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Johannesburg - Black-owned and managed financial services company Vunani [JSE:VUN] has reported diluted headline earnings per share of 19.3 cents for the six months ended June 2012, after a headline loss per share of 25.4c a year ago.
The company‚ which operates through two divisions - financial services and investment services - reported revenue from continued operations increased 12% to R51.18bn on the back of a heightened focus on the professional services operations.
The benefit of disposal-led restructuring resulted in net finance costs falling by 54%.
Vunani’s management said it was encouraged by the fact that in spite of low business confidence and negative sentiment‚ it returned a profit.
"This is an indication that the resolve and focus to address the legacy challenges the business has faced is starting to pay off‚" it said.
Investment income decreased by 64% to R0.6m owing to the realisation of a number of dividend yielding investments during 2011 and 2012 to reduce interest-bearing debt.
In the current period‚ profit on disposal of assets amounted to R1.5m as asset disposals tapered off. Positive fair value adjustments of R27.6m were largely due to the rerating of Vunani's investment in Vunani Property Investment Fund.
The asset management segment reported a profit of R0.5m for the six months‚ down from a profit of R6.3m in June 2011.
The corporate finance business had a tough start to the year on the back of significant uncertainty in the market delaying transactions.
A decision was taken to terminate the designated adviser services business that services JSE AltX companies, as its viability became questionable. This decision was implemented after period end‚ the company said.
While some bad debt write-offs were incurred‚ business activity has improved considerably since the beginning of the second quarter of the year‚ it said.
Investment holdings reflected a segment profit of R21.2m to June 2012 after a previous loss of R20.6m.
Positive fair value adjustments and reduced interest costs reflect the effort that was devoted to restructuring the investment holding portfolio to reduce the legacy debt issues‚ the company said.
The securities broking segment’s revenue increased by 12% to R24.6m despite difficult trading conditions. After the acquisition and consolidation of Kagiso Securities into the group‚ cost reduction became a focus for the 2012 year.
The segment loss improved from R2.2m in 2011 to R0.8m in 2012. However, management remains dedicated to further growing revenues and cost rationalisation to return the segment to profitability.
Looking ahead, the group said the financial and sovereign issues in Europe and the USA mean that the outlook for the global economy is not bright.
The real worry however is South Africa´s own unique challenges as the country looks for a stimulus for the economy.
There are a number of areas that will need to converge to create a positive outlook‚ which include addressing the structural constraints to growth recognised in the government's various growth plans.
Vunani believes that should investment and infrastructure spending be a key feature in the domestic economy‚ then the group is very well placed to take advantage of it.
"As things stand‚ with the economy forecast to grow by only 2.5 %‚ business will continue to be a challenge for areas such as the stockbroking broking and corporate finance business‚" it said.
Nevertheless, this will be mitigated by growth potential in the fund management and property businesses.
Management is committed to the restructuring of outstanding debt, which should significantly lower finance costs in the last quarter of the year and remains a priority for management for the second half of the year.
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The company‚ which operates through two divisions - financial services and investment services - reported revenue from continued operations increased 12% to R51.18bn on the back of a heightened focus on the professional services operations.
The benefit of disposal-led restructuring resulted in net finance costs falling by 54%.
Vunani’s management said it was encouraged by the fact that in spite of low business confidence and negative sentiment‚ it returned a profit.
"This is an indication that the resolve and focus to address the legacy challenges the business has faced is starting to pay off‚" it said.
Investment income decreased by 64% to R0.6m owing to the realisation of a number of dividend yielding investments during 2011 and 2012 to reduce interest-bearing debt.
In the current period‚ profit on disposal of assets amounted to R1.5m as asset disposals tapered off. Positive fair value adjustments of R27.6m were largely due to the rerating of Vunani's investment in Vunani Property Investment Fund.
The asset management segment reported a profit of R0.5m for the six months‚ down from a profit of R6.3m in June 2011.
The corporate finance business had a tough start to the year on the back of significant uncertainty in the market delaying transactions.
A decision was taken to terminate the designated adviser services business that services JSE AltX companies, as its viability became questionable. This decision was implemented after period end‚ the company said.
While some bad debt write-offs were incurred‚ business activity has improved considerably since the beginning of the second quarter of the year‚ it said.
Investment holdings reflected a segment profit of R21.2m to June 2012 after a previous loss of R20.6m.
Positive fair value adjustments and reduced interest costs reflect the effort that was devoted to restructuring the investment holding portfolio to reduce the legacy debt issues‚ the company said.
The securities broking segment’s revenue increased by 12% to R24.6m despite difficult trading conditions. After the acquisition and consolidation of Kagiso Securities into the group‚ cost reduction became a focus for the 2012 year.
The segment loss improved from R2.2m in 2011 to R0.8m in 2012. However, management remains dedicated to further growing revenues and cost rationalisation to return the segment to profitability.
Looking ahead, the group said the financial and sovereign issues in Europe and the USA mean that the outlook for the global economy is not bright.
The real worry however is South Africa´s own unique challenges as the country looks for a stimulus for the economy.
There are a number of areas that will need to converge to create a positive outlook‚ which include addressing the structural constraints to growth recognised in the government's various growth plans.
Vunani believes that should investment and infrastructure spending be a key feature in the domestic economy‚ then the group is very well placed to take advantage of it.
"As things stand‚ with the economy forecast to grow by only 2.5 %‚ business will continue to be a challenge for areas such as the stockbroking broking and corporate finance business‚" it said.
Nevertheless, this will be mitigated by growth potential in the fund management and property businesses.
Management is committed to the restructuring of outstanding debt, which should significantly lower finance costs in the last quarter of the year and remains a priority for management for the second half of the year.
* Follow Fin24 on Facebook, Twitter and Google+.
