market, to satisfy the fast-growing industries in
Angola and the Democratic Republic of Congo ("DRC"). GRS continues to grow its exports into Africa.
Robor
Robor is the largest steel tube and pipe manufacturer in southern Africa, and services the following industries:
- Agriculture
- Automotive
- Building and Construction
- Energy and Power Generation
- Manufacturing
- Mining
- Petrochemical
- Rail and Road
- Water Reticulation
Robor has a large export market with over one million tons of its products exported worldwide.
For the financial year ending 30 September 2012, Robor produced a solid set of financial results despite a tough
trading environment. Robor succeeded in reducing group debt, and paid a dividend to shareholders.
The outlook for the remainder of the financial year looks encouraging, with volumes increasing. Robor will
continue its African growth strategy by developing the company's businesses in Namibia, Botswana, Zimbabwe, Zambia,
DRC and Mozambique.
At year end, Blackstar held 6.1% in Robor after purchasing additional shares at a total price of R5.0 million
(GBP0.4 million) during the year. In February 2013, Blackstar spent a further R2.0 million (GBP0.1 million)
buying Robor shares at an attractive valuation.
Stalcor
Stalcor is a tier-one distributor for both Columbus (stainless steel) and Hulamin (rolled, flat and extruded aluminium)
products.
In June 2012, Blackstar brought in an equity partner into Stalcor who injected R5 million into the business. At the
same time ordinary shares of Stalcor were allocated to the equity partner, as well as to management and a customer
loyalty trust, bringing Blackstar's equity holding down to 50.1%. As the capital providers to Stalcor, Blackstar and its
equity partner will be entitled to 18% of retained income (sharing in a ratio of 90:10 in favour of Blackstar) prior to
other ordinary shareholders receiving any equity benefits.
At the beginning of 2012, we put in a new management team and this has resulted in Stalcor regaining lost market
share, with sales in the second half of the year growing by 27%. The new management has done a superb job of
managing working capital and strengthening their regional branches in KwaZulu-Natal and Cape Town and
enhancing their facilities with both banks and trade suppliers. We believe 2013 will remain a difficult macro
environment however management are looking at a number of opportunities to enhance the business.
Litha
Following Blackstar's disposal of half of its investment in Litha for R200.6 million (GBP15.6 million) in June 2012,
Blackstar held 13.4% of Litha as at year-end. Litha is carried at a value of R260.6 million (GBP18.6 million) in the
intrinsic NAV table and represents 23.3% of intrinsic net assets as at 31 March 2013.
Litha's 2012 financial results were negatively impacted by a number of once-off merger factors, the weakening
Rand, and higher operating costs that all reduced Earnings Before Interest, Taxation, Depreciation and Amortisation
("EBITDA") overall a very disappointing year. The physical merger of Litha Pharma and Pharmaplan is complete.
However, there are still opportunities to improve efficiencies and reduce operating costs which will come into effect
during 2013.
Litha's strategy for shifting into a revenue growth phase includes acquiring new products, signing more agencies,
and maintaining organic growth. Litha will continue to broaden its footprint in the SADC region via joint ventures and
licensing agreements with regional distributors.
TMG
Blackstar obtained its initial 11.5% interest in TMG as a result of a distribution of TMG shares by NBC to its
shareholders. Subsequent to year-end, Blackstar acquired further shares in TMG and as at 31 March 2013, Blackstar
held a 15.6% interest in TMG with a fair value of R312.7 million (GBP22.3 million), representing 27.9% of Blackstar's
total intrinsic net asset value. By April 2013, Blackstar had increased its stake to 18.2% through the purchase of
additional TMG shares.
As mentioned previously, I recently assumed the day-to-day running of TMG. TMG is an interesting opportunity. It is a
business that has lost its way through the 2000's but owns some of South Africa's most well-known media
publications, and is content rich.
TMG produces very strong cash flows and has remained profitable despite various issues. Firstly, TMG is a leverage
opportunity: as the acquisition finance is repaid, the equity value will increase and we expect the TMG market
capitalisation to rise as a result. To date, TMG has repaid 22% of its acquisition leverage within a five-month period.
The leverage has allowed TMG to focus the business and bring efficiencies to its underlying operations.
Over the coming months, it is our intention to focus on the business' core operations. We will sell-off the non-core
assets to reduce the leverage further, while having little impact on TMG's EBITDA. It is our view that TMG is a
potentially very valuable and profitable platform.
In our view TMG is also more than just a newspaper print business, it generates and owns a lot of content. We will be
launching live streaming radio in May 2013 and developing our Television assets further utilising the content that
TMG currently owns.
Blackstar Real Estate
Blackstar owns a number of commercial properties based in the industrial, retail and commercial sectors of the
property market. The most recent acquisition was the commercial property in Midrand, Gauteng, South Africa which
was acquired in the first half of 2012 and is now occupied by Litha under a 12-year lease.
