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BTG
BTG
BTG - BTG - Reviewed Preliminary Consolidated Financial Results For The
Year Ended 28 February 2007 and dividend declaration
Bytes Technology Group Limited
(Registration number 1911/003874/06)
(Incorporated in the Republic of South Africa)
Share Code: BTG & SIN: ZAE000029526
("BTG")
REVIEWED PRELIMINARY CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28
FEBRUARY 2007
Revenue up 18%
Operating profit up 16%
Adjusted headline earnings per share up 18%
Dividend up 24%
Net cash increased to R149 million
#1 BEE ranking in ICT sector
Condensed income statements
2007 2006
Figures in R million (Reviewed) (Audited)
Revenue 4 088 3 470
Operating costs (3 763) (3 189)
Operating profit before goodwill 325 281
adjustment, impairment and capital
items
Financial income 50 21
Financial expense (43) (36)
Finance lease settlement (note 1) (18) -
Goodwill adjustment and impairment (69) (38)
(notes 2 and 3)
Capital items (note 3) (5) 1
Profit before taxation 240 229
Taxation (87) (48)
Profit for the year 153 181
Attributable to:
Equity holders of Bytes 143 173
Minority interest 10 8
Earnings per share - basic (cents) 85,9 105,7
Earnings per share - diluted (cents) 66,1 85,8
Dividend per share paid (cents) 45,0 32,0
Dividend per share declared in 56,0 45,0
respect of that year (cents)
Notes:
1. In 1998 the group entered into a structured finance transaction with a
financial institution, the substance of which was a property finance sale
and leaseback arrangement which has subsequently been challenged by the
South African Revenue Service (SARS). SARS has disallowed certain interest
deductions claimed by the institution, resulting in a settlement in the
amount of R18 million being agreed in full and final settlement of the
taxation consequences of the transaction. In terms of the transaction the
group bears the risk of any adverse taxation consequences emanating from
the transaction. A deferred taxation asset of R3 million has been raised
representing the capital gains tax (CGT) impact. The group is not exposed
to any other structured finance transactions.
2. A deferred taxation asset of R16 million has been raised at year-end on
the assessable loss and deductible temporary differences in an acquired
group company. Consequently an equal amount has been released from
goodwill. In addition, a further amount of R3 million has been released
from goodwill as this operation has made a taxable profit in the year under
review which, due to the utilisation of its assessed loss, has not resulted
in a taxation charge.
3. During the second half of the year the directors took a decision to
dispose of the group`s shareholding in Bytes IT Solutions Limited
("Plato"). This operation is consequently classified as held-for-sale as at
28 February 2007 and the net assets have been valued at R4 million which is
the lower of the carrying amount of the net assets and the fair value less
costs to sell. Accordingly the carrying value of the net tangible assets
held-for-sale has been impaired by R6 million as well as the remaining
goodwill of R50 million.
The capital items are disclosed net of gains made on the disposal of
property, plant and equipment and investments of R1 million.
4. Headline earnings
Attributable profit is reconciled to
headline earnings as follows:
Attributable to equity holders of Bytes 143 173
Goodwill adjustment and impairment 69 38
Capital items 5 (1)
Portion of goodwill adjustment (1) (2)
attributable to minority interest
Headline earnings 216 208
Headline earnings per share - basic 129,8 127,7
(cents)
Headline earnings per share - diluted 105,3 101,5
(cents)
5. Adjusted headline earnings
Adjusted headline earnings have been presented as a more accurate measure
of the sustainable earnings of the group.
Headline earnings are reconciled to adjusted headline earnings as follows:
Headline earnings 216 208
Deferred taxation asset raised (16) (32)
Finance lease settlement (note 1) 18 -
CGT effect on finance lease settlement (3) -
(note 1)
Portion of deferred taxation asset raised - 2
and finance lease settlement attributable
to minority interest
Adjusted headline earnings 215 178
Adjusted headline earnings per share - 129,6 109,4
basic (cents)
Adjusted headline earnings per share - 105,2 88,4
diluted (cents)
6. Diluted earnings
Diluted earnings, diluted headline earnings and diluted adjusted headline
earnings have been calculated on the basis that Kagiso Strategic
Investments (Pty) Limited exercised its full option on 22% of the shares in
Bytes Technology Group South Africa (Pty) Limited effective 1 March 2005.
