Interim Results

MONTEAGLE HOLDINGS SOCIETE ANONYME (Incorporated in Luxembourg RC Number B19600) Registered Office: 6 rue Adolphe Fischer, L-1520, Luxembourg 26th June 2002 INTERIM REPORT 2002 TO THE MEMBERS We are pleased to be able to report on another satisfactory half year for our Group. During the last two years your directors have implemented a substantial change in the internal structure of the Group's balance sheet and the location of our assets. Without reducing our financial support or managerial encouragement to our operations in southern Africa, we have stripped out all non-essential assets and investments, and redeployed them into hard currencies. These actions not only proved to be timely, but are now greatly benefiting our expanding trading businesses both within southern Africa and internationally. Turnover for the Group, including our share of associates, has increased to US$28,620,000 for the six months to 31st March 2002, compared to US$17,511,000, mainly because of inflationary increases affecting our farming and gold mining interests in Zimbabwe. Profit before tax and exceptional items has increased from US$687,000 to US$2,066,000 and this is analysed by activity in note 2. Earnings per share have increased to US$14.4c from US$5.2c last year and are analysed in note 4. The Group had net assets at market value of US$33,712,000 (US$5.35 per share) at 31st March 2002. This compares to US$33,281,000 (US$5.28 per share) at 30th September 2001, after providing for the final dividend, and US$32,659,000 (US$5.18 per share) a year ago. As mentioned above the mix of these assets has changed and we now have US$17,413,000 (US$2.76 per share) outside southern Africa compared to US$12,719,000 (US$2.02 per share) a year ago. Our importing, exporting and international trading businesses showed good growth, and we look forward to a very satisfactory year end result. We have broadened the base of the products handled both into and out of southern Africa and also between other countries. We are now staffed by a young, yet experienced, and very energetic team. In California our commercial properties with a gross asset value of US$8,955,000 remained fully occupied and income rose once again. Since the half year closed, we have refinanced our commercial building at a reduced interest rate, and we are negotiating the sale of our office block at about US$500,000 above our book value. Should the transaction be completed, we will consider using the proceeds to acquire another multi-tenanted commercial building in California. However, the decline in value of the South African Rand against the US dollar has reduced the value of the contribution from our South African properties as shown in note 2. Of our total assets of US$5.35 per share, less than US$2.15 remain invested in Zimbabwe and shareholders must regard the value of these assets with caution. The profits generated in Zimbabwe show a substantial improvement, but this is largely due to a chaotic currency situation and it is therefore difficult to foresee the outcome for the full year. Commercial agriculture in Zimbabwe is very troubled and the uncertainty surrounding the Government's policy leaves our management with a hard task. With a high proportion of our agricultural production destined for export into hard currency areas, we are to a certain extent protected from rampant inflation of approximately 120 percent p.a. This situation is not sustainable, and Zimbabwe's agricultural production for export, and of food for local consumption, is diminishing rapidly. Our gold mining activities have decreased during the six-month period and sadly we have closed one of the four mines in the group. Losses have also been made by some of the other mines and the industry as a whole is in a parlous state. Although the Zimbabwe government introduced a gold price support scheme, which is adjusted from time to time, revenues are insufficient to sustain medium term viability of our mines in the face of ever increasing costs, unless there is a change in government policy. Special credit must go to all our employees in Zimbabwe for maintaining the operations of both the agricultural and gold mining business in our Group and we remain very concerned about the future of Zimbabwe. After the sale and reorganisation of our general portfolio holdings referred to above we had, as a group, approximately US$10,000,000 to reinvest. We had invested about 60% of these funds by 31st March 2002 and intend to use the next six months to continue our investment policy. Equity investments are now held across the markets of the United Kingdom, the United States of America, Switzerland and other European countries. At 31st March 2002 we had a surplus of market value above cost despite a very hesitant investment climate throughout the world. The diversity of our operations, our dedicated Group staff and our strong balance sheet give us confidence for the future. J.M. Robotham, D.C. Marshall Chairman Chief Executive CONSOLIDATED GROUP PROFIT AND LOSS ACCOUNT Half years ended Year ended 31st March 30th September 2002 2001 2001 Notes Unaudited Unaudited US$000 US$000 US$000 Group Revenue including share of 28,620 17,511 41,799 Associates Less revenue of Associates (15,386) (6,920) (15,861) ------------ ----------- ------------ Group revenue 2 13,234 10,591 25,938 Operating costs (12,408) (10,108) (24,155) ------------ ----------- ------------ Operating profit 826 483 1,783 Share of associated companies' results 1,255 274 2,052 Income from investments - dividends 105 197 317 - interest 112 76 294 ----------- ---------- ---------- 2,298 1,030 4,446 Interest paid and similar charges (232) (343) (1,494) ---------- ---------- ---------- Profit on ordinary activities before 2,066 687 2,952 exceptional items and taxation Exceptional items 3 12 83 6,450 ---------- ---------- ---------- Profit before taxation 2 2,078 770 9,402 Taxation (534) (231) (691) ---------- ---------- ---------- Profit after taxation 1,544 539 8,711 Attributable to outside shareholders (637) (205) (1,127) ---------- ---------- ---------- PROFIT ATTRIBUTABLE TO SHAREHOLDERS 907 334 7,584 ---------- ---------- ---------- Dividend per share (US cents) - - 8.5c Earnings per share (US cents) - basic 4 14.4c 5.2c 120.4c Headline earnings per share (US cents) 14.2c 4.3c 24.0c CHANGES IN EQUITY Net profit for the period 907 334 7,584 Revaluations - (38) - Exchange differences (517) (742) (316) Change in interest in subsidiaries - - (217) Dividends (536) (536) (536) ---------- ---------- ---------- Total recognised (losses)/profits (146) (982) 6,515 Shareholders funds at start of period 31,651 25,136 25,136 ----------- ---------- ---------- Shareholders funds at end of period 31,505 24,154 31,651 --------- ---------- ---------- CONSOLIDATED GROUP BALANCE SHEET 31st March 30th September 2002 2001 2001 Unaudited Unaudited Notes US$000 US$000 US$000 Fixed assets Tangible fixed assets 20,100 20,943 20,233 Investments 6 Listed associates (Market value - 12,701 10,324 11,285 US$14,718,000) Listed - other (Market value - 5,696 5,772 2,835 US$6,682,000) Unlisted associates 513 454 504 Other unlisted 130 38 21 ---------- ----------- ---------- 39,140 37,531 34,878 Current assets ---------- ---------- ---------- Inventories 7,648 5,170 7,066 Debtors 4,527 4,033 4,944 Cash 4,259 1,362 8,083 ---------- ---------- ----------- 16,434 10,565 20,093 Current liabilities Creditors (falling due within one (8,713) (10,115) (8,618) year) ---------- ----------- ---------- Net current assets 7,721 450 11,475 ---------- ----------- ---------- Total assets less current liabilities 46,861 37,981 46,353 Creditors (falling due after more than (3,280) (3,702) (3,485) one year) Provisions for liabilities and (3,073) (2,414) (2,636) deferred taxation ----------- ----------- ---------- 40,508 31,865 40,232 ======= ======= ======= Capital and reserves Share capital 9,450 9,450 9,450 Share premium - 2,411 - Other reserves 6,405 6,493 6,133 Retained earnings 15,650 5,800 16,068 ---------- ---------- ---------- Shareholders' funds 31,505 24,154 31,651 Minority interests 9,003 7,711 8,581 ---------- ---------- ---------- 40,508 31,865 40,232 ======= ======= ======= Shareholders funds including listed 5 33,712 32,659 33,817 investments at market value Net assets per share 6 US$5.35 US$5.18 US$5.37 Net assets per share outside Africa 6 US$2.76 US$2.02 US$2.76 after providing for proposed dividends CONSOLIDATED CASH FLOW STATEMENT Half years ended Year ended 31st March 30th September 2002 2001 2001 Unaudited Unaudited US$000 US$000 US$000 Operating activities Cash (absorbed by)/generated from (571) (109) 1,802 operating activities Interest paid (232) (343) (890) Taxation paid (487) (311) (604) ---------- ---------- ---------- Net cash (outflow)/inflow from (1,290) (763) 308 operating activities Investment activities Net purchase of tangible fixed assets (284) (158) (439) Purchase of investments (3,255) (210) (3,405) Disposal of investments - 775 13,946 Interest received and other investment 216 274 611 income Dividends received from associates 359 67 297 ---------- ---------- ---------- Net cash (outflow)/inflow from (2,964) 748 11,010 investment activities ---------- ---------- ---------- Net cash (outflow)/inflow before (4,254) (15) 11,318 financing ---------- ---------- ---------- Financing activities Net decrease in long term financing (71) (46) (245) Foreign exchange cost of subsidiary's - - (610) dividend Dividend paid - group - - (536) - minority shareholders - (8) (170) ---------- ---------- ---------- Net cash outflow from financing (71) (54) (1,561) activities ---------- ---------- ---------- Net (decrease)/increase in cash (4,325) (69) 9,757 Net funds/(debt) at start of period 7,388 (2,750) (2,750) Effect of foreign exchange rates (413) 179 381 ---------- ---------- ---------- Net funds/(debt) at end of period 2,650 (2,640) 7,388 ---------- ---------- ---------- Offices: United Kingdom: South Africa: 25 City Road, 11 Sunbury Park, London, EC1Y 1BQ La Lucia 4051, Durban Transfer agents: Europe South Africa C.I. Registrars Limited Computershare Investor Services Limited Cresta House, Alma Street, 11 Diagonal Street, Luton, Bedfordshire, Johannesburg 2001 LU1 2PU, U.K. (P.O. Box 1053, Johannesburg, 2000 NOTES TO THE INTERIM STATEMENT 1. The results and the cash flow statement for the half-year ended 31st March 2002 are unaudited and have been prepared on the basis of accounting policies adopted in the accounts for the year ended 30th September 2001 and comply with International Accounting Standards except as set out in note 8 and Luxembourg law in all material respects. The results for the year to 30th September 2001 are an abridged version of the Group's full accounts for that year which have been filed with the relevant authorities. 