RNS Number:7990J
Old Mutual South Africa Trust PLC
09 April 2003
OLD MUTUAL SOUTH AFRICA TRUST PLC
Unaudited interim results for the period ended 28 February 2003
Investment Manager's Report
Review of performance
For the six months to 28 February 2003, the Trust outperformed its benchmark by
3.9%, returning 15.0% compared to 11.1% for the Index, in capital sterling
terms. The sterling total return outperformance was 2%. Performance was
supported by a higher weighting in small and mid-cap industrial stocks which
benefited from strong domestic growth. General stock selection across the
sectors, the largest overall contributor in terms of attribution, also helped
lift performance. Absolute returns were boosted by the rand appreciation against
sterling over the period.
The South African equity market
South Africa was one of the best performing markets in 2002 and the rand was the
best performing currency. During the six months since August 2002, the FTSE/JSE
All Share Index (the "Index"), the benchmark for the Trust, climbed 11.1% in
capital sterling terms. In capital rand terms, the Index fell 13.2%, with all
major sectors recording losses against the backdrop of weak global sentiment and
the impact on local earnings of the strong rand, which appreciated over 28%. The
Financial Index declined 8.7% in rand terms, but was still the best performing
sector, reflecting its continued relative appeal. Industrials fell 15.2%, in
line with worldwide scepticism about the outlook for IT stocks. Resources
declined 14% as a result of the net effect of rising commodity prices and a
strengthening rand.
The South African economy
The South African economy remained relatively buoyant during 2002, despite weak
global demand and four interest rate hikes. GDP grew at a rate of 3.0%, twice
the global average, for the tenth successive year of positive growth. While
recent indicators point to a moderate slowdown in economic activity early in
2003, a significant downturn is unlikely. Strong growth in government
consumption and infrastructure spending, significant individual tax cuts in the
February budget and sustained momentum in private capital spending should
prevent a strong downturn in local economic activity. Consumer spending, in
particular, has remained firm, supported by strong wage growth and the tax cuts.
Consequently, growth is forecast to average about 2.5% in 2003, only moderately
slower than in 2002.
A key supporting force to domestic demand is fiscal policy. Government released
yet another market-friendly budget in February, which balanced fiscal prudence
with greater social and capital spending and significant individual tax cuts. It
also announced further steps in the process of gradual exchange control
relaxation. The budget deficit is projected to rise to 2.4% (1.4% in the
previous fiscal year), which is low by historical and international standards.
While the expansionary nature of the budget is welcome, it has implications for
monetary policy. Last year's surge in inflation was the motivating factor behind
the rise in interest rates. Inflation is expected to decline sharply in 2003.
CPIX inflation peaked at 12.7% in November 2002 and has already eased to 11.3%
in February 2003. CPIX is expected to fall to just within the South African
Reserve Bank's ("SARB") 3%-6% target range by year-end. It is unlikely that the
SARB will start to reduce interest rates until it is convinced that there is a
strong downtrend in inflation. Consequently, it is expected that the SARB will
maintain its current stance for a while longer, with the first rate cut forecast
for June.
Outlook
While the South African economy is expected to slow moderately further in the
first half of 2003, with the impact of high interest rates, a strong rand and
weak foreign demand, growth is forecast to pick up during the second half of the
year. The expansionary fiscal stance, expected lower interest rates and,
hopefully, improved global conditions (including lower energy prices) should
lend new support to the economy as the year progresses.
South African equities look cheap in their own right, on a price-earnings basis,
as well as relative to bonds. Based on an excellent dividend yield, they also
look particularly attractive. The risk for the South African market remains the
pressure from global equity markets. As long as the war with Iraq continues,
world economic recovery is in question and volatility in international markets
is likely to persist.
