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CONDUIT CAPITAL LIMITED - Condensed Consolidated Audited Results for the 10 Months Ended 30 June 2015

Release Date: 25/09/2015 17:30
Code(s): CND     PDF:  
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Condensed Consolidated Audited Results for the 10 Months Ended 30 June 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” or “the Company”)

CONDENSED CONSOLIDATED AUDITED RESULTS FOR THE 10 MONTHS ENDED 30 JUNE 2015


Conduit Capital is a holding company owning subsidiaries involved in the insurance industry in South Africa.
Conduit’s ambition is to develop a high quality, diversified insurance group complemented by a non-insurance
value-oriented investment programme. We aim to create an environment where exceptional people can thrive
in the building of a quality business over many decades.

2015 was a watershed year for the Company. In April 2015 a new board of directors (“Board”) was nominated
and approved by shareholders and Sean Riskowitz was appointed as an Executive Director - initially as Chief
Investment Officer and subsequently as Chief Executive Officer (“CEO”). Sean knows the Group well, having
been a shareholder since 2010. We would like to thank the former Board and management for their hard
work and professional integrity over the years, and welcome the new Board and management to what
promises to be an exciting journey.

LETTER FROM THE CEO TO THE SHAREHOLDERS OF CONDUIT CAPITAL:

It is my pleasure to present our financial results for the 10 months ending 30 June 2015 to Shareholders. In
this maiden letter I will explain our new strategic direction and provide comment and context on our financial
performance in the 2015 fiscal.

Our objective is to increase the intrinsic value* of the Company on an annual basis at an absolute rate in
excess of the market generally. Growth in intrinsic value is roughly measured by the change in adjusted net
asset value per share over the measurement period. This measure is more appropriate than standard price to
earnings ratios because of the nature of the Company as an insurer driven by underwriting profits and
investment gains (or losses). This characteristic may result in inconsistent (but by no means undesirable)
volatility in net profit after tax in any year-on-year comparison. Growth in net asset value per share is not a
perfect proxy for growth in intrinsic value, but it will over long time periods offer a suitable correlation.

To accomplish our goal we will:
1. invest in and sustainably build top quality insurance businesses;
2. pursue non-insurance investment opportunities; and
3. grow our investable assets at no cost by achieving combined ratios** well below 100%.

The combined ratio is a measure of an insurance company’s ability to generate profits from underwriting
activities. Generally, the lower the ratio the better, as it means our insurance book is profitable. If we can

* Intrinsic value refers to the actual value of a company or share determined through fundamental analysis without reference to its
  market value. Intrinsic value can vary significantly from market value.

**The combined ratio is calculated as the sum of the net loss ratio and the expense ratio, divided by the net earned premium.
  grow our insurance book at a below 100% combined ratio, we will generate more investable assets. The cost
  to us of this increased capital base is measured by the combined ratio. If the combined ratio is below 100%,
  we would have increased our investable assets at no cost (as our capital available for investment would have
  increased), which is otherwise only achievable by:


a) borrowing money (which would cost us at least the prime lending rate from banks - as a best case
    scenario);
b) retained earnings growth; or
c) raising capital from shareholders.

The increase in investable assets at no cost, combined with our ability to invest these assets productively, will
allow us to achieve our objective of compounding intrinsic value per share at a high rate over the long term.

Capital allocation and investment strategy

The management teams of companies are not only responsible for operations but also for capital allocation
(that is, decisions about where to invest a company’s capital). Obvious areas to utilise a company’s resources
include expanding the business either organically or acquisitively, or paying dividends. At Conduit, we take
capital allocation decisions extremely seriously. Fortunately, our subsidiary companies have their own
operational management teams and Boards, which allow us to focus on capital allocation at the Conduit
holding company level. It is important to note that Conduit is not an operating company, but an investment
company. Our responsibility at Conduit is to guide the strategy of our subsidiaries and allocate capital across
the Group as efficiently as possible.

