Wrap Text
CND - Conduit Capital Limited - Condensed consolidated unaudited results for
the six months ended 28 February 2009
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
2009
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited
6 months Unaudited Audited
ended restated 12
28 Feb * 6 months
2009 months ended
R`000 ended 31 Aug
29 Feb 2008
2008 R`000
R`000
CONTINUING OPERATIONS
Gross revenue 406 943 940 194 1 434
478
Net insurance revenue 101 088 123 804 237 722
Other operating revenue 41 525 54 397 91 656
Net revenue 142 613 178 201 329 378
Operating expenses (131 348) (173 269) (314
176)
- Direct expenses: Insurance and risk (64 499) (108 466) (179
services 782)
- Administration and other expenses (26 853) (26 770) (56
442)
- Depreciation and amortisation (1 484) (1 483) (3 014)
- Employee costs (38 512) (36 550) (74
938)
Operating profit 11 265 4 932 15 202
Income from associates 851 699 1 856
Investment income 8 036 3 072 14 831
Other expenses (6) (10) (51)
Finance charges (1 889) (2 828) (5 308)
Impairment of goodwill - - (185)
Profit before taxation 18 257 5 865 26 345
Taxation (6 580) (1 490) (7 052)
Profit for the period from continuing 11 677 4 375 19 293
operations
DISCONTINUED OPERATION
Profit for the period from - 1 730 3 644
discontinued operation
Profit for the period 11 677 6 105 22 937
* Refer to note 3 for details
Attributable to:
Ordinary shareholders 7 253 2 710 15 182
Minority interest 4 424 3 395 7 755
- Continuing operations 4 424 2 531 5 935
- Discontinued operation - 864 1 820
Profit for the period 11 677 6 105 22 937
EARNINGS PER SHARE (CENTS)
Basic 2.90 1.20 6.54
- Continuing operations 2.90 0.82 5.75
- Discontinued operation - 0.38 0.79
Diluted 2.89 1.08 6.51
- Continuing operations 2.89 0.73 5.73
- Discontinued operation - 0.35 0.78
Headline 2.90 1.20 6.38
- Continuing operations 2.90 0.82 5.74
- Discontinued operation - 0.38 0.64
Diluted headline 2.89 1.08 6.36
- Continuing operations 2.89 0.73 5.72
- Discontinued operation - 0.35 0.64
SEGMENTAL REPORT FOR CONTINUING OPERATIONS
Head Financ Total
office Insura Direct ial Privat R`000
& nce R`000 servic e
treasu and es equity
ry risk R`000 R`000
R`000 servic
es
R`000
Unaudited - 6 months ended 28
February 2009
Gross revenue 13 374 30 932 189 985 406
824 943
Net revenue 13 110 30 932 189 985 142
494 613
Investment income (loss) 784 7 045 351 (187) 43 8 036
Profit (loss) before taxation (4 13 164 8 905 (160) 367 18 257
019)
Attributable earnings (loss) (3 8 540 2 445 (160) 213 7 253
785)
Minority interest - 717 3 666 - 41 4 424
Total assets 13 630 1 246 32 695 8 313 1 077 1 302
853 568
Total liabilities (1 (1 055 (6 (7) (925) (1 064
174) 761) 663) 530)
Capital expenditure 14 2 717 404 - - 3 135
Unaudited - 6 months ended 29
February 2008
Gross revenue 45 922 17 164 27 696 940
262 194
Net revenue 45 160 17 164 27 696 178
269 201
Investment income (loss) (2 4 462 130 - 32 2 081
543)
Profit (loss) before taxation (6 11 282 2 834 (1 219 5 865
834) 636)
Attributable earnings (loss) (5 8 046 715 (1 144 1 844
882) 179)
Minority interest - 1 457 1 074 - - 2 531
Total assets 19 225 1 034 25 865 104 1 019 1 185
203 772 084
Total liabilities (1 (878 (6 (52 (861) (940
346) 719) 755) 861) 542)
Capital expenditure 45 2 397 492 219 3 3 156
Audited - 12 months ended 31
August 2008
Gross revenue 48 1 389 43 127 31 1 684 1 434
588 478
Net revenue 48 284 43 127 31 1 684 329
488 378
Investment income 3 14 507 247 - 74 14 831
Profit (loss) before taxation (8 30 604 7 623 (3 406 26 345
970) 318)
Attributable earnings (loss) (8 21 933 2 118 (2 220 13 358
250) 663)
Minority interest - 2 757 3 178 - - 5 935
Total assets 9 267 1 059 30 416 21 062 1 162 1 121
241 148
Total liabilities (2 (880 (7 (8) (1 (892
943) 376) 799) 135) 261)
Capital expenditure 313 4 408 1 758 306 29 6 814
CONSOLIDATED BALANCE SHEET
Note Unaudited Unaudited Audited
as at 28 as at as at
Feb 2009 29 Feb 2008 31 Aug 2008
R`000 R`000 R`000
ASSETS
Non-current assets 97 349 178 020 123 716
- Property, plant and 15 804 27 080 23 952
equipment