Profit attributable to equity holders of Bytes is reconciled to diluted
earnings as follows:
Profit attributable to equity holders of 143 173
Bytes
Additional 22% minority interest (26) (21)
Diluted earnings 117 152
Headline earnings are reconciled to diluted headline earnings as follows:
Headline earnings 216 208
Additional 22% minority interest (30) (29)
Diluted headline earnings 186 179
Adjusted headline earnings are reconciled to diluted adjusted headline
earnings as follows:
Adjusted headline earnings 215 179
Additional 22% minority interest (30) (22)
Diluted adjusted headline earnings 185 157
Reconciliation between the number of shares used for earnings per share and
diluted earnings per share:
Weighted average number of shares in issue 166.1 163.6
(million)
Unexercised employee share options 10.2 14.0
Number of shares used to calculate 176.3 177.6
dilution
The calculations for the comparative period have been restated,
the effects of which were insignificant.
7. The preliminary consolidated financial results have been prepared in
accordance with the measurement criteria of International Financial
Reporting Standards (IFRS) and its interpretations adopted by the
International Accounting Standards Board (IASB) and the presentation and
disclosure requirements of IAS 34, Interim Financial Reporting.
Balance sheets
2007 2006
Figures in R million (Reviewed) (Audited)
ASSETS
Non-current assets 819 715
Property and equipment 114 113
Intangible assets 439 417
Loans receivable 91 33
Finance lease assets 77 68
Available-for-sale investment 24 20
Deferred taxation 74 64
Current assets 1 115 964
Inventories 180 164
Short-term loans 37 27
Accounts receivable 616 585
Assets classified as held-for-sale 19 -
Cash and cash equivalents 263 188
TOTAL ASSETS 1 934 1 679
EQUITY AND LIABILITIES
Total equity 707 604
Non-current liabilities 141 95
Loans 39 16
Finance lease liabilities 77 68
Straight line lease accrual 21 11
Deferred taxation liability 4 -
Current liabilities 1 086 980
Short-term loans 62 32
Accounts payable 926 814
Liabilities classified as held-for- 15 -
sale
Taxation 33 44
Bank overdraft 50 90
TOTAL EQUITY AND LIABILITIES 1 934 1 679
Shares in issue at end of the year 168,3 165,0
(million)
Net asset value per share (cents) 420,1 365,1
Net tangible asset value per share 159,2 112,9
(cents)
Reconciliation of net cash
2007 2006
Figures in R million (Reviewed) (Audited)
Loans (39) (16)
Finance lease liabilities (77) (68)
Short-term loans (62) (32)
Total debt per balance sheet (178) (116)
Less finance lease assets 114 95
Net debt (64) (21)
Cash and cash equivalents 263 188
Bank overdraft (50) (90)
Net cash 149 77
Condensed cash flow statements
2007 2006
Figures in R million (Reviewed) (Audited)
Cash flows from operating activities
Net cash generated by operating 211 176
activities
Cash generated by operations 386 319
Financial income 50 21
Decrease/(increase) in working capital 10 (2)
Cash generated by operating activities 446 338
Financial expense (43) (36)
Taxation paid (111) (71)
Cash available from operating 292 231
activities
Dividend paid (81) (55)
Cash flows from investing activities (181) (220)
Cash flows from financing activities 85 (149)
Increase/(decrease) in cash and cash 115 (193)
equivalents
Net cash and cash equivalents at 98 291
beginning of year
Net cash and cash equivalents at end of 213 98
year
Cash and cash equivalents 263 188
Bank overdraft (50) (90)
Net cash and cash equivalents at end of 213 98
year
Condensed segmental analysis
2007 2006
Figures in R million (Reviewed) (Audited)
BUSINESS SEGMENTS
Segment revenue
ICT Infrastructure and Services 1 965 1 666
Software, Consulting and Document 1 167 1 043
Services
Specialised Equipment and Services 1 029 823
4 161 3 532
Corporate and Other 3 2
Consolidation eliminations (76) (64)
Total all operations 4 088 3 470
Segment result
ICT Infrastructure and Services 121 77
Software, Consulting and Document 123 120
Services
Specialised Equipment and Services 126 120
370 317
Corporate and Other (33) (25)
Consolidation eliminations (12) (11)
Total all operations 325 281
GEOGRAPHICAL SEGMENTS
Segment revenue
South Africa 3 011 2 745
United Kingdom 987 634
Rest of Africa 166 155
Consolidation eliminations (76) (64)
Total all operations 4 088 3 470
Segment result
South Africa 285 256
United Kingdom 35 18
Rest of Africa 17 18
Consolidation eliminations (12) (11)
Total all operations 325 281
Segment result represents the operating profit directly attributable to
each segment before goodwill adjustments, impairments and capital items.
