Financial Services Correspondent

EMBATTLED financial services company Corpcapital reported a 23% drop in headline earnings yesterday for a tough six-month period to February.

Rocked by allegations of corporate governance misdeeds and illegal spying activities made by former director Nic Frangos, Corpcapital's share price and reputation have taken a beating.

Headline earnings a share fell to 19,8c from 25,6c for the comparable six months, and the value of the controversial Cytech investment fell R45m.

CEO Jeff Liebesman said the results were actually "quite an improvement", given that Corpcapital spent most of last year closing its banking operations and streamlining into its current incarnation as an investment group focused on private equity and property.

In the 12 months from February last year, Corpcapital returned more than R1bn in deposits as it wrapped up Corpcapital Bank.

Liebesman said that as the business model changed so dramatically, a better gauge of performance would be comparing the 19,9c earnings a share to the 9,9c figure for the last six months of its previous financial year. "If you look at the six months to the end of August 2002, you'll see that we actually doubled our performance in the six months to the end of February this year."

A strengthening rand knocked R29,6m off Corpcapital's headline earnings to R67,6m. Excluding currency movements, headline earnings showed a slight gain over last year's figure of 25,6c.

The best performance was from Corpbuild, with pretax profit leaping 80% to R35m, and its property asset management and consulting division. Streamlining will see personnel halved from February last year and this June.

One Frangos claim was the overvaluation of subsidiary Cytech in 2001, enabling Corpcapital to artificially boost its balance sheet. Having bought Cytech for R4,5m in 1999, Corpcapital was carrying it at R110m on its books until yesterday. This value has now been reduced to about R65m after a goodwill amortisation of about R20m and an impairment of R24,7m caused by exchangerate losses.

In his report on the group's corporate governance, Nigel Payne cleared it of claims of overvaluing Cytech. Payne said valuations were "made according to proper process and were audited to their satisfaction by the external auditors, Fisher Hoffman".

Corpcapital is "unlocking value for shareholders" through realising certain investments, although sharpening focus on property. While it saw good prospects in some areas, Corpcapital expected difficult market conditions could affect strategy.

Corpcapital's share price lost 2,4% to close at 120c.
Apr 11 2003 07:09:35:000AM Rob Rose Business Day 1st Edition