Blackstar Fund Managers - Hedge Fund
Over the past seven years, Blackstar has developed a successful and profitable track record making portfolio
investments in various listed instruments, and employing its private equity processes and hedge fund strategies. In
order to leverage off this track record and establish a fund management platform, Blackstar has launched both a local
fund (South African focused) and a global hedge fund. Both funds have been seeded by Blackstar along with some
other investors.
Blackstar has partnered with well-known, experienced hedge fund managers with impressive track records to
complement Blackstar's existing intellectual capital and created Blackstar Fund Managers (Pty) Limited ("BFM").
Fund management is a scalable business and with relatively small capital investment, reasonable earnings can be
produced as funds under management grow.
The Blackstar Special Opportunities Fund ("BSOF") has had a satisfactory start since launching on 1 October 2012,
returning 8.3% up to March 2013.
BSOF is a multi-strategy fund with an emphasis on special opportunities within the South African market. Positions
will be extensively researched using private equity research and analysis techniques to establish fundamental
reasons for a difference between the price and value of a security. Technical analysis will overlay the investment
process to maximise entry and exit pricing. Blackstar Group SE invested R20.8 million (GBP1.5 million) into the fund.
BSOF has been consolidated in the 2012 annual financial statements.
The Blackstar Global Opportunities Fund ("BGOF") launched at the beginning of April 2013. BGOF is a global USD
multi-strategy fund holding only highly liquid global securities in a combination of longer term-long and short positions,
and shorter-term trading positions.
Longer-term holdings will be based on fundamental analysis and valuation, while trading will be based on high-risk
return propositions. Technical and quantitative analysis will overlay the investment and trading processes. The size
and liquidity of the fund universe makes it possible to significantly scale this business.
Other investments
The December 2011 report detailed that by 2012 year-end, Blackstar would hold an investment of R19.1 million
(GBP1.4 million) in Shoprite Holdings Limited ("Shoprite"). At 31 March 2013, the investment had a fair value of
R20.7 million (GBP1.5 million), representing 1.7% of Blackstar's current intrinsic net asset value as at 31 March 2013.
The decision to purchase the Lusaka shares was driven by the fact that Lusaka shares traded at a 43% discount to
the JSE share price at the time of acquisition. The discount has persisted and is now at a 38% discount to the
Shoprite JSE price. Unfortunately the pending Shoprite litigation has frozen share trading activity.
Shoprite has also suspended all dividends to shareholders on the Zambian exchange pending the outcome of the
legal action against Lewis Nathan and Lusaka shareholders. Blackstar, along with other shareholders, has engaged
Shoprite on this matter and is working to resolve the shareholder element of the dispute. We maintain our position
that Shoprite is mistaken in challenging Lusaka shareholders, and that Blackstar will succeed in any legal
proceedings.
Services derivatives which had an underlying exposure to Bidvest Group Limited were sold during November 2012
for R151.6 million (GBP11.6 million). The realisation generated a 2.28 times return on investment in South African
Rands and 2.04 times money on investment in Pounds Sterling.
Financial Review
In light of the fact that a significant portion of Blackstar's shareholders are South African, Blackstar now presents its
results in South African Rand in addition to Pounds Sterling. Comparatives have also been provided in Rands. The
applicable exchange rates utilised to translate the financial information from Rands to Pounds Sterling are as follows:
average ZAR/GBP exchange rate for the 12 months ended 31 December 2012 of 13.015 (2011:11.629) and a closing
ZAR/GBP exchange rate of 13.773 as at 31 December 2012 (12.546 as at 31 December 2011).
The subsidiaries of Blackstar including Blackstar Group (Pty) Limited ("Blackstar SA"), BFM, GRS and its
subsidiaries, Stalcor, Blackstar Real Estate (Pty) Limited ("BRE") and its subsidiaries have been consolidated in
accordance with IFRS. In addition to these, the hedge fund BSOF has also been consolidated due to the fact that
Blackstar has a controlling interest in the General Partner to the fund and also a beneficial interest in BSOF in the
form of a direct investment. The associate Navigare Securities (Pty) Limited ("Navigare") has been equity accounted.
Litha was also equity accounted up until the date of sale of half of the investment, at which point it ceased to be an
associate and the remaining investment was transferred to the investments held at fair value through profit and loss
category within the balance sheet and fair valued.
Financial performance
The statement of income separately reports profit generated by continuing and discontinued operations. The
discontinued operations separately reported includes the results of the associate Litha until June 2012, being the date
on which Blackstar disposed of half of its Litha shares, the results of Ferro Industrial Products (Pty) Limited to date of
disposal in June 2011 as well as Stalcor's operations discontinued or disposed of during the 2011 financial year.
Comparatives have been restated to separately disclose these discontinued operations.
A gross profit of R153.1 million (GBP11.8 million) was generated by the Group's trading businesses Stalcor, and GRS
and its subsidiaries (2011: R141.5 million, GBP12.2 million).
Other income of R291.1 million (GBP22.3 million) comprises mainly of the following: net gains on investments of R19.9
million (GBP1.7 million); dividends from investments of R212.9 million (GBP16.4 million), fee income of R22.1 million
(GBP1.7 million), R10.5 million (GBP0.8 million) of rental income generated by the Group's property portfolio and a
R9.5 million (GBP0.7 million) fair value increase on two of the properties within the Group.