2. The segmental analysis of turnover and operating profit is as follows: - Half years ended 31st March Year ended 30th September 2002 2001 2001 US$000 US$000 US$000 Revenue Result Revenue Result Revenue Result Analysed by activity:- Import/distribution 7,691 524 7,323 415 16,874 1,064 Property 675 255 761 272 1,499 567 Agriculture 2,969 183 1,540 7 5,100 309 Gold mining 1,899 137 967 140 2,215 432 Other - (37) - (78) 250 22 -------- -------- -------- -------- -------- -------- 13,234 1,062 10,591 756 25,938 2,394 Share of associated companies results:- Agriculture 9,603 1,443 4,487 451 10,027 2,482 Gold mining 5,783 (188) 2,433 (177) 5,834 (430) --------- -------- -------- Group revenue including 28,620 17,511 41,799 associates -------- -------- -------- Interest paid (251) (343) (1,494) -------- -------- -------- Profit before exceptional 2,066 687 2,952 items Exceptional items 12 83 6,450 ------- -------- -------- Profit before tax 2,078 770 9,402 -------- -------- -------- The results of our agriculture and gold mining operations in Zimbabwe continue to be translated at the official rate of exchange for the Zimbabwe dollar, which has remained unchanged over the period at an unrealistic rate of Z$55: US$1. There is a parallel rate of exchange for the Zimbabwe dollar which has diverged considerably from the official rate and now stands in excess of Z$650: US$1. Income from agriculture and mining was earned at effective average exchange rates of approximately Z$220:US$1 and Z$81:US$1 respectively for the period under review. Comparable rates for the same period last year were approximately ZS80:US$1 and Z$55:US$1. With local inflation running in excess of 100% p.a. the existence of a fixed exchange rate distorts the true growth in the results of these operations. 3. The exceptional items arise from the surplus on disposal of investments and tangible fixed assets. 31st March 30th September 2002 2001 2001 US$000 US$000 US$000 Surplus on disposal of listed and unlisted - 104 7,036 investments (Deficit)/Surplus on disposals of tangible - (32) 3 fixed assets Share of associated company's surplus on 12 11 - disposal of fixed assets Investment provisions - - (589) -------- -------- -------- Exceptional items - net income 12 83 6,450 -------- -------- -------- 4. Earnings per share are based on profits attributable to members and on the average of 6,300,000 shares in issue during the period, allowing for the shares held in Treasury. Headline earnings per share exclude extraordinary items after tax. The source of these earnings is analysed geographically as follows: 31st March 30th September 2002 2001 2001 USc USc USc Zimbabwe 10.0 2.8 16.1 South Africa 1.7 (0.8) 1.5 Other including central costs 2.5 2.3 6.4 -------- -------- -------- Headline earnings per share 14.2 4.3 24.0 Exceptional gains 0.2 0.9 96.4 -------- -------- -------- Total earnings per share 14.4 5.2 120.4 --------- -------- -------- 5. Net assets 31st March 30th September 2002 2001 2001 US$000 US$000 US$000 Investments at book value 19,040 16,588 14,645 Listed investments at market value and other 22,043 25,920 17,870 investments at cost --------- ---------- ---------- Net unrealised profits on investments 3,003 9,332 3,225 (before tax) Minority share of excess (796) (827) (1,059) Shareholders' funds 31,505 24,154 31,651 ---------- ---------- ---------- Net assets attributable to shareholders 33,712 32,659 33,817 ---------- ----------- ---------- 6. Net assets per share are based on Shareholders' funds plus net unrealised profits on investments (before tax) divided by the number of shares in issue at the period end. 7. Net capital expenditure during the period was US$284,000. There was US$237,000 of authorised capital expenditure, but none was contracted at 31st March 2002. 8. Our Zimbabwe subsidiaries have not complied with IAS 29, Financial Reporting in Hyperinflationary Economies. All expenditure in Zimbabwe is subjected to a stringent cost/benefit analysis and the additional costs arising from the preparation and audit of restated accounts incorporating hyperinflation adjustments cannot be justified. In normal circumstances the exchange rates of countries suffering high levels of inflation depreciate to reflect inflation levels. However, the Government of Zimbabwe has ensured that the official Zimbabwe dollar exchange rate has remained relatively unchanged over the period. Consequently, we are unable to determine the full impact of any changes to the financial statements that would be required to adjust for the effects of hyperinflation. It is estimated that the only significant impact on the Group balance sheet would be to reverse prior year translation differences, which have reduced Zimbabwe fixed assets at the balance sheet dates, and to reduce unrealised exchange losses by a corresponding amount.

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