- Intangible assets 47 774 79 490 46 646
- Investment properties 8 319 17 245 15 791
- Loans receivable 8 471 2 512 2 293
- Deferred taxation 4 970 9 395 6 168
- Investments in associates 4 844 3 742 4 602
- Investments held at fair 7 167 38 556 24 264
value
Current assets 1 189 702 1 007 064 997 432
- Insurance assets 775 291 658 742 678 029
- Investments held at fair 778 2 022 569
value
- Trade and other 5 169 764 146 131 95 328
receivables
- Taxation 9 337 8 301 10 463
- Cash and cash equivalents 234 532 191 868 213 043
Non-current assets - Held 15 517 - -
for sale
Total assets 1 302 568 1 185 084 1 121 148
EQUITY AND LIABILITIES
Capital and reserves 238 038 244 542 228 887
- Ordinary share capital and 199 185 180 315 199 220
share premium
- Retained earnings 23 242 2 128 15 989
- Contingency reserve - 1 389 -
- Share-based payment 802 569 604
reserve
- Vendors for equity - 18 905 -
223 229 203 306 215 813
- Minority shareholders` 14 809 41 236 13 074
interest
Non-current liabilities 51 974 72 649 52 962
- Policyholder liabilities 23 662 21 917 23 662
under insurance contracts
- Interest-bearing 22 063 42 373 22 166
borrowings
- Deferred taxation 6 249 8 359 7 134
Current liabilities 1 012 556 867 893 839 299
- Insurance liabilities 841 191 728 670 747 963
- Vendors for cash 95 2 924 3 049
- Trade and other payables 5 163 409 90 968 80 598
- Current portion of 5 080 39 814 5 142
interest-bearing borrowings
- Taxation 2 752 3 430 2 501
- Bank overdraft 29 2 087 46
Total equity and liabilities 1 302 568 1 185 084 1 121 148
Net asset value per share 89.19 89.85 86.23
(cents)
Tangible net asset value per 70.10 54.72 67.59
share (cents)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited 6 Unaudited Audited
months restated 12 months
ended 6 months ended
28 Feb 2009 ended 31 Aug 2008
R`000 29 Feb 2008 R`000
R`000
Net cash flows from operating 20 461 (10 365) 22 870
activities
- Continuing operations 20 461 (14 700) 19 759
- Discontinued operation - 4 335 3 111
Net cash flows from investing 10 377 17 692 43 575
activities
- Continuing operations 10 377 17 911 43 874
- Discontinued operation - (219) (299)
Net cash flows from financing (9 332) 2 980 (21 184)
activities
- Continuing operations (9 332) 6 979 (13 227)
- Discontinued operation - (3 999) (7 957)
Total cash movement for the period 21 506 10 307 45 261
Cash at the beginning of the period 212 997 179 474 179 474
Cash disposed of - - (11 738)
Total cash at the end of the period 234 503 189 781 212 997
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Retaine Other Minorit Total
capital d reserve y R`000
and earning s R`000 interes
share s R`000 t R`000
premium
R`000
Balance at 1 September 170 315 807 19 193 40 194 230 509
2007
Net proceeds from 10 000 - - - 10 000
issue of shares
Profit for the period - 2 710 - 3 395 6 105
Equity options issued - - 281 - 281
to executives
Contingency reserve - (1 389) 1 389 - -
transfer
Dividends paid - - - (2 353) (2 353)
Balance at 28 February 180 315 2 128 20 863 41 236 244 542
2008
Net proceeds from 18 905 - (18 - -
issue of shares 905)
Disposal of interest - - - (31 (31
in subsidiaries 361) 361)
Profit for the period - 12 472 - 4 360 16 832
Equity options issued - - 35 - 35
to executives
Contingency reserve - 1 389 (1 389) - -
transfer
Dividends paid - - - (1 161) (1 161)
Balance at 31 August 199 220 15 989 604 13 074 228 887
2008
Cost of issue of (35) - - - (35)
shares
Profit for the period - 7 253 - 4 424 11 677
Equity options issued - - 198 - 198
to executives
Dividends paid - - - (2 689) (2 689)
Balance at 28 February 199 185 23 242 802 14 809 238 038
2009
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of preparation
These condensed consolidated results have been prepared using accounting
policies compliant with IAS 34: Interim Financial Reporting,
International Financial Reporting Standards ("IFRS"), the Companies Act
(Act 61 of 1973), as amended and the Listings Requirements of JSE
Limited. The accounting policies used are consistent with those of the
prior period.