In terms of capital allocation, our aim is to create more than a rand of value for every rand invested by the
Company. We spend time identifying, researching and evaluating different opportunities. We will buy or invest
in companies when the right opportunity presents itself and when it makes logical sense from an opportunity
cost point of view. We are conservative but opportunistic capital allocators, always concerned with the
downside of an investment before we consider the upside. We seek companies with durable competitive
advantages managed by motivated, honest and ambitious people. We are building a decentralised system to
provide capital and infrastructure where necessary to support long-term sustainable growth primarily in the
insurance industry.

Investable capital, by order of preference, will be used first to support internal growth in existing insurance
operations. Should no sufficiently attractive opportunities exist, we will seek acquisitions in the realm of
insurance or non-insurance businesses generally. If we cannot find a reasonable opportunity, we will look to
acquire publicly traded securities for the dual purposes of supporting our insurance operations and earning
superior long-term returns on capital (our listed equity investment strategy is explained in more detail below).
Finally, we will consider the repurchase of the Company’s shares, when it is believed this action creates better
returns than any of the above three choices.
                                                                                                              
Comment on financial results

The 2015 fiscal results represent the 10-month period to 30 June 2015, as opposed to the 2014 fiscal results,
which were for the year to 31 August 2014. As previously reported, we changed our year-end from 31 August
to 30 June to better align the holding company’s reports with the year-end of our major subsidiary, Constantia
Insurance Company Limited, which was in turn altered to correspond to the requirements of the insurance
regulator. The 2015 year therefore represents approximately three months of operations under present
management.

Results are presented on an audited IFRS and “normalised” basis. The normalised results exclude once-off
costs incurred as a result of changes to Conduit’s Board and management team described earlier in the letter.
This commentary relates to the normalised numbers.

Net asset value per share increased by 5.8% over the year to 30 June 2015 to 177.6 cents. The change in net
asset value per share is our approximate but imprecise measure of the change in the intrinsic value of the
Group (the actual intrinsic value of the Company is subjective but is very likely to be a significant premium to
net asset value). Normalised headline earnings per share over the same period increased by 50.8% to 18.4
cents.

Gross written premium increased by 7.9% to R788.52 million, while net premium income grew 15.0% to
R313.97 million. Our net underwriting result grew 11.4% to R21.83 million, resulting in a slight increase in our
net underwriting margin. The net claims ratio (also known as the “loss ratio”, which is net claims costs as a
percentage of net earned premium) also improved, which speaks to our conservative underwriting appetite.
Insurance contract acquisition costs (costs incurred to write premium) increased only 6.2%, but agency fees
increased by 13.1%, due to a change in the product mix. Constantia also incurred significantly higher
actuarial expenses associated with various new regulatory developments. Excluding these costs (which are
not directly related to writing premiums) and staff incentives, other expenses increased by approximately
3.3%. The Constantia group produced a combined ratio of 98.1% compared to 98.2% for the 10 months to
30 June 2014. The equity portfolio returned 38.7% for the 10 months to June 2015 (June 2014: 18.1%).

Going forward, Constantia is well positioned to pursue new opportunities and we thank Robert Shaw, the CEO
of Constantia, and his team for their sterling efforts over the past year.

Investment income increased significantly as the investment portfolio experienced the benefits of having
invested in attractively priced listed equities. The majority of the investment income gains were of an
unrealised nature (meaning we have not sold these positions despite their gains). Toward the end of the
financial year, we substantially reduced our investments in fixed income instruments and increased our cash
and equity investments accordingly. The increase in cash and cash equivalents on the balance sheet is
therefore mostly the movement from fixed income and money market investments into cash and cash equivalents. 
The marginally higher yield available in money market instruments was not worth the extra credit
risk: we will never sacrifice the certainty of liquidity for an insignificant short-term return.

Now is as good a time as any to caution that in any single year our investment returns and therefore
investment income may be very high, very low, or somewhere in between. Over time, our strategy of
investing in high quality businesses at reasonable prices will prove to be a significant competitive advantage
for our insurance operations.