Blackstar was successful in generating additional fee income during the current year and as a result increased fee
income by R16.9 million (GBP1.2 million) to R22.1 million (GBP1.7 million) when compared to the comparative year.
Dividends of R212.9 million (GBP16.4 million) include a capital distribution received by Blackstar from NBC in the form of
TMG shares which were valued at R209.4 million (GBP16.1 million) being the closing TMG share price on the date the
shares were received.
Gains on investments include a R125.3 million (GBP9.6 million) gain recognised when the remaining investment in Litha
was transferred from the investment in associate category to investments at fair value through profit and loss and fair
valued to its closing share price at 31 December 2012, and a R35.1 million (GBP2.7 million) realised gain recognised
during the 2012 year on the services derivative investment.
Operating expenses for the Group have reduced from R351.5 million (GBP29.4 million) in 2011 to R246.5 million
(GBP18.7 million) for the 2012 financial year mainly as a result of a decline in the total amount of impairments
recognised in the current financial year. Included in operating expenses for 2012 are total impairments of R57.4 million
(GBP4.2 million) recognised on goodwill, intangible assets, plant and equipment and investment properties
(2011: R153.8 million, GBP12.4 million).
Fee income generated from investments of R22.1 million (GBP1.7 million) covers operating costs incurred by the
investment activities segment excluding legal fees and staff incentive costs which are deal specific of R21.7 million
(GBP1.7 million).
The Group generated an operating profit of R197.7 million (GBP15.4 million) in the current year compared to a loss of
R118.6 million (GBP16.0 million) in the prior year. The main reasons for this significant improvement was a reduction in
operating expenses and additional income generated from investments in the form of fee income and gains on
disposals.
Net finance costs increased from R17.9 million (GBP1.5 million) in 2011 to R33.7 million (GBP2.6 million) in 2012. This is
mainly as a result of the borrowings raised to finance the initial NBC acquisition (this debt was settled prior to year-
end on disposal of the investment), as well as additional mortgage bonds taken out to fund the new property
acquisition.
The profit after tax from continuing operations for the year ended 31 December 2012 amounted to R164.2 million
(GBP12.8 million).
A profit of R128.2 million (GBP7.7 million) was generated by discontinued operations and comprises equity accounted
earnings of Litha amounting to R70.0 million (GBP5.6 million) to date of disposal of 50% of the Litha investment, a net
gain of R63.2 million (GBP2.5 million) recognised on disposal of the investment, and a R5.0 million (GBP0.4 million) loss
arising as a result of further costs incurred during the current year relating to Stalcor's operations which were
discontinued in the prior financial year.
The Group reported a profit attributable to equity holders of the parent of R292.4 million (GBP20.5 million), and basic and
diluted earnings of 356.16 cents (25.03 pence) per share and headline earnings of 273.59 cents (21.11 pence) per
share.
Balance sheet changes
Total equity attributable to equity holders amounted to R1.1 billion (GBP83.1 million) as at 31 December 2012.
Investments at fair value through profit and loss amounted to R610.0 million (GBP44.3 million) as at 31 December 2012
and mainly comprised the following carried at fair value: investment in Litha carried at R262.8 million (GBP19.1 million),
TMG investment of R195.0 million (GBP14.2 million), R60.0 million (GBP4.4 million) investment in Robor, and the BSOF
investment portfolio with a fair value of R53.1 million (GBP3.8 million).
Investments classified as loans and receivables declined by R25.7 million (GBP2.1 million) to R1.7 million (GBP0.1 million)
mainly due to disposals during the year.
Investment properties increased by R13.5 million (GBP0.4 million) to R101.6 million (GBP7.4 million) mainly as a result of
the acquisition of the new commercial property for R5.4 million (GBP0.4 million) which is occupied by Litha under a 12
year lease, as well as fair value increases of R9.5 million (GBP0.7 million) which were partially offset by an impairment of
R4.1 million (GBP0.3 million).
Goodwill was impaired by a total of R30.4 million (GBP2.2 million) which includes an impairment of R26.8 million
(GBP1.9 million) on the remaining goodwill relating to Blackstar SA on the internalisation of investment advisory arrangements,
and a R3.6 million (GBP0.3 million) impairment being recognised on goodwill relating to one of GRS's South African
subsidiaries. The goodwill recognised on the internalisation of the investment advisory arrangement has now been
impaired to nil which is in line with the terms of the investment advisory arrangements. Goodwill is tested for
impairment at each reporting date. The remaining goodwill of R9.0 million (GBP0.6 million) mainly comprises goodwill
recognised on the GRS subsidiary in Namibia of R8.1 million (GBP0.6 million).
As at 31 December 2012, intangible assets of R22.7 million (GBP1.7 million) comprise acquired marketing-related
intangibles (brand names and registered trademarks) that arose on the acquisition of GRS. This is after an
impairment of R11.7 million (GBP0.9 million) was recognised on these intangible assets as a result of difficult market
conditions during the year.
Gross assets increased from R1.2 billion (GBP95.2 million) in 2011 to R1.5 billion (GBP106.6 million) as at 31 December
2012. The main reasons for this are the increase in cash generated on successful realisation of investments which
was then utilised to grow the investment portfolio, as well as an increase in value of the investments held.
Borrowings and other financial liabilities amounted to R180.2 million (GBP13.1 million) compared to R185.3 million
(GBP14.8 million) at 31 December 2011 and mainly comprises mortgage bonds raised by property companies amounting
to R82.4 million (GBP6.0 million) as well as R71.9 million (GBP5.2 million) of invoice discounting facilities utilised by Stalcor
and GRS. The borrowings raised to finance the acquisition of the interest in NBC were settled on the subsequent
realisation of the investment. All debt is ring-fenced within each subsidiary.
Cash and cash equivalents increased by R96.9 million (GBP5.2 million) during the current financial year to an amount of
R351.9 million (GBP25.5 million) as at 31 December 2012. Significant cash flow movements during the period included
a R657.2 million (GBP50.3 million) cash outflow on purchases of investments, proceeds of R671.1 million (GBP51.4 million)
received in cash on the disposal of investments and a R200.6 million (GBP15.7 million) cash inflow on disposal of half of
the investment in Litha.
Share buy-backs
In January 2013, Blackstar purchased 5.9 million ordinary shares of 0.76 each in the Company at a price of 79
pence (R11.07) per share, representing 7.19% of the issued ordinary share capital prior to such purchases. The
shares are currently being held in treasury.
Dividends
As a reflection of the strengthened financial position and cash reserves available to Blackstar, the Board has resolved
to declare a final gross dividend of 17 South African cents (1.42 cents in Euros and 1.21 pence in Pounds Sterling) per
ordinary share. The exchange rates have been fixed for the calculation of the Euro and Pounds Sterling equivalents
based on the closing exchange rates on Thursday, 18 April 2013 of EUR 1 = ZAR 11.983 and GBP 1 = ZAR 14.000. The
Board recognises that regular dividends are an important part of shareholder wealth creation.
The dividend will be paid in accordance with the salient dates and times set out below:
Last day to trade on the South African register Friday, 7 June 2013
Trading ex-dividend commences on the South African register Monday, 10 June 2013
Last day to trade on the UK register Tuesday, 11 June 2013
Trading ex-dividend commences on the UK register Wednesday, 12 June 2013
Record date for shareholders recorded on the UK and South African registers Friday, 14 June 2013
Date of payment Tuesday, 18 June 2013
Share certificates may not be dematerialised or rematerialised between Monday, 10 June 2013 and Friday, 14 June
2013, both days inclusive, and transfers between the UK register and the South African register may not take place
during that period.
Dividend Tax will be withheld from the amount of the gross dividend of 17 South African cents per share paid to
South African shareholders at the rate of 15% unless a shareholder qualifies for exemption. After the Dividend Tax
has been withheld, the net dividend will be 14.45 South African cents per share. There are no other taxes (foreign or
otherwise) to be withheld from the dividend. The Company had a total of 82,088,422 shares in issue (which includes
5,900,000 shares held in treasury) at the date on which the dividend was announced, 19 April 2013. The dividend will
be distributed by Blackstar Group SE (Malta tax registration number 995944033) and is regarded as a foreign
dividend. There are no Secondary Tax on Companies ("STC") credits available for use.
Blackstar Foundation
Blackstar is committed to reaching out to those less fortunate and giving back to the community. The Blackstar
Foundation, a non-profit organisation, has been registered and will focus on the education of underprivileged children,
providing bursaries, educating and funding the tools required to assist with their education. Blackstar has donated
R1.0 million (GBP0.08 million) to the Foundation and third parties have donated a further R0.2 million (GBP0.02 million).
These funds have been invested and returns generated will be utilised by the Blackstar Foundation to
fund the education of identified individuals. The Blackstar Foundation will continue to source further donations from
Corporates and individuals.
Blackstar: Management Incentive Scheme
At present, Blackstar does not have a formalised share incentive scheme in place to remunerate and retain
Management. As such the Board is proposing to implement a share incentive scheme that will be presented at the
upcoming annual general meeting of the Company and put to a Shareholder vote.
Much of Blackstar's success is based on the intellectual capital that is held within its current management. We are
constantly in competition with other companies and funds (with share incentive schemes already in place) who vie for
the talent we currently hold within our ranks. It has become imperative for Blackstar to introduce a share incentive
scheme that levels the playing field, allowing us to retain and attract new talent, and effectively grow the Company.
For Blackstar to align all Management incentives with the performance expectations of our Shareholders is vital. The
proposed scheme will therefore be linked to the NAV per share of the Company. Share prices will fluctuate over time
but ultimately NAV per share will drive the Company's share price. When making asset allocation decisions,
Management will explore all opportunities to create value on a per share basis, which may include share buy backs.