The interim results have not been audited or reviewed by the group`s
auditors.
2 Changes in share capital
R35 000 in share issue expenses were written off against share premium
during the period under review.
Details of shares in issue as at the balance sheet dates are as follows:
28 Feb 29 Feb 31 Aug
2009 2008 2008
`000 `000 `000
Number of shares in issue 250 277 226 277 250 277
- Shares in issue 256 380 232 380 256 380
- Shares held as treasury shares (6 103) (6 103) (6 103)
Weighted average number of shares 250 277 225 856 232 166
- Shares in issue 256 380 231 959 238 269
- Shares held as treasury shares (6 103) (6 103) (6 103)
Fully diluted weighted average 251 334 250 954 233 095
number of shares
- Shares in issue 257 437 257 057 239 198
- Shares held as treasury shares (6 103) (6 103) (6 103)
3 Disposal of subsidiaries
Conduit Capital disposed of its 50.05% interest in Gateway Capital
Limited ("Gateway") (which is active in the specialised structured
finance industry with a focus on property secured finance activities)
with effect from 31 July 2008. As a result of the sale, Gateway is
reflected as a discontinued operation in the group`s accounts. Published
results from prior periods have been restated for comparative purposes.
The discontinued operation produced the following results during the
periods under review:
Unaudited
6 months Unaudited Audited
ended restated 12
28 Feb 6 months months
2009 ended ended
R`000 29 Feb 31 Aug
2008 2008
R`000 R`000
Revenue - 11 848 26 688
Direct expenses: Cost of sales - (5 766) (15
331)
Administration and other expenses - (1 600) (3 307)
Depreciation and amortisation - (102) (226)
Employee costs - (1 307) (2 493)
Operating profit - 3 073 5 331
Investment income - - 112
Negative goodwill on acquisition - - 678
of subsidiaries
Finance charges - (309) (661)
Profit before taxation - 2 764 5 460
Taxation - (1 034) (1 816)
Profit for the period - 1 730 3 644
No subsidiary companies were disposed of during the six months under review.
4 Reconciliation of headline earnings
Unaudited
6 months Unaudited Audited
ended restated 12
28 Feb 6 months months
2009 ended ended
R`000 29 Feb 31 Aug
2008 2008
R`000 R`000
Profit for the period from 11 677 4 375 19 293
continuing operations
Minority interest in profit from (4 424) (2 531) (5 935)
continuing operations
Earnings used in the calculation 7 253 1 844 13 358
of basic earnings per share from
continuing operations
Loss on disposal of subsidiaries - - 193
After tax profit on revaluation of - - (302)
investment properties
Unclaimed shares written back - - (125)
Loss on disposal of property, 4 7 23
plant and equipment (net of tax)
Impairment of goodwill - - 185
Headline earnings from continuing 7 257 1 851 13 332
operations
Headline earnings from - 866 1 485
discontinued operation
Attributable profit for the period - 866 1 824
from discontinued operation
Less: Negative goodwill on - - (339)
acquisition of subsidiary
Headline earnings 7 257 2 717 14 817
5 Trade receivables and trade payables
Implementation of the Insurance and Risk Services division`s new ledger
system enabled the group to give a more accurate breakdown between
receivables and payables in the current period than what was previously
possible. As a result, certain receivables and payables balances are
shown on a gross basis as at 28 February 2009, whilst they have been set
off in comparative periods. Prior periods` numbers are not restated; any
restatement would however have had no impact on net assets, tangible net
assets, earnings or headline earnings.
6 Directors
There were no changes to the directorate during the period under review.
7 Dividends
The directors did not recommend any dividend payment to ordinary
shareholders for the six months ended 28 February 2009 (February 2008:
Nil; August 2008: Nil).
8 Post balance sheet events
There were no material post balance sheet events.
COMMENTARY
GROUP OPERATIONAL REVIEW
1 HEAD OFFICE AND TREASURY
The group`s conservative investment strategy and limited exposure to
equity markets (R2.6 million as at 28 February 2009) resulted in group
cash and near cash resources available for investment increasing to
approximately R140 million (29 February 2008: R110 million). These funds
are in addition to existing working capital utilised within the group.
2 CONDUIT INSURANCE AND RISK SERVICES
Underwriting
As previously reported, the reduction in gross premium is attributable to
the cancellation of non-performing insurance books, in addition to the
decline in inward Customer Protection Insurance as a result of the
takeover of Ellerine Holdings Limited by African Bank Limited. Although
the short-term insurance portfolio performed above expectations, the
challenge is to grow premium while navigating through a general insurance
market awash with inferior quality premium. We are confident that we have
the people, skills and systems to successfully do so and, as with our
investment portfolio, we will implement a growth strategy with due care.
Investments
In the period under review, the investment portfolio was further weighted
in favour of cash. Whilst this has proved beneficial in the short term,
the declining interest rate environment necessitates that we extend the
portfolio to cover alternatives which offer improved returns. These
alternatives will be carefully explored with due regard given to the
protection of capital.
Statutory funding ratio and credit rating
The statutory funding ratio of the insurance division`s main asset,
Constantia Insurance Company Limited ("Constantia"), improved from 29% on
29 February 2008 to 56% as at 28 February 2009 (Statutory requirement:
15%). Constantia`s international solvency margin increased to 65% as at
28 February 2009 (2008: 47%).
Global Credit Rating has recently re-affirmed Constantia`s A- credit
rating.
3 CONDUIT FINANCIAL SERVICES
Conduit Fund Managers (Proprietary) Limited ("CFM")
As previously reported, CFM`s activities are for the time being
restricted to the management of group investments.
4 CONDUIT DIRECT
Anthony Richards & Associates (Proprietary) Limited ("ARA")
ARA performed particularly well in the last six months and reported a
241.8% improvement in earnings compared to the previous corresponding
financial period. The operation is exceptionally well run and is expected
to perform well in the second half of the year, further entrenching its
position as a leader in the debt recovery market.
CONCLUSION
The group finds itself in the unique and favourable position where its
capital significantly exceeds both its working capital requirements and any
reasonable growth requirements. While this has been no mean feat in the
current environment, we are by no means content with our achievements. We
are of the view that the current environment, while challenging, offers good
opportunities and we intend to take advantage of these by appropriately
expanding our insurance activities and gradually returning to an active
investment strategy, both within and external to the insurance portfolio. To
achieve this we will seek out opportunities that match our skill set and
investment appetite. We envisage that this process will take time and is not
expected to yield short term results, but we are confident that we will be
able to find opportunities that will unlock significant value for the group
over the medium to long term. This will in no way detract from our focus on
our existing operations where our strong balance sheet and conservative
policies have served us well.
For and on behalf of the Board
Jason D Druian Lourens E Louw
Chief Executive Officer Financial Director
Johannesburg
7 May 2009
Directors:
Executive directors: Jason D Druian (CEO), Lourens E Louw (Financial
Director), Stanley D Shane
Non-executive directors: Reginald S Berkowitz (Chairman), Scott M
Campbell, Gunter Z Steffens OBE
Company secretaries:
Probity Business Services (Proprietary) Limited
Third Floor, JHI House, 11 Cradock Avenue
Rosebank, 2196
Registered address:
Unit 7 Tulbagh, 360 Oak Avenue
Randburg, 2194
PO Box 97, Melrose Arch, 2076
Telephone: 011 789 3342
Facsimile: 011 789 3709
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
Ground Floor, 70 Marshall Street
Johannesburg, 2001
Auditors:
Grant Thornton
Chartered Accountants (SA)
Registered Auditors
Member of Grant Thornton International
Sponsor:
Merchantec (Proprietary) Limited
Date: 07/05/2009 17:03:01 Supplied by www.sharenet.co.za
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