Old Mutual Asset Managers (Bermuda) Ltd
8 April 2003
Unaudited Statement of Total Return
(incorporating the revenue account*)
for the six months to 28 February 2003
Unaudited Unaudited
Six months to 28 February 2003 Six months to 28 February 2002
Revenue* Capital Total Revenue* Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Gains/(losses) on - 5,247 5,247 - (12,082) (12,082)
investments
Exchange - (388) (388) - 21 21
(losses)/gains on
capital items
Income 670 - 670 522 - 522
Investment (43) (128) (171) (45) (136) (181)
management fee
Other (143) - (143) (160) - (160)
administrative --------------- ---------- ---------- ------------- ------------ ------------
expenses
Net return/(loss) 484 4,731 5,215 317 (12,197) (11,880)
on ordinary
activities before
finance costs and
taxation
Interest payable (29) (88) 117) (16) (49) (65)
and similar charges --------------- ---------- ---------- ------------- ------------ ------------
Net return/(loss) 455 4,643 5,098 301 (12,246) (11,945)
on ordinary
activities before
taxation
Taxation on (142) 142 - (55) 55 -
ordinary activities --------------- ---------- ---------- ------------- ------------ ------------
Net return/(loss) 313 4,785 5,098 246 (12,191) (11,945)
on ordinary --------------- ---------- ---------- ------------- ------------ ------------
activities after
taxation
Realised gain on - - - - 3,329 3,329
lapse of warrants
Final dividend - - - - - -
2002: 1.29p --------------- ---------- ---------- ------------- ------------ ------------
Transfer to/(from) 313 4,785 5,098 246 (8,862) (8,616)
reserves ======== ====== ====== ======= ======= =======
Return/(loss) per 0.60p 9.14p 9.74p 0.47p (23.30p) (22.83p)
ordinary share** ======== ====== ====== ======= ======= =======
Audited
Year to 31 August 2002
Revenue* Capital Total
#'000 #'000 #'000
Gains/(losses) on investments - (14,199) (14,199)
Exchange (losses)/gains on capital items - 175 175
Income 1,165 - 1,165
Investment management fee (91) (271) (362)
Other administrative expenses (289) - (289)
------------ ------------ ---------
Net return/(loss) on ordinary activities before finance 785 (14,295) (13,510)
costs and taxation
Interest payable and similar charges (48) (144) (192)
--------------- ------------ ------------
Net return/(loss) on ordinary activities before taxation 737 (14,439) (13,702)
Taxation on ordinary activities (164) 164 -
--------------- ------------ ------------
Net return/(loss) on ordinary activities after taxation 573 (14,275) (13,702)
--------------- ------------ ------------
Realised gain on lapse of warrants - 3,329 3,329
Final dividend 2002: 1.29p (675) - (675)
------------ ------------ ----------
Transfer to/(from) reserves (102) (10,946) (11 ,048)
======= ======= =======
Return/(loss) per ordinary share** 1.10p (27.29p) (26.19p)
======= ======= =======
The revenue columns of this statement represent the revenue accounts of the Company.
** See note 1.
Balance Sheet
as at 28 February 2003
Unaudited Unaudited Audited
at 28 February 2003 at 28 February 2002 at 31 August 2002
#'000 #'000 #'000
Fixed assets
Investments 39,396 34,301 34,652
--------------- --------------- ---------------
Current assets
Debtors 51 439 140
Cash at bank 180 268 33
--------------- --------------- ---------------
231 707 173
--------------- --------------- ---------------
Creditors - amounts falling due within one year (2,820) (867) (3,116)
--------------- --------------- ---------------
Net current liabilities (2,589) (160) (2,943)
---------------- ---------------- ----------------
Net assets 36,807 34,141 31,709
========= ========= ========
Capital and reserves
Called-up share capital 5,232 5,232 5,232
Share premium account 19,001 19,001 19,001
Warrant reserve
- exercised 26 26 26
Special reserve 22,000 22,000 22,000
Capital reserve
- realised (12,420) (11,940) (11,596)
- unrealised 1,681 (1,500) (3,928)
Revenue reserve 1,287 1,322 974
--------------- --------------- ---------------
Equity shareholders' funds 36,807 34,141 31,709
======== ======== ========
Net asset value per ordinary share* 69.7p 64.8p 60.6p
======== ======== ========
* See note 2.
Cash Flow Statement
for the six months to 28 February 2003
Unaudited Unaudited Audited
Six months to Six months to Year to
28 February 2003 28 February 2002 31 August 2002
#'000 #'000 #'000
Net cash inflow from operating activities 389 154 321
Interest paid (117) (88) (214)
Total tax recovered - - 196
Net cash inflow from purchases and sales of 547 5,397 2,957
investments
Equity dividends paid (675) (675) (675)
------------------ ------------------ ------------------
Net cash inflow before financing 144 4,788 2,585
Net cash outflow from financing (18) (4,610) (2,096)
------------------ ------------------ ------------------
Increase in cash 126 178 489
========== ========== ==========
Reconciliation of operating revenue before
finance costs and taxation to net cash flow from
operating activities
Net revenue before interest payable and taxation 484 317 785
Scrip received on share capitalisation awards (6) (22) (136)
Decrease/(increase) in accrued income 47 50 (29)
Decrease/(increase) in other debtors 4 (20) (12)
Decrease in creditors (12) (35) (16)
Investment management fee charged to capital (128) (136) (271)
---------------- ---------------- ----------------
Net cash inflow from operating activities 389 154 321
========= ========= ==========
Reconciliation of net cash inflow to movement in
net debt
Increase in cash as above 126 178 489
Cash outflow from financing 18 4,610 2,096
------------------ ------------------ ----------------
Change in net debt resulting from cash flows 144 4,788 2,585
Exchange movements (388) 21 175
------------------ ------------------ -----------------
Movement in net debt during the year (244) 4,809 2,760
Net debt at beginning of the period (2,280) (5,040) (5,040)
------------------- ------------------- -----------------
Net debt at the end of the period (2,524) (231) (2,280)
=========== =========== =========
Represented by:
Cash at bank and short term deposits 180 268 33
Debt falling due within one year (2,704) (499) (2,313)
------------------ ------------------ -----------------
(2,524) (231) (2,280)
========== ========== ==========
NOTES
1. Return/(loss) per ordinary share
Revenue return per ordinary share is based on the net revenue on ordinary
activities after taxation of #313,000 (six months to 28 February 2002: #246,000;
year to 31 August 2002: #573,000) and on 52,326,063 ordinary shares (six months
to 28 February 2002: 52,326,063; year to 31 August 2002: 52,326,063) being the
weighted average number of ordinary shares in issue during the period.