Supplementary information
2007 2006
Figures in R million (Reviewed) (Audited)
Amortisation of intangibles 14 11
Depreciation of property, plant and 41 40
equipment
Net foreign exchange gains/(losses) 1 (3)
Capital expenditure 50 65
Contingent liabilities 5 6
Operating lease commitments (net) 273 300
Payable within the next 12 months: 52 40
- property 44 38
- plant, equipment and vehicles 10 5
Less: related straight-lined lease (2) (3)
accrual
Payable one to five years: 147 154
- property 138 133
- plant, equipment and vehicles 9 21
Payable thereafter:
- property 95 117
Less related straight-lined lease (21) (11)
accrual
Statements of changes in equity
Attributable to equity holders of
Bytes
Deferred
Share hedging Accumulated
Figures in R million capital Reserves reserve deficit
Balance at 1 March 2005 703 20 (1) (289)
(audited)
Total recognised income (3) (4) 173
and expense for the year
Foreign currency (3)
translation differences
Fair value adjustment to (4)
cashflow hedges
Income and expense (3) (4)
recognised directly in
equity
Profit for the year 173
Transactions with 13 2 - (51)
shareholders
Dividend paid (51)
Share based payments 2
Issue of share capital 13
for cash
Balance at 28 February 716 19 (5) (167)
2006 (audited)
Total recognised income 7 5 143
and expense for the year
Foreign currency 4
translation differences
Fair value adjustment to
available-for-sale
investment 3
Fair value adjustment to 5
cashflow hedges
Income and expense 7 5
recognised directly in
equity
Profit for the year 143
Transactions with 13 6 - (75)
shareholders
Dividend paid (75)
Share based payments 6
Issue of share capital 13
for cash
Balance at 28 February 729 32 - (99)
2007 (reviewed)
Statements of changes in equity
Attributable to
equity holders of
Bytes
Premium on
minority Minority Total
equity
Figures in R million transactions Total interest equity
Balance at 1 March 2005 27 460 10 470
(audited)
Total recognised income - 166 8 174
and expense for the year
Foreign currency (3) (3)
translation differences
Fair value adjustment to (4) (4)
cashflow hedges
Income and expense (7) - (7)
recognised directly in
equity
Profit for the year 173 8 181
Transactions with - (36) (4) (40)
shareholders
Dividend paid (51) (4) (55)
Share based payments 2 2
Issue of share capital 13 13
for cash
Balance at 28 February 27 590 14 604
2006 (audited)
Total recognised income - 155 10 165
and expense for the year
Foreign currency 4 4
translation differences
Fair value adjustment to
available-for-sale
investment 3 3
Fair value adjustment to 5 5
cashflow hedges
Income and expense 12 - 12
recognised directly in
equity
Profit for the year 143 10 153
Transactions with - (56) (6) (62)
shareholders
Dividend paid (75) (6) (81)
Share based payments 6 6
Issue of share capital 13 13
for cash
Balance at 28 February 27 689 18 707
2007 (reviewed)
MESSAGE TO STAKEHOLDERS
OVERