Wrap Text
Condensed Consolidated Unaudited Results for the Six Months Ended 28 February 2015
CONDUIT CAPITAL LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/017351/06)
Share code: CND ISIN: ZAE000073128
(“Conduit” or “Conduit Capital” or “the Group”)
CONDENSED CONSOLIDATED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2015
FINANCIAL REVIEW
During the six months under review, Conduit’s headline earnings per share increased by 17.9% to 9.9 cents
(February 2014: 8.4 cents) and the net asset value per share increased to 172.8 cents (February 2014: 160.6
cents).
The overall increase in headline earnings can be broken down into the following components:
1. The net underwriting margin reduced to 2.4% during the period under review (3.6% as at February
2014). The reduction can be entirely attributed to an increased loss ratio on the Property and Motor
books that were cancelled during the period under review (refer to the Chief Executive Officer’s report
contained in the 2014 Integrated Report for further details).
2. Expenses, including staff retrenchment costs, specifically related to the aforementioned termination of
the Property and Motor books, amounted to R0.72 million.
3. Equity accounted income from associates and joint ventures increased by 33.4% to R9.37 million. It is
believed that the current level of earnings from these entities is sustainable.
4. Investable assets generated an improved 11.1% annualised return, compared to 6.3% annualised in
February 2014.
The above can be summarised in the following table:
February February
2015 2014 Total %
Headline earnings – February 2014 21 625
Net underwriting surplus 11 329 17 581 (6 252)
Termination expenses (720) - (720)
Equity accounted income 9 368 7 021 2 347
Investment income 21 117 11 676 9 441
Other (1 581)
Taxation 589
Headline earnings – February 2015 25 449 17.7
GROUP STRATEGIC DIRECTION
Post the period under review, the Group underwent a Board and management transformation as further
disclosed in points 7 and 9 of the notes to the condensed consolidated unaudited results. Going forward,
Conduit will focus primarily on opportunities in the insurance sector, supported by a conservative, value-
oriented investment strategy. Further details on the Group’s new strategic direction will be contained in the
forthcoming Annual Results and Integrated Report.
Lourens E Louw
Financial Director and Acting Chief Executive Officer
Johannesburg
22 May 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited six Unaudited six Audited
months ended months ended year ended
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R'000
Gross written premium 467 155 492 567 882 998
Reinsurance premium (311 751) (326 944) (550 080)
Net written premium 155 404 165 623 332 918
Net change in provision for unearned premium 707 1 850 (2 622)
Net premium income 156 111 167 473 330 296
Reinsurance commission received 244 295 256 126 413 076
Income from insurance operations 400 406 423 599 743 372
Net claims and movement in claims reserves (70 563) (69 251) (142 097)
Insurance contract acquisition costs (105 260) (107 311) (189 206)
Agency fees (197 965) (212 392) (353 453)
Gross underwriting surplus 26 618 34 645 58 616
Administration costs (15 289) (17 064) (32 293)
Net underwriting surplus 11 329 17 581 26 323
Non-insurance revenue 2 481 2 860 5 775
Other expenses (16 167) (14 466) (30 145)
Operating profit (2 357) 5 975 1 953
Equity accounted income 9 368 7 021 16 162
Investment income 21 117 11 676 25 889
Other income 2 343 97 551 97 375
Finance charges (53) (282) (387)
Profit before taxation 30 418 121 941 140 992
Taxation (4 916) (24 131) (24 508)
Profit for the period 25 502 97 810 116 484
Other comprehensive income - - -
Total comprehensive income 25 502 97 810 116 484
Attributable to:
Equity holders of the parent 25 443 97 769 116 383
Non-controlling interest 59 41 101
Total comprehensive income 25 502 97 810 116 484
Headline earnings 25 449 21 625 40 162
Earnings per share (cents)
- Basic 9.9 38.1 45.4
- Diluted 9.9 38.1 45.4
- Headline 9.9 8.4 15.7
- Diluted headline 9.9 8.4 15.7
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME PER SEGMENT
CORPORATE AND INVESTMENT SERVICES
Unaudited six Unaudited six Audited
months ended months ended year ended
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R'000
Gross written premium - - -
Reinsurance premium - - -
Net written premium - - -
Net change in provision for unearned premium - - -
Net premium income - - -
Reinsurance commission received - - -
Income from insurance operations - - -
Net claims and movement in claims reserves - - -
Insurance contract acquisition costs - - -
Agency fees - - -
Gross underwriting surplus - - -
Administration costs - - -
Net underwriting surplus - - -
Non-insurance revenue 6 394 5 824 13 973
Other expenses (7 986) (8 779) (15 834)
Operating profit (1 592) (2 955) (1 861)
Equity accounted income 8 618 6 069 13 592
Investment income 2 908 2 656 4 527
Other income 8 93 858 93 884
Finance charges - - (302)
Profit before taxation 9 942 99 628 109 840
Taxation (114) (18 515) (18 433)
Profit for the period 9 828 81 113 91 407
Other comprehensive income - - -
Total comprehensive income 9 828 81 113 91 407
Attributable to:
Equity holders of the parent 9 822 81 101 91 401
Non-controlling interest 6 12 6
Total comprehensive income 9 828 81 113 91 407
Headline earnings 9 822 5 551 15 852
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME PER SEGMENT
(continued)
INSURANCE AND RISK SERVICES
Unaudited six Unaudited six Audited
months ended months ended year ended
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R'000
Gross written premium 467 155 492 567 882 998
Reinsurance premium (311 751) (326 944) (550 080)
Net written premium 155 404 165 623 332 918
Net change in provision for unearned premium 707 1 850 (2 622)
Net premium income 156 111 167 473 330 296
Reinsurance commission received 244 295 256 126 413 076
Income from insurance operations 400 406 423 599 743 372
Net claims and movement in claims reserves (70 563) (69 251) (142 097)
Insurance contract acquisition costs (105 260) (107 311) (189 206)
Agency fees (197 965) (212 392) (353 453)
Gross underwriting surplus 26 618 34 645 58 616
Administration costs (15 289) (17 064) (32 293)
Net underwriting surplus 11 329 17 581 26 323
Non-insurance revenue 2 274 2 768 5 475
Other expenses (11 463) (11 419) (27 586)
Operating profit 2 140 8 930 4 212
Equity accounted income 750 952 2 570
Investment income 15 304 9 931 21 266
Other income 2 335 2 782 3 491
Finance charges (53) (282) (387)
Profit before taxation 20 476 22 313 31 152
Taxation (4 802) (5 616) (6 075)
Profit for the period 15 674 16 697 25 077
Other comprehensive income - - -
Total comprehensive income 15 674 16 697 25 077
Attributable to:
Equity holders of the parent 15 621 16 668 24 982
Non-controlling interest 53 29 95
Total comprehensive income 15 674 16 697 25 077
Headline earnings 15 627 16 074 24 310
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R’000
ASSETS
Non-current assets 459 148 450 322 444 553
- Property, plant and equipment 9 705 10 209 9 985
- Intangible assets 35 147 35 171 35 113
- Loans receivable 15 730 18 642 17 721
- Deferred taxation 15 237 14 826 9 364
- Investment properties 4 189 3 978 4 173
- Investment in associates 120 967 121 185 124 931
- Investment in joint ventures 217 286 93
- Investments held at fair value 257 956 246 025 243 173
Current assets 623 737 641 834 572 787
- Insurance assets 360 150 382 623 345 605
- Loans receivable 1 629 1 496 376
- Investments held at fair value 23 970 - 4 683
- Trade and other receivables 125 666 146 101 128 743
- Taxation 6 880 2 930 4 418
- Cash and cash equivalents 105 442 108 684 88 962
Total assets 1 082 885 1 092 156 1 017 340
EQUITY AND LIABILITIES
Capital and reserves 443 658 412 438 431 053
- Ordinary share capital and share premium 176 704 176 704 176 704
- Inter-group funding - - -
- Retained earnings 266 361 235 123 253 737
Equity attributable to equity holders of the parent 443 065 411 827 430 441
Non-controlling interest 593 611 612
Non-current liabilities 56 944 49 733 48 468
- Policyholder liabilities under insurance contracts 20 522 19 214 20 522
- Deferred taxation 36 422 30 519 27 946
Current liabilities 582 283 629 985 537 819
- Insurance liabilities 405 604 446 832 400 049
- Trade and other payables 173 819 178 336 137 081
- Taxation 2 860 4 817 689
Total equity and liabilities 1 082 885 1 092 156 1 017 340
Capital expenditure 381 214 624
Net asset value per share (cents) 172.8 160.6 167.9
Tangible net asset value per share (cents) 125.5 113.3 120.6
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION PER SEGMENT
CORPORATE AND INVESTMENT SERVICES
Unaudited Unaudited Audited
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R’000
ASSETS
Non-current assets 122 043 124 082 129 636
- Property, plant and equipment 81 79 80
- Intangible assets 15 15 15
- Loans receivable - - -
- Deferred taxation 4 754 4 936 4 844
- Investment properties - - -
- Investment in associates 117 193 119 052 121 774
- Investment in joint ventures - - -
- Investments held at fair value - - 2 923
Current assets 53 851 47 968 47 399
- Insurance assets - - -
- Loans receivable - - -
- Investments held at fair value 23 970 - 4 683
- Trade and other receivables 4 379 5 179 11 452
- Taxation 18 110 115
- Cash and cash equivalents 25 484 42 679 31 149
Total assets 175 894 172 050 177 035
EQUITY AND LIABILITIES
Capital and reserves 152 929 147 044 156 890
- Ordinary share capital and share premium 176 704 176 704 176 704
- Inter-group funding (112 931) (111 513) (111 961)
- Retained earnings 88 971 81 668 91 968
Equity attributable to equity holders of the parent 152 744 146 859 156 711
Non-controlling interest 185 185 179
Non-current liabilities 18 308 18 492 18 308
- Policyholder liabilities under insurance contracts - - -
- Deferred taxation 18 308 18 492 18 308
Current liabilities 4 657 6 514 1 837
- Insurance liabilities - - -
- Trade and other payables 4 555 6 436 1 745
- Taxation 102 78 92
Total equity and liabilities 175 894 172 050 177 035
Capital expenditure 1 - 60
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION PER SEGMENT (continued)
INSURANCE AND RISK SERVICES
Unaudited Unaudited Audited
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R’000
ASSETS
Non-current assets 339 469 333 870 317 280
- Property, plant and equipment 9 626 10 130 9 905
- Intangible assets 37 495 37 519 37 461
- Loans receivable 15 730 23 910 17 721
- Deferred taxation 10 482 9 889 4 520
- Investment properties 4 189 3 977 4 173
- Investment in associates 3 774 2 133 3 157
- Investment in joint ventures 217 286 93
- Investments held at fair value 257 956 246 026 240 250
Current assets 570 938 600 835 536 396
- Insurance assets 360 150 382 623 345 605
- Loans receivable 1 629 1 496 376
- Investments held at fair value - - -
- Trade and other receivables 122 341 147 892 128 298
- Taxation 6 861 2 819 4 303
- Cash and cash equivalents 79 957 66 005 57 814
Total assets 910 407 934 705 853 676
EQUITY AND LIABILITIES
Capital and reserves 293 093 273 024 276 526
- Ordinary share capital and share premium - - -
- Inter-group funding 112 931 116 780 111 961
- Retained earnings 179 754 155 818 164 129
Equity attributable to equity holders of the parent 292 685 272 598 276 090
Non-controlling interest 408 426 436
Non-current liabilities 38 636 31 240 30 160
- Policyholder liabilities under insurance contracts 20 522 19 213 20 522
- Deferred taxation 18 114 12 027 9 638
Current liabilities 578 678 630 441 546 990
- Insurance liabilities 405 604 446 832 400 049
- Trade and other payables 170 315 178 869 146 344
- Taxation 2 759 4 740 597
Total equity and liabilities 910 407 934 705 853 676
Capital expenditure 380 214 564
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited
six months six months Audited
ended ended year ended
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R'000
Net cash flows from operating activities 24 726 18 927 (11 975)
Net cash flows from investing activities (9 294) (164 955) (156 534)
Net cash flows from financing activities 1 048 (5 326) (2 567)
Total cash movement for the period 16 480 (151 354) (171 076)
Cash at the beginning of the period 88 962 276 449 276 449
Cash disposed of - (16 411) (16 411)
Total cash at the end of the period 105 442 108 684 88 962
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share capital
and share Retained Non-controlling
premium earnings interest Total
R'000 R'000 R'000 R'000
Balance at 31 August 2013 176 704 137 354 13 567 327 625
Total comprehensive income for the period - 97 769 41 97 810
Reclassification of subsidiary to associate - - (12 997) (12 997)
Balance at 28 February 2014 176 704 235 123 611 412 438
Total comprehensive income for the period - 18 614 60 18 674
Dividends paid - - (59) (59)
Balance at 31 August 2014 176 704 253 737 612 431 053
Total comprehensive income for the period - 25 443 59 25 502
Dividends paid - (12 819) (78) (12 897)
Balance at 28 February 2015 176 704 266 361 593 443 658
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The accounting policies applied in the preparation of these condensed consolidated unaudited financial
statements for the six months ended 28 February 2015 (“interim results”) are in accordance with
International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council. These accounting policies are consistent with those applied in the
annual financial statements for the year ended 31 August 2014. The interim results have been prepared
making use of reasonable judgements and estimates and reporting is done in terms of IAS 34 – Interim
Financial Reporting, the Companies Act, 2008 (Act 71 of 2008), as amended, and the Listings
Requirements of JSE Limited (“the JSE”) under the supervision of Mr Lourens Louw, the Financial Director.
The interim results have not been audited or reviewed by the Group’s auditors.
2. Changes in share capital
Details of the shares in issue as at the reporting dates are as follows:
28 Feb 2015 28 Feb 2014 31 Aug 2014
’000 ’000 ’000
Number of shares 256 377 256 377 256 377
- Shares in issue 256 380 256 380 256 380
- Shares held as treasury shares (3) (3) (3)
Weighted average number of shares 256 377 256 377 256 377
- Shares in issue 256 380 256 380 256 380
- Shares held as treasury shares (3) (3) (3)
Diluted weighted average number of shares 256 377 256 377 256 377
- Shares in issue 256 380 256 380 258 380
- Shares held as treasury shares (3) (3) (3)
3. Financial instruments
Fair value estimation
The financial assets valued at fair value through profit and loss in the statement of financial position are
grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 Total
Financial assets R’000 R’000 R’000 R'000
Listed investments 253 005 - - 253 005
Unlisted investments - 4 951 - 4 951
253 005 4 951 - 257 956
There have been no transfers between levels 1, 2 and 3 during the reporting period.
The methods and valuation techniques used for the purpose of measuring fair value are unchanged
compared to the previous reporting period:
- Financial assets classified in Level 1 have been valued with reference to quoted prices and market
rates (unadjusted) in active markets for identical assets or liabilities; and
- Financial assets classified in Level 2 have been valued by an independent third party according to a
formula (using the fair market values of the underlying assets in the investment) in terms of which
the investment could have been liquidated as at the reporting date.
4. Other income / Profit on revaluation of associates
As previously reported, with effect from 1 September 2013, Conduit’s interest in credit recovery and debt
management specialist, Anthony Richards and Associates Proprietary Limited (“ARA”), was accounted for
as an associate. The change in accounting treatment required that the Group carry out a once-off fair
value adjustment of Conduit’s 40% interest in ARA and bring to book R93.86 million in pre-tax earnings
(R75.55 million after tax) during the six months ended 28 February 2014. There was no requirement to
perform a similar fair value adjustment in 2015.
5. Reconciliation of headline earnings
Unaudited Unaudited
six months six months Audited
ended ended year ended
28 Feb 2015 28 Feb 2014 31 Aug 2014
R’000 R’000 R'000
Profit attributable to ordinary equity holders of Conduit 25 443 97 769 116 383
Net profit on revaluation of investment properties - - (65)
Net loss on disposal of intangibles, property, plant and
equipment 8 4 5
Profit on revaluation of associates - (93 862) (93 862)
Profit on disposal of joint ventures - (912) (937)
Tax on the items above (2) 18 626 18 638
Headline earnings 25 449 21 625 40 162
6. Contingent liabilities
The Group is not aware of any current or pending legal cases that would have a material adverse effect
on its results.
7. Directors
During March 2015, following discussions with certain shareholders of the Group, it was agreed that the
Board would be restructured. This resulted in the resignations of the following Directors:
7.1. Jason Druian (Executive) on 23 March 2015;
7.2. Reginald Berkowitz (Independent non-executive) on 31 March 2015;
7.3. Scott Campbell (Independent non-executive) on 31 March 2015;
7.4. Günter Steffens (Independent non-executive) on 31 March 2015; and
the appointment of the following Directors:
7.5. Sean Riskowitz (Executive) on 31 March 2015;
7.6. Ronald Napier (Independent non-executive) on 31 March 2015;
7.7. David Harpur (Independent non-executive) on 31 March 2015; and
7.8. Jabulani Mahlangu (Independent non-executive) on 31 March 2015.
Following a general meeting of shareholders held on 19 May 2015, the following additional Directors were
appointed to the Board:
7.9. Tyrone Moodley (Non-executive);
7.10. Barry Scott (Independent non-executive); and
7.11. Rosetta Xaba (Independent non-executive).
8. Dividends and other distributions
The Board has not recommended any dividend payment to ordinary shareholders for the six months
ended 28 February 2015 (2014: Nil).
9. Post balance sheet events
As detailed in a SENS announcement on 24 March 2015, Jason Druian has concluded an agreement in
terms whereof he resigned his employment as Chief Executive Officer of Conduit. The terms of the
agreement included an agreed severance package equivalent to 2.5 times annual basic salary. The
agreement came into effect on 31 March 2015.
Directors:
Executive directors: Lourens Louw (Financial Director and Acting Chief Executive Officer), Sean
Riskowitz, Robert Shaw, Gavin Toet
Non-executive directors: Ronald Napier (Chairman)*, Richard Bruyns*, David Harpur*, Jabulani
Mahlangu*, Tyrone Moodley, Barry Scott*, Rosetta Xaba*
* Independent
Company secretary:
CIS Company Secretaries Proprietary Limited
70 Marshall Street
Johannesburg, 2001
Registered address:
Unit 7 Tulbagh, 360 Oak Avenue
Randburg, 2194
PO Box 97, Melrose Arch, 2076
Telephone: 011 686 4200
Facsimile: 011 886 0206
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Sponsor:
Merchantec Capital
Date: 22/05/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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