Public equity investments

Our equity portfolio is comprised of a concentrated selection of high quality South African businesses acquired
for prices that ensure an attractive rate of return over the long term. We view equity investments as part
ownership in a real business enterprise, just in the same way as we own Constantia as a subsidiary. When we
consider buying shares in a company, we always view the transaction as if we were buying the whole
company. We are shareholder partners of these companies and support their growth where necessary with
guidance and capital (the former free, the latter not). Our equity investment portfolio comprises companies
that meet two broad criteria:

1.  The investee company’s shares can be purchased at a price significantly below the intrinsic value of the
    company; and

2.  The investee company has the capability to compound intrinsic value at a high rate over the long-term
    due to a confluence of factors centered primarily on the durable competitive advantage of the business
    model.

The portfolio comprises a meaningful part of our investable assets (R92.78 million as at 30 June 2015) and is
likely to continue to be a significant part of our assets in the future. The companies we own have excellent
prospects, strong competitive advantages and exceptional management teams. The portfolio creates a stable
base of diversified earnings, which support the growth aspirations of our insurance businesses.

Dividends

Paying a dividend is a discretionary decision concerning the use of shareholder funds that could otherwise be
used to internally reinvest. Companies without attractive reinvestment opportunities should rightly pay most
of their earnings in dividends. However, companies with attractive reinvest opportunities would do better for
their shareholders by pursuing such opportunities. The test to determine if a dividend should be paid is
whether or not each retained rand can produce more than one rand in market value. The Company’s new
strategy has given rise to a number of excellent opportunities and as a result, in our view, shareholders will
be better off if we invest our capital internally, which requires capital resources. For this reason, the Board
decided not to declare a dividend for the 2015 financial year. For as long as we can identify opportunities that
meet our return requirements, it is unlikely that Conduit will pay a dividend.
                                                                                                               
Appreciation

Conduit as an insurance and investment entity is reliant on its people more than any other asset. I can safely
say the calibre and quality of people in this Group is second-to-none. I would like to acknowledge and express
my appreciation to all Conduit and Constantia staff, as well as our new Board for their efforts during the year.
I would especially like to sincerely thank my fellow Executive Committee members Gavin Toet (Chief
Operating Officer), Lourens Louw (Financial Director) and Robert Shaw (CEO of Constantia) for their
unwavering support and enthusiasm as we move the Group forward.

Conclusion

What we are trying to achieve at Conduit will take time, hard work and a lot of patience. There will inevitably
be bumps along the way, especially when the insurance industry hits a down cycle or equity markets are
volatile. The intention of the Conduit team is to build a wonderful company over the long-term. We are not
interested in flipping to the highest bidder or liquidating – why should we when we have such a fantastic set
of assets? I encourage shareholders (who are our partners) to join us on this journey, but only if you share
our vision and long-term time horizon. We have a magnificent team of people and all the right ingredients to
compound intrinsic value over time. If you share our perspective and recognise the opportunity that lies
before us, we do hope you stick around to see what is possible over the coming decade and more.


Sean Riskowitz
Chief Executive Officer

Johannesburg
25 September 2015


                                                                                                             
CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
For ease of comparison, we have provided two additional Normalised (but unaudited) columns which compare the two periods as if
they were accounted for on a like-for-like basis, i.e. both being 10-month periods and after:

1.     reversing certain once-off costs associated with management changes during 2015; and
2.     excluding the Anthony Richards and Associates Proprietary Limited (“ARA”) revaluation from subsidiary to associate for 2014.
                                                                                                         Normalised          Normalised
                                                                    Audited             Audited           unaudited           unaudited
                                                                 10 months                  year         10 months           10 months
                                                                      ended               ended               ended               ended
                                                                30 Jun 2015         31 Aug 2014         30 Jun 2015         30 Jun 2014
                                                                      R’000               R'000               R'000               R'000

 Gross written premium                                              788 517             882 998              788 517             730 510
 Reinsurance premium                                              (474 544)           (550 080)            (474 544)           (456 974)

 Net written premium                                                313 973             332 918             313 973             273 536
 Net change in provision for unearned premium                        (1 190)             (2 622)             (1 190)             (1 462)

 Net premium income                                                 312 783             330 296             312 783             272 074
 Reinsurance commission received                                    362 663             413 076             362 663             342 634

 Income from insurance operations                                   675 446             743 372              675 446             614 708
 Net claims and movement in claims reserves                       (129 273)           (142 097)            (129 273)           (117 037)
 Insurance contract acquisition costs                             (167 106)           (189 206)            (167 106)           (157 428)
 Agency fees                                                      (332 531)           (353 453)            (332 531)           (293 931)

 Gross underwriting surplus                                          46 536               58 616              46 536              46 312
 Administration costs                                              (24 702)             (32 293)            (24 702)            (26 718)

 Net underwriting surplus                                            21 834               26 323              21 834              19 594
 Non-insurance revenue                                                3 948                5 775               3 948               4 666
 Other expenses                                                    (41 180)             (30 145)            (32 188)            (23 102)

 Operating (loss) profit                                           (15 398)               1 953              (6 406)               1 158
 Equity accounted income                                             14 015              16 162               14 015              11 283
 Investment income                                                   45 576              25 889               45 576              22 509
 Other income                                                         2 935              97 375                2 935               3 368
 Finance charges                                                      (212)               (387)                (212)               (361)
 Profit before taxation                                               46 916             140 992              55 908              37 957
 Taxation                                                            (9 247)            (24 508)             (9 247)             (5 872)
 Profit for the period                                               37 669             116 484              46 661               32 085
 Other comprehensive income                                               -                   -                   -                    -
 Total comprehensive income                                          37 669             116 484              46 661               32 085


 Attributable to:
 Equity holders of the parent                                        37 626             116 383              46 618               31 987
 Non-controlling interest                                                43                 101                  43                   98

 Total comprehensive income                                          37 669             116 484              46 661               32 085


 Headline earnings                                                   38 179              40 162              47 171               31 397


 Earnings per share (cents)
 -   Basic                                                             14.7                45.4                18.2                 12.5
 -   Diluted                                                           14.7                45.4                18.2                 12.5
 -   Headline                                                          14.9                15.7                18.4                 12.2
 -   Diluted headline                                                  14.9                15.7                18.4                 12.2
 



                                                                                                                                             
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                                                         GROUP
                                                                  Audited        Audited
                                                              30 Jun 2015    31 Aug 2014
                                                                    R’000          R’000

 ASSETS
 Non-current assets                                               304 563        444 553

 -   Property, plant and equipment                                  9 067          9 985
 -   Intangible assets                                             35 246         35 113
 -   Loans receivable                                              16 004         17 721
 -   Deferred taxation                                              9 334          9 364
 -   Investment properties                                          5 928          4 173
 -   Investment in associates                                     124 411        124 931
 -   Investment in joint ventures                                     225             93
 -   Investments held at fair value Note A                        104 348        243 173

 Current assets                                                   781 817        572 787

 -   Insurance assets                                             326 833        345 605
 -   Loans receivable                                               1 180            376
 -   Investments held at fair value Note A                              -          4 683
 -   Trade and other receivables                                  130 723        128 743
 -   Taxation                                                      10 149          4 418
 -   Cash and cash equivalents Note A                             312 932         88 962

 Total assets                                                   1 086 380      1 017 340

 EQUITY AND LIABILITIES
 Capital and reserves                                             455 825        431 053

 - Ordinary share capital and share premium                       176 704        176 704
 - Inter-group funding                                                  -              -
 - Retained earnings (Accumulated losses)                         278 544        253 737

 Equity attributable to equity holders of the parent              455 248        430 441
 Non-controlling interest                                             577            612

 Non-current liabilities                                           61 281         48 468
 - Policyholder liabilities under insurance contracts              32 606         20 522
 - Interest-bearing borrowings                                          -              -
 - Deferred taxation                                               28 675         27 946

 Current liabilities                                              569 274        537 819

 - Insurance liabilities                                          369 104        400 049
 - Trade and other payables                                       191 970        137 081
 - Taxation                                                         8 200            689

 Total equity and liabilities                                   1 086 380      1 017 340

 Capital expenditure                                                1 254            624

 Net asset value per share (cents)                                  177.6          167.9


Note A: The movement between Investments held at fair value and Cash & cash
equivalents primarily relates to the shift from liquid, low-risk investments (money market
instruments, gilts, bank and corporate paper) back to cash.

                                                                                          
SEGMENTAL REPORT

The report has been reformatted to more accurately reflect the performance of the different segments under
the Group's enhanced strategy, as well as the capital utilised by each segment. The prior year segmental
report has been presented in a manner similar to that of the current period in order to simplify comparative
analysis.

SEGMENTAL REPORT FOR THE 10 MONTHS ENDED 30 JUNE 2015
                                                              Insurance
                                                               and Risk      Investments          Total
                                                                  R'000            R'000          R'000

 Net underwriting surplus                                          21,834               -       21,834
 Non-insurance revenue and other expenses                        (15,877)         (2,411)      (18,288)

 Operating profit (loss)                                           5,957          (2,411)        3,546
 Equity accounted income (loss)                                    (256)           14,271       14,015
 Investment income                                                11,745           32,998       44,743
 Other                                                             2,724                -        2,724

 Profit before taxation                                           20,170          44,858         65,028
 Unallocated net head office expenses                                                          (18,112)
 Taxation                                                                                       (9,247)

 Profit for the period                                                                          37,669


 Capital utilised
 Capital employed at end of period                               204,806         197,312       455,825
 Capital utilised at end of period                               204,806         121,759       380,271
 Average capital utilised during the period                      190,952         111,502       365,002


SEGMENTAL REPORT FOR THE YEAR ENDED 31 AUGUST 2014
                                                              Insurance
                                                               and Risk      Investments          Total
                                                                  R'000            R'000         R'000

 Net underwriting surplus                                          26 323               -        26 323
 Non-insurance revenue and other expenses                        (10 903)         (3 575)      (14 478)

 Operating profit (loss)                                          15   420        (3 575)       11 845
 Equity accounted income (loss)                                    2   570         13 592       16 162
 Investment income                                                13   506         10 684       24 190
 Other                                                             3   104              -        3 104

 Profit before taxation                                           34 600          20 701         55 301
 Unallocated net head office expenses                                                            85 691
 Taxation                                                                                      (24 508)
 Profit for the period                                                                          116 484


 Capital utilised
 Capital employed at end of period                               179 244         171 612       431 054
 Capital utilised at end of period                               179 244          96 059       355 501
 Average capital utilised during the period                      172 724          81 441       334 264




                                                                                                           
SEGMENTAL REPORT (CONTINUED)

SEGMENTAL REPORT FOR THE 10 MONTHS ENDED 30 JUNE 2015 (NORMALISED)

                                                         Insurance
                                                          and Risk     Investments      Total
                                                             R'000           R'000     R'000

 Net underwriting surplus                                    21,834               -     21,834
 Non-insurance revenue and other expenses                  (15,877)         (2,411)   (18,288)

 Operating profit (loss)                                     5,957          (2,411)     3,546
 Equity accounted income (loss)                              (256)           14,271    14,015
 Investment income                                          11,745           32,998    44,743
 Other                                                       2,724                -     2,724

 Profit before taxation                                     20,170          44,858      65,028
 Unallocated net head office expenses                                                  (9 120)
 Taxation                                                                              (9,247)

 Profit for the period                                                                 46 661


 Capital utilised
 Capital employed at end of period                         204,806         197,312    455,825
 Capital utilised at end of period                         204,806         121,759    380,271
 Average capital utilised during the period                190,952         111,502    365,002


SEGMENTAL REPORT FOR THE 10 MONTHS ENDED 30 JUNE 2014 (NORMALISED)

                                                         Insurance
                                                          and Risk     Investments      Total
                                                             R'000           R'000     R'000

 Net underwriting surplus                                    19 594               -     19 594
 Non-insurance revenue and other expenses                   (4 901)         (2 750)    (7 651)

 Operating profit (loss)                                    14   693        (2 750)    11 943
 Equity accounted income (loss)                              1   015         10 268    11 283
 Investment income                                          11   090         10 508    21 598
 Other                                                       3   012              -     3 012

 Profit before taxation                                     29 810          18 026      47 836
 Unallocated net head office expenses                                                  (9 879)
 Taxation                                                                              (5 872)

 Profit for the period                                                                 32 085


 Capital utilised
 Capital employed at end of period                         165 487         170 360    421 173
 Capital utilised at end of period                         165 487          94 806    345 620
 Average capital utilised during the period                172 597          79 527    331 228




                                                                                                  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                    Audited        Audited
                                                                                  10 months           year
                                                                                      ended          ended
                                                                                30 Jun 2015    31 Aug 2014
                                                                                      R’000          R'000

 Net cash flows from operating activities                                            50 522        (11 916)
 Net cash flows from investing activities                                           185 418       (156 534)
 Net cash flows from financing activities                                          (11 970)         (2 626)

 Total cash movement for the year         Note A
                                                                                    223 970       (171 076)
 Cash at the beginning of the year                                                   88 962         276 449
 Cash disposed of                                                                         -        (16 411)

 Total cash at the end of the year                                                  312 932          88 962

 Note A: The considerable cash movement primarily relates to the shift from liquid, low-risk investments (money market
 instruments, gilts, bank and corporate paper) back to cash.



CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                                                                 Share
                                                            capital and                          Non-
                                                                 share       Retained      controlling
                                                              premium        earnings         interest         Total
                                                                 R'000          R'000           R'000          R'000

Balance at 1 September 2013                                     176 704        137 354          13 567        327 625
Total comprehensive income for the year                               -        116 383             101        116 484
Reclassification of subsidiary to associate                           -              -        (12 997)       (12 997)
Dividends paid                                                        -              -            (59)           (59)
Balance at 31 August 2014                                       176 704         253 737            612        431 053
Total comprehensive income for the period                             -          37 626             43         37 669
Dividends paid                                                        -        (12 819)           (78)       (12 897)

Balance at 30 June 2015                                         176 704        278 544            577        455 825


                                                                                                              
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

   The accounting policies applied in the preparation of these condensed consolidated provisional audited
   financial statements for the 10 months ended 30 June 2015 (“audited 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 audited 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.


2. Changes in share capital

   Details of the shares in issue as at the reporting dates are as follows:

                                                                               30 Jun 2015     31 Aug 2014
                                                                                       ’000            ’000
    Number of shares                                                                256 377        256 377
    - Shares in issue                                                               256 380        256 380
    - Shares held as treasury shares                                                     (3)            (3)
    Weighted average number of shares                                               256 377        256 377
    - Shares in issue                                                               256 380        256 380
    - Shares held as treasury shares                                                     (3)            (3)
    Diluted weighted average number of shares                                       256 377        256 377
    - Shares in issue                                                               256 380        256 380
    - Shares held as treasury shares                                                     (3)            (3)


3. Profit and loss on revaluation of associates

   3.1. As previously reported, Conduit’s interest in credit recovery and debt management specialist ARA
        was accounted for as an associate with effect from 1 September 2013. 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 year ended 31 August 2014. There was no requirement to perform a similar fair value
        adjustment in 2015.


   3.2. Constantia Insurance Holdings Proprietary Limited (“CIH”), a subsidiary of the Group’s investments
        in Administration Plus Proprietary Limited and Auto Trade Underwriting Managers Proprietary
        Limited was impaired by a total of R1.07 million.

                                                                                                              
4. 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
    2015
    Listed investments                                  99 133               -                -       99 133
    Investment properties                                    -           5 928                -        5 928
    Unlisted investments                                     -           5 215                -        5 215
                                                        99 133          11 143                -      110 276

    2014
    Listed investments                                 243 042               -                -      243 042
    Investment properties                                    -           4 173                -        4 173
    Unlisted investments                                     -           4 814                -        4 814
                                                       243 042           8 987                -      252 029


   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.


5. Reconciliation of headline earnings

                                                                                       Audited        Audited
                                                                                    10 months             year
                                                                                         ended          ended
                                                                                   30 Jun 2015    31 Aug 2014
                                                                                         R’000          R'000
    Profit attributable to ordinary equity holders of Conduit                           37 626        116 383
    Net (profit) loss on revaluation of investment properties                            (657)           (65)
    Net (profit) loss on disposal of intangibles, property, plant and
    equipment                                                                               (7)             5
    Net revaluation profit on reclassification from subsidiary to associate                   -      (93 862)
    Profit on disposal of joint ventures                                                                (937)
    Impairment of associates                                                             1 071              -
    Tax on the items above                                                                 146         18 638
    Headline earnings                                                                   38 179         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;
    7.8.    Jabulani Mahlangu (Independent non-executive) on 31 March 2015;
    7.9.    Tyrone Moodley (Non-executive) on 19 May 2015;
    7.10. Barry Scott (Independent non-executive) on 19 May 2015; and
    7.11. Rosetta Xaba (Independent non-executive) on 19 May 2015.

   On 15 July 2015 Mr Sean Riskowitz was appointed as Chief Executive Officer of the Company.


   Furthermore, following the retirement and resignation of Dr CH Kühn from the insurance subsidiary
   companies of Conduit Capital (comprising Constantia Insurance Company Limited, Constantia Life Limited
   and Constantia Life and Health Assurance Company Limited) (hereinafter collectively referred to as
   “Constantia Insurance Group”) and      in order to ensure continuity and maintain independence of the
   Constantia Insurance Group Boards, Mr Richard Bruyns has resigned as an independent non-executive
   director of the Conduit Capital Board with effect from 3 August 2015 and has simultaneously been
   appointed as Chairman of the Constantia Insurance Group.


8. Dividends

   In line with the Group's new strategy, the details of which appear in the Letter from the CEO, the Board
   has not recommended any further dividend payment to ordinary shareholders. The dividend of 5 cents
   per share (R12.82 million in aggregate) announced in the previous Directors' Report was paid on 22
   December 2014 (2014: Nil).

                                                                                                         
9. Events after reporting period

    There were no events that resulted in a material impact on the Group between the reporting date and the
    date of publication of this report.


10. Audit opinion

    Grant Thornton has audited the Group’s results and their unqualified audit report is available for
    inspection at the Group's registered office.
    The    auditor’s   report   does   not   necessarily   cover   all   of   the   information   contained   in   this
    announcement/financial report. Shareholders are therefore advised to obtain a copy of the audited Group
    annual financial information from the registered office of the Company.


11. Directors’ responsibility

    The directors take full responsibility for the preparation of the provisional report and the financial
    information has been correctly extracted from the underlying Group financial statements.


    The provisional report is extracted from audited information, but is not itself audited.



Directors:

Executive directors:            Sean Riskowitz (Chief Executive Officer), Lourens Louw (Financial Director),
                                Robert Shaw, Gavin Toet
Non-executive directors:        Ronald Napier (Chairman)*, David Harpur*, Jabulani Mahlangu*, Tyrone
                                Moodley, Barry Scott*, Rosetta Xaba*
* Independent

Sponsor:

Merchantec Capital


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




                                                      

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