Page 17 - Stellar IAR2015

BOARD REPORT2015 FINANCIAL REVIEWFollowing the conversion from an operating entity to an investment holding company in January 2015, the Group completed the successful disposals of its investments in Digicore and Goliath Gold. The Group also established strategic stakes in Torre Industries (Industrials – equipment and aftermarket distribution) and Cadiz (Financial Services) alongside its other core investment in Tellumat (Industrials - Electronics and Communications) which was acquired as part of the conversion to an investment entity.CAPITALStellar Capital completed a R0.15 billion capital raise in January 2015 and raised a further R1 billion in November 2015 by way of a R400 million rights issue and R600 million convertible redeemable preference share issue. These corporate actions signi cantly strengthened the Group balance sheet and provided the Company with the nancial capacity to acquire the remaining stakes in Cadiz and Tellumat. The Group has further capital available to support growth in investee companies or to pursue standalone investment opportunities.NET ASSET VALUEThe initial conversion to an investment holding company, subsequent acquisitions and capital raises saw the net asset value of the Group increase from R179 million to R1.88 billion in less than 12 months. The NAVPS also increased from R1.92 to R2.03 as a result of concluding transactions and issuing shares in the Company at premiums to net asset value.OTHER MATERIAL BALANCE SHEET MOVEMENTSIn addition to concluding various transactions, excess capital was deployed towards high-yielding loan investments to mid-sized corporate third parties and investee companies. These loan exposures can be sold down in the event that a new investment opportunity arises, but in the interim they reduce the impact of cash drag on the Group’s performance.At year end, R200 million of the R1 billion capital raised had been paid as a deposit in anticipation of the closing of the acquisition of the Cadiz and Tellumat minorities.DIVIDEND POLICYThe Board has decided to retain a discretionary dividend policy in light of the very recent establishment of the investment portfolio and the capital required in terms of the growth strategies of Torre and Tellumat and turnaround strategy of Cadiz.No dividend has therefore been declared for the year under review.DIRECTORATEStellar Capital welcomed Mr CJ Roodt to the Board during the year under review. Mr CJ Roodt contributes a wealth of experience and business understanding for which we extend our appreciation. The appointment of Mr CE Pettit as Chief Executive O cer strengthens the Group’s deal-making capability, whilst Mr PJ van Zyl’s move to non-executive director has ensured continuity for the Group. Mr CB de Villiers, previously part of a team which assisted the transition from operating entity to investment holding company, joined the Board as Chief Financial O cer.HUMAN RESOURCESThe Group has appointed Thunder Securitisations (Pty) Ltd as dedicated investment manager. A small team of nance professionals and support sta work with the Chief Executive O cer in executing the investment strategy of Stellar Capital. The Company recovers the full payroll costs of support sta and executive director remuneration from the investment manager to the extent that it exceeds the approved non-executive remuneration level.FINANCE TEAMThe nance team has been strengthened during the year under review, entrenching its role as a support function to the Chief Executive O cer.STELLAR CAPITAL PARTNERS | 13