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PRESS RELEASES

 

VenFin PERFORMS IN CHALLENGING MARKETS

9 September 2003

  • Headline earnings of 130.2 cents per share
  • Headline earnings per share for the 12 months to 30 June 2003 increased by 10.8% to 130.2 cents, from the adjusted headline earnings of 117.5 cents for the 15-month period to 30 June 2002.
  • Headline earnings per share based on a comparative 12-month period increased by 42.8% to 130.2 cents from adjusted headline earnings of 91.2 cents per share in 2002
  • Maiden dividend per share 25 cents

VenFin Limited (VenFin), the technology, telecommunication and media investment holding company, today announced results for the year ended 30 June 2003.

VenFin changed its year-end from 31 March to 30 June in the 2002 financial period. The results for the comparative 15-month period ended 30 June 2002 are therefore not directly comparable with those for the 12 months ended 30 June 2003. The other main change relates to e-tv, which has become an associated company during the period under review. e-tv's results are therefore now equity accounted. In the past, it was accounted for as a loan and an adjustment was made to reflect the impact of treating it as an associated company.

Headline earnings for the 12 months to 30 June 2003 was R665 million compared to headline earnings of R707 million for the 15 months to 30 June 2002. Headline earnings per share was 130.2 cents for the 12 months to 30 June 2003 compared to 135.7 cents for the 15-month period to 30 June 2002.

Headline earnings per share for the 12 months to 30 June 2003 increased by 10.8% to 130.2 cents, from the adjusted headline earnings of 117.5 cents for the 15-month period to 30 June 2002.

Based on a comparative 12-month period to 30 June 2002, the increase in headline earnings per share for the year to 30 June 2003 would have been 42.8%, from an adjusted 91.2 cents to 130.2 cents.

The group's main sources of earnings were from Vodacom Group (Proprietary) Limited (Vodacom) (15% interest), which contributed approximately 57% (2002: 62% for a 13.5% interest) to headline earnings, the associated company R&V Holdings Limited (R&V) (33.3% interest), contributed 32% (2002: 39%) to headline earnings, and the interest received from other cash resources which contributed 19% (2002: 18%) to group earnings.

Net asset value, at market value and director's valuation of investments, which VenFin sees as an important indicator of its performance as an investment holding company, amounted to R24.17 per share compared to R27.11 per share at 30 June 2002. This decrease resulted from two primary factors: In the first instance, the drop in the valuation of the group's share in R&V as a result of the strengthening of the rand. In the second instance, the drop in the Richemont share price.

Cash and cash equivalents amounted to R1 414.0 million (2002: R860 million) at year-end. Of this amount, R1 246.9 million (2002: R619.0 million) represents cash in South Africa, while R167.1 million (2002: R246.5 million) is held in foreign currency by RGH Holdings, a foreign administered subsidiary. This excludes the cash held by R&V, an associate. The portion of R&V's cash attributable to VenFin was
R1 712.0 million (2002: R2 992.0 million).

Commenting on the results, Dillie Malherbe, VenFin Chief Executive Officer, said:

"Although the year under review has been challenging for our investments, all our investee companies, besides Intervid, met our expectations. Strong action has been taken by the Intervid Board to address the problems in the business.

"Taking everything into account, VenFin managed to perform well and ended the year with a strong balance sheet, no gearing and with shareholders' funds totaling R8 205 million."

Operational overview

Vodacom again performed strongly, with headline earnings of R2 308 million and an EBITDA margin of 33.9% for its year ended 31 March 2003. Vodacom's headline earnings for the three months from 1 April 2003 to 30 June 2003 was R699 million.

The majority of R&V's earnings is interest earned on cash and interest generated through the Alexander Forbes and Dimension Data convertible bonds.

The decrease in earnings from R&V is mainly attributed to the accounting of 12 months earnings as opposed to 15 months in the previous period.

Corporate's (wholly-owned subsidiaries) contribution of net interest income to headline earnings increased by 14.3% to R128 million (2002: R112 million), mainly as a result of a higher average cash balance, as well as the high interest rate levels that prevailed on local cash.

Dividends received from other investments contributed R19.7 million (2002: R29.1 million) to headline earnings.

Provision for impairment of investments and goodwill amounting to R70 million has been made as follows:

  • An impairment provision amounting to R13 million has been made against the carrying value of FRS due to it still being at a development stage
  • The unamortised goodwill created on the investments previously made in Intervid amounting to R34 million, and SAIL amounting to R23 million, were impaired to reflect the diminution in the value of these assets.

The write-down by R&V of the Intervid International convertible loan amounting to R226 million is included in the impairment of assets of associated companies amounting to R234 million.

Investment portfolio

During the period, the most significant changes to VenFin's investment portfolio were:

  • The acquisition of an additional 1.5% interest in Vodacom from Hosken Consolidated Investments Limited (HCI), with effect from 31 December 2002 for a total consideration of R451.1 million. The proceeds from the Richemont transaction mentioned below, were in part used to settle this amount. At 30 June 2003, VenFin's interest in Vodacom was 15.0%.
  • On 31 December 2002, VenFin exercised the put option acquired from Merrill Lynch International in respect of 51 858 000 Richemont depositary receipts held by VenFin ("the Richemont transaction"). The net cash proceeds realised by VenFin as a result of exercising the put option amounted to R942.9 million (R18.18 per share). An after-tax capital surplus of R347.5 million was realised and is accounted for as an exceptional item.
  • In March 2003 ICASA approved the equity interest in e-tv. VenFin's indirect interest in e-tv was 33.0% on 30 June 2003.
  • An additional investment of $4 million was made in GenuOne. At 30 June 2003, VenFin's effective interest in GenuOne was 36.9%.
  • An investment of R11.4 million was made in Idion. At 30 June 2003, VenFin's effective interest in Idion was 6.0%.
  • The approval of an investment of $1.5 million in Veritas Venture Partners Fund II, L.P. of which $150 000 had been drawn at 30 June 2002. During the period under review an additional $150 000 was drawn.
  • During November 2002, VenFin invested a further R3 million in Financial Reporting Solutions. At 30 June 2003, the interest in FRS was 42.9%.
  • VenFin sold its interest in Fibalogic on 30 September 2002. A capital loss of R4.3 million was realised and is accounted for as an exceptional item.
  • On 31 December 2002, associate R&V subscribed for a $100 million seven-year convertible bond issued by Dimension Data Holdings plc (Didata). If converted, R&V will hold an equity interest of approximately 12.3% of the fully diluted share capital of Didata.

During the period under review, VenFin acquired an additional 14 246 966 ordinary VenFin shares for a total amount of R228.3 million. These shares, together with the 7 400 000 shares bought during the fifteen months ended 30 June 2002, are held as treasury shares. The 21 646 966 shares bought to date represent 4.4% of the issued ordinary shares of 1 cent each.

Commenting on the group's prospects, Malherbe said:

"Although we are seeing some signs of economic recovery internationally, it is at a slow pace. In South Africa, the outlook is slightly better and we believe we are operationally well positioned for future growth in both markets.

"We will be continuing to evaluate new investment opportunities on a regular basis both inside and outside South Africa. Our investment strategy is to take a long-term view and we believe that the current market offers good opportunities, " Malherbe concluded.

A maiden dividend of 25 cents per share was declared.


Directors

Messrs M J Bosman, A G Fletcher, E Links and Prof E C Botha were appointed as independent non-executive directors on 8 September 2003.

Notes to editors:

An analysis and detailed composition of the performance of the various investments appears in the paid advertisement and a full operational review of all investments can be found in the group's 2003 annual report, due for distribution by the end of September 2003.

Shortened Curricula Vitae of four VenFin Limited independent non-executive directors appointed on 8 September 2003


1. Mike Bosman
Age 42
Directorships:- Director of Primedia Limited, Klein Champagne (Proprietary) Limited and Skystream Air Charters (Proprietary) Limited

2. Liesbeth Botha
Age 41
Directorships:- Director of Unistel Group Holdings, Manager of Innovation, Stellenbosch University and fellow of the CSIR

3. Anthony Fletcher
Age 51
Directorships:- Executive Deputy Chairman of ELB Group Limited and director of the Industrial Development Corporation of South Africa Limited and Explorer Corporation Holdings Limited.

4. Elias Links
Age 56
Directorships:- Director of Pepkor Limited, Business Partners Limited and Lion of Africa Insurance Company Limited