The share incentive scheme will be structured so that it is non-dilutive for Shareholders. This means that participants
in the scheme will accrue shares based on a portion of the NAV growth per share that has been created. In order to
retain talent over the long-term, participants will receive the value of their share incentives incrementally, over a
defined period of time.
The Board believes that through this model, Management will be motivated to drive share performance, and align
with our Shareholders' interests.
Outlook
The 2012 period under review has been a busy and successful year for Blackstar. Several investments have been
realised with pleasing returns and the remaining investments have been reassessed and reviewed during the year
ensuring they are well-positioned to generate profitable returns going forward. TMG is proving to be an exciting
opportunity and the successful finalisation of the NBC transaction will enhance Blackstar's balance sheet placing it in
a good position to invest in new, attractive ventures. Blackstar maintains a strong focus on cost control and lowering
these as a percentage of total assets.
It is our view that there may be opportunities for Blackstar to potentially absorb some of the operating companies
which are currently in realisation mode, have decent assets, and which trade at large discounts to their intrinsic NAV.
It has been well publicised that the Cypriot government has been attempting to push through a levy on all deposits
held in the island's banks in return for an EU bailout. This will have no impact on Blackstar as although it has a
subsidiary registered in Cyprus (Blackstar (Cyprus) Investors Limited), none of the Group's bank accounts are held
with Cypriot banks.
Subject to them being endorsed for use in the EU, Blackstar intends to adopt the Investment Entities amendments to
IFRS 10, IFRS 12, and IAS27. These amendments introduce an exception to the principle that all subsidiaries need
to be consolidated and instead allows qualifying investment entities to measure the investments in particular
subsidiaries at fair value through profit and loss. As a result of adopting these amendments, the Blackstar
consolidated statement of financial position would be more closely aligned with the intrinsic NAV of the Group.
Andrew Bonamour
19 April 2013
Annexure A
Intrinsic NAV as at 31 March 2013
Unaudited Unaudited
R'000 GBP'000
Times Media Group Limited 312 730 22 278
Litha Healthcare Group Limited 260 571 18 563
Global Roofing Solutions (Pty) Limited 155 000 11 042
Stalcor (Pty) Limited 32 000 2 280
Robor (Pty) Limited 63 931 4 554
Blackstar Real Estate (Pty) Limited 30 260 2 156
Other listed 102 021 7 268
Other unlisted 7 487 533
Cash and cash equivalents 156 678 11 233
Intrinsic NAV 1 120 678 79 907
Actual number of shares in issue net of treasury
shares held ('000) 76 188 76,188
Intrinsic NAV per share (in Rands/Pounds Sterling) 14.71 1.05
Ordinary share price on 31 March 2013 (in
Rands/Pounds Sterling) 11.50 0.79
Ordinary share price discount to NAV 22% 25%
Notes
1 The intrinsic NAV 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.
2 For the purposes of determining the intrinsic values, listed investments on recognised stock exchanges are valued using
quoted bid prices and unlisted investments are shown at directors' valuation, determined using the discounted cash flow
methodology. This methodology uses reasonable assumptions and estimations of cash flows and terminal values, and applies
an appropriate risk-adjusted discount rate that quantifies the investment's inherent risk to calculate a present value. Given the
subjective nature of valuations, the Group is cautious and conservative in determining the valuations and has a track record of
selling its unlisted investments in the ordinary course of business above the levels at which it values them.
3 All amounts have been translated using the closing exchange rates at 31 March 2013. The GBP/ZAR closing exchange rate at
31 March 2013 was 14.037.
4 Other listed include investments in Shoprite Holdings Limited, Blackstar Global Opportunities Fund and Blackstar Special
Opportunities Fund.
5 Other unlisted include investments in Navigare Securities (Pty) Limited and Blackstar Fund Managers (Pty) Limited.
Consolidated statement of income
for the year ended 31 December 2012
*As restated
2011 2012 2012 2011
R'000 R'000 GBP'000 GBP'000
1 058 912 1 063 016 Revenue 81 676 91 058
(917 372) (909 943) Cost of sales (69 915) (78 887)
141 540 153 073 Gross profit 11 761 12 171
91 369 291 102 Other income 22 302 1 176
(351 502) (246 488) Operating expenses (18 694) (29 384)
(118 593) 197 687 Operating profit/(loss) 15 369 (16 037)
(17 912) (33 741) Net finance costs (2 592) (1 541)
2 220 6 174 Finance income 474 191
(20 132) (39 915) Finance costs (3 066) (1 732)
495 490 Share of profit from associate 38 43
(136 010) 164 436 Profit/(loss) before taxation 12 815 (17 535)
(4 935) (262) Taxation (36) (421)
(140 945) 164 174 Profit/(loss) from continuing operations 12 779 (17 956)
Discontinuing operations
Profit from discontinued operations, net of
115 151 128 198 taxation 7 741 10 739
(25 794) 292 372 Profit/(loss) for the year 20 520 (7 217)
Profit/(loss) for the period attributable to:
(29 832) 292 365 Equity holders of the parent 20 544 (7 584)
4 038 7 Non controlling interests (24) 367
(25 794) 292 372 20 520 (7 217)
Basic and diluted earnings/(losses) per
ordinary share attributable to equity holders
(37.86) 356.16 (in cents/pence) 25.03 (9.62)
Basic and diluted earnings/(losses) per
ordinary share attributable to equity holders
(177.29) 199.99 from continuing operations (in cents/pence) 15.60 (22.65)
* Refer note 4
Headline earnings/(losses) reconciliation ^
*As
restated
Year to Year to Year to Year to
31 31 31 31
December December December December
2011 2012 2012 2011
R'000 R'000 GBP'000 GBP'000
Profit/(loss) for the period attributable to equity holders of the
(29 832) 292 365 parent 20 544 (7 584)
Adjusted for:
(22 476) - Exceptional gain on dilution of interest in associate - (2 188)
(85 373) (63 152) Gain on disposal of discontinued operation (2 531) (7 861)
9 869 11 716 Impairment of intangible assets 851 861
141 619 30 417 Impairment of goodwill 2 208 11 382
2 345 11 172 Impairment of property, plant and equipment 853 202
- 4 050 Impairment of investment properties 311 -
Non-headline items included in equity accounted profits of
(2 885) (53 300) associates (4 257) (248)
(1 055) (1 708) Profit on disposal of property, plant and equipment (131) (91)
(3 121) (6 674) Total tax effects of adjustments (498) (272)
183 (295) Total non controlling interests' effects of adjustments (23) 15
9 274 224 591 Headline earnings/(losses) 17 327 (5 784)
Basic and diluted headline earnings/(losses) per ordinary
11.77 273.59 share attributable to equity holders (in cents/pence) 21.11 (7.34)
^ Disclosure of headline earnings/(losses) has been provided in accordance with the JSE Listing Requirements
*Refer note 4
Consolidated statement of comprehensive income
for the year ended 31 December 2012
2011 2012 2012 2011
R'000 R'000 GBP'000 GBP'000
(25 794) 292 372 Profit/(loss) for the year 20 520 (7 217)
Other comprehensive income/(loss):
Currency translation differences on translation of Rand
- - denominated Group entities (7 681) (9 075)
Release of foreign currency translation reserve on disposal
- - of associate/subsidiary 2 407 (1 261)
- - Net comprehensive loss recognised directly in equity (5 274) (10 336)
(25 794) 292 372 Total comprehensive income/(loss) for the year 15 246 (17 553)
Attributable to:
(29 832) 292 365 Equity holders of the parent 15 184 (18 095)
4 038 7 Non controlling interests 62 542
(25 794) 292 372 15 246 (17 553)
Consolidated statement of changes in equity
for the year ended 31 December 2012
Capital Treasury Non-
Share Share redemption shares Retained Attributable to controlling
capital premium reserve reserve earnings equity holders interests Total equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance as at 31 December 2010 519 267 - 29 965 - 392 400 941 632 (25 643) 915 989
Total comprehensive income/(loss) for the
period - - - - (29 832) (29 832) 4 038 (25 794)
Income/(loss) for the period - - - - (29 832) (29 832) 4 038 (25 794)
Other comprehensive income/(loss) for the
period - - - - - - - -
Capital raising 77 612 22 125 - - - 99 737 - 99 737
Buy-back of ordinary shares - - - (29 452) - (29 452) - (29 452)
Arising on reclassification of investment,
now a subsidiary - - - - - - 75 75
Reduction in non controlling interests arising
on subsidiary share buy-back of shares from
non-controlling shareholders - - - - (50 276) (50 276) 50 276 -
Reduction in non-controlling interests arising
on acquisition of additional interests in
subsidiary - - - - (4 520) (4 520) 4 520 -
Arising on disposal of subsidiary - - - - - (34 020) (34 020)
Dividend paid - - - - (80 175) (80 175) - (80 175)
Balance as at 31 December 2011 596 879 22 125 29 965 (29 452) 227 597 847 114 (754) 846 360
Capital Treasury
Share redemption shares Retained Attributable to Non-controlling
Share capital premium reserve reserve earnings equity holders interests Total equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance as at 31 December 2011 596 879 22 125 29 965 (29 452) 227 597 847 114 (754) 846 360