Capital gain per ordinary share is based on net capital gains of #4,785,000 (six
months to 28 February 2002: loss of #12,191,000; year to 31 August 2002: loss of
#14,275,000) and on 52,326,063 ordinary shares (six months to 28 February 2002:
52,326,063; year to 31 August 2002: 52,326,063) being the weighted average
number of ordinary shares in issue during the period.
2. Net asset value per share
The net asset value per ordinary share at 28 February 2003 and 28 February 2002
excludes current period retained revenue of #313,000 and #246,000 respectively.
3. Issued share capital
At 28 February 2003 there were 52,326,063 ordinary shares in issue (28 February
2002 and 31 August 2002: 52,326,063).
4. 2002 Accounts
The figures and financial information for the year to 31 August 2002 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies and included
the report of the Auditors which was unqualified and did not contain a statement
under either section 237(2) or 237(3) of the Companies Act 1985.
The interim report will be issued to shareholders in late April 2003 and further
copies will be available from the Company's registered office.
For further information, contact:
Helen Horton
Cogent Secretarial Services Limited
Tel: 020 7410 3132
Investment Portfolio
Ten largest holdings as at 28 February 2003
Sector Market value of % of total net
holdings (#'000) assets
Anglo American plc Mining resources 5,306 14.4
BHP Billiton Mining resources 2,859 7.8
Gold Fields Mining resources (gold) 2,494 6.8
Sasol Non-mining resources 2,324 6.3
Gencor Mining resources (platinum) 1,872 5.1
Remgro Diversified industrial 1,754 4.8
Standard Bank Group Banks 1,648 4.5
United Service Technologies Transport 1,451 3.9
Murray & Roberts Holdings Construction and building materials 1,390 3.8
Nedcor Banks 1,319 3.6
Total 22,417 61.0
The net assets had a total value of #36,807,000 (R467,574,000). The rate of
exchange on 28 February 2003 was R12.7034 to #1.
Structure of the Trust
as at 28 February 2003
#m % of total net
assets
Industrial shares 14.4 39.1
Financial shares 7.9 21.5
Mining resources 13.8 37.5
Non-mining resources 3.3 9.0
Total direct investment* 39.4 107.1
Net current liabilities (2.6) (7.1)
-------- --------
Total net assets 36.8 100.0
===== =====
Structure of the Trust by market capitalisation
as at 28 February 2003
% of direct investment* % of FTSE/JSE All
Share Index
Large-market capitalisation (top 40) 79.3 86.7
Mid-market capitalisation (next 60) 16.4 10.9
Small-market capitalisation (remaining 4.3 2.4
companies)
-------- --------
Total 100.0 100.0
===== =====
*Total direct investment is taken to include ordinary shares, preference shares
and loan stocks issued by South African companies.
NAV and share price in sterling terms
as at 28 February 2003
2003 2002
Net asset value ('NAV') (pence) 69.7 64.8
Ordinary share price (pence) 59.0 54.5
Performance comparison percentage change in sterling terms
to 28 February 2003 (capital returns)
Share price JSE Fin & Ind FTSE/JSE All NAV
Share
6 months since 31 August 2002 26.2 11.1 15.0
12 months since 28 February 2002 8.3 10.8 7.6
14 months since 31 December 2001 21.0 10.6 19.2
1 year to 31 December 2001# (34.1)* (40.1) (37.6)
2 years to 31 December 2001# (52.0)* (51.4) (54.3)
5 years to 31 December 2001# (43.5)* (52.1) (45.2)
# This data shown to 31 December 2001 and compared to the JSE Actuaries
Financial and Industrial Index which was the benchmark from inception. The
benchmark was changed to the JSE Actuaries All Share Index from 1 January 2002
(subsequently renamed FTSE/JSE All Share Index)
* For these periods this figure was a share price package incorporating the
price of the warrants. The warrants have now lapsed following the final exercise
on 31 December 2001.
This information is provided by RNS
The company news service from the London Stock Exchange
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