Total comprehensive income for the
period - - - - 292 365 292 365 7 292 372
Income for the period - - - - 292 365 292 365 7 292 372
Other comprehensive income for the
period - - - - - - - -
Cancellation of ordinary shares (22 208) - 22 208 29 452 (29 452) - - -
Arising on acquisition of investment in
subsidiary - - - - - - 7 7
Reduction in non-controlling interests
arising on rights issue by subsidiary - - - - (309) (309) 309 -
Increase in non-controlling interests
arising on part disposal of subsidiary - - - - 5 087 5 087 (5 087) -
Arising on creation of Blackstar Special
Opportunities Fund - - - - - - 33 379 33 379
Balance as at 31 December 2012 574 671 22 125 52 173 - 495 288 1 144 257 27 861 1 172 118
Foreign
Capital Treasury currency Attributable Non-
Share Share redemption shares Retained translation to equity controlling
capital premium reserve reserve earnings reserve holders interests Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 31 December
2010 50 130 - 2 893 - 22 569 14 604 90 196 (2 474) 87 722
Total comprehensive
income/(loss) for the period - - - - (7 584) (10 511) (18 095) 542 (17 553)
Income/(loss) for the period - - - - (7 584) - (7 584) 367 (7 217)
Other comprehensive
income/(loss) for the period - - - - - (10 511) (10 511) 175 (10 336)
Capital raising 6 923 1 974 - - - - 8 897 - 8 897
Buy-back of ordinary shares - - - (2 272) - - (2 272) - (2 272)
Arising on reclassification of
investment, now a subsidiary - - - - - - - 6 6
Reduction in non controlling
interests arising on subsidiary
share buy-back of shares from
non-controlling shareholders - - - - (4 577) - (4 577) 4 577 -
Reduction in non-controlling
interests arising on acquisition
of additional interests in
subsidiary - - - - (415) - (415) 415 -
Arising on disposal of
subsidiary - - - - - - - (3 126) (3 126)
Release of foreign currency
translation reserve on
disposal of investments - - - - 815 (815) - - -
Dividend paid - - - - (6 217) - (6 217) - (6 217)
Balance as at 31 December
2011 57 053 1 974 2 893 (2 272) 4 591 3 278 67 517 (60) 67 457
Foreign
Capital Treasury currency Attributable Non-
Share redemption shares Retained translation to equity controlling
Share capital premium reserve reserve earnings reserve holders interests Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 31 December
2011 57 053 1 974 2 893 (2 272) 4 591 3 278 67 517 (60) 67 457
Total comprehensive
income/(loss) for the period - - - - 20 544 (5 360) 15 184 62 15 246
Income for the period - - - - 20 544 - 20 544 (24) 20 520
Other comprehensive
income/(loss) for the period - - - - - (5 360) (5 360) 86 (5 274)
Cancellation of ordinary
shares (1 706) 1 706 2 272 (2 272) - - - -
Arising on acquisition of
investment in subsidiary - - - - - - - 1 1
Reduction in non controlling
interests arising on rights
issue by subsidiary - - - - (24) - (24) 24 -
Increase in non controlling
interests arising on part
disposal of subsidiary - - - - 397 - 397 (397) -
Arising on creation of
Blackstar Special
Opportunities Fund - - - - - - - 2 393 2 393
Balance as at 31 December
2012 55 347 1 974 4 599 - 23 236 (2 082) 83 074 2 023 85 097
A final dividend of 10.10 South African cents, 0.90 pence, per ordinary share was paid on 26 May 2011.
A special dividend of 80.53 South African cents, 6.5 pence, per ordinary share was paid on 2 December 2011.
A final dividend of 17 South African cents, 1.21 pence, per ordinary share has been proposed, to be paid on 18 June 2013.
Consolidated statement of financial position
as at 31 December 2012
2011 2012 2012 2011
R'000 R'000 GBP'000 GBP'000
Non-current assets
94 872 74 631 Property, plant and equipment 5 418 7 563
88 050 101 585 Investment properties 7 375 7 018
36 178 9 022 Goodwill 656 2 884
36 972 22 713 Intangible assets 1 650 2 947
206 234 1 870 Investments in associates 136 16 437
1 799 1 741 Investments classified as loans and receivables 126 144
46 260 517 728 Investments at fair value through profit and loss 37 588 3 687
- - Other financial assets - -
1 157 2 405 Deferred tax assets 177 92
511 522 731 695 53 126 40 772
Current assets
25 628 - Investments classified as loans and receivables - 2 042
130 457 92 314 Investments at fair value through profit and loss 6 702 10 398
23 917 Other financial assets 67 2
310 2 155 Current tax assets 155 24
144 797 141 009 Trade and other receivables 10 238 11 540
125 997 148 117 Inventories 10 753 10 042
255 124 352 063 Cash and cash equivalents 25 560 20 334
682 336 736 575 53 475 54 382
1 193 858 1 468 270 Total assets 106 601 95 154
Non-current liabilities
(88 792) (92 366) Borrowings (6 705) (7 077)
(9 844) (2 400) Other financial liabilities (175) (785)
(2 490) (1 939) Provisions (141) (199)
(18 802) (13 305) Deferred tax liabilities (969) (1 499)
(119 928) (110 010) (7 990) (9 560)
Current liabilities
(7 549) (4 528) Borrowings (329) (602)
(79 150) (80 870) Other financial liabilities (5 871) (6 308)
(1 168) (2 500) Provisions (182) (93)
(1 069) (313) Current tax liabilities (23) (85)
(138 569) (97 814) Trade and other payables (7 101) (11 044)
(65) (117) Bank overdrafts (8) (5)
(227 570) (186 142) (13 514) (18 137)
(347 498) (296 152) Total liabilities (21 504) (27 697)
846 360 1 172 118 Total net assets 85 097 67 457
Equity
596 879 574 671 Share capital 55 347 57 053
22 125 22 125 Share premium 1 974 1 974
29 965 52 173 Capital redemption reserve 4 599 2 893
(29 452) - Treasury shares reserve - (2 272)
- - Foreign currency translation reserve (2 082) 3 278
227 597 495 288 Retained earnings 23 236 4 591
847 114 1 144 257 Total equity attributable to equity holders 83 074 67 517
(754) 27 861 Non-controlling interests 2 023 (60)
846 360 1 172 118 Total equity 85 097 67 457
993 1 394 Net asset value per share (in cents/pence) 101 79
Consolidated statement of cash flows
for the year ended 31 December 2012
2011 2012 2012 2011
R'000 R'000 GBP'000 GBP'000
Cash flow from operating activities
71 614 (46 018) Cash generated/(absorbed) by operations (3 048) 2 013
3 503 6 174 Interest received 348 310
(16 504) (28 688) Interest paid (2 204) (1 627)
2 670 3 537 Dividends received 272 230
(15 981) (9 635) Taxation paid (740) (1 431)
45 302 (74 630) Cash generated/(absorbed) by operating activities (5 372) (505)
Cash flow from investing activities
(13 297) (11 167) Purchase of property, plant and equipment (857) (1 164)
(58 350) (5 405) Purchase of investment properties (415) (5 018)
Additions to investments classified as loans and
(21 683) (41) receivables (3) (1 883)
Purchase of investments at fair value through profit or
(34 042) (657 174) loss (50 336) (2 965)
23 (21 734) Acquisition of subsidiaries, net of cash acquired (1 560) 2
Proceeds from disposal of property, plant and
5 186 2 401 equipment 185 446
37 268 671 133 Proceeds from disposal of investments 51 402 3 080
Disposal of discontinued operations, net of cash
272 476 200 569 disposed 15 651 23 006
187 581 178 582 Cash generated by investing activities 14 067 15 504
Cash flow from financing activities
54 980 333 697 Proceeds from borrowings 25 639 4 728
(24 163) (333 143) Repayment of borrowings (25 597) (2 181)
Movement in other financial liabilities (including short-
(197 582) (7 619) term funding facilities) (585) (16 804)
(29 452) - Buy-back of ordinary shares - (2 272)
99 737 - Capital raising - 8 897
(80 175) - Dividends paid to equity holders of the parent - (6 217)
(176 655) (7 065) Cash absorbed by financing activities (543) (13 849)
56 228 96 887 Net increase in cash and cash equivalents 8 152 1 150
Cash and cash equivalents at the beginning of the
198 831 255 059 year 20 329 19 195
- - Exchange losses on cash and cash equivalents (2 929) (16)
255 059 351 946 Cash and cash equivalents at the end of the year 25 552 20 329
Notes to the consolidated financial statements
for the year ended 31 December 2012
1. Financial information
The financial information set out above does not constitute the Company's statutory accounts for the year ended
31 December 2012 or 2011 as defined in section 171 of the Malta Companies, Act 1995. Statutory accounts for
the year ended 31 December 2011 have been delivered to the Luxembourg Registrar of Companies and those
for the year ended 31 December 2012 will be delivered to the Malta Registrar of Companies following the
Company's annual general meeting. The auditors have reported on those accounts, their reports were
unqualified and did not include references to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports. Their reports for the year ended 31 December 2012 did not contain
statements under s149 paragraph (10),(11),(12) of the Malta Companies Act, 1995. The auditors report for the
year ended 31 December 2011 did not contain statements under s498 (2) or (3) of the UK Companies Act, 2006,
(which the Company was subject to at that time).
2. Distribution of the annual report and accounts to shareholders
Copies of the Group's audited statutory accounts for the year ended 31 December 2012 will be dispatched to
shareholders shortly.
3. Adoption of a secondary presentational currency
In light of the fact that a significant portion of Blackstar's shareholders are now South African, the decision was
taken to add the South African Rand as an additional presentational currency (Blackstar's functional currency is
the Rand). Blackstar's financial report is therefore published in both Pounds Sterling and Rands and
comparatives have been provided in both currencies.
4. Comparative figures
In order to improve disclosures and readability for users, the Group elected to change the presentation of its
statement of income and group income and expenditure according to its function. Comparatives have been
restated for these changes. The actual results of the Group have not been impacted in any way by the
amendments to the presentation of the figures.
The comparative information for the year ended 31 December 2011 was restated to present income generated
and expenses incurred by discontinued operations separately from continuing operations.
For further information, please contact:
Blackstar Group SE John Kleynhans +352 402 505 427
Liberum Capital Limited Chris Bowman/Christopher Britton +44 (0) 20 3100 2222
PSG Capital (Pty) Limited David Tosi/Willie Honeyball +27(0) 21 887 9602
Date: 19/04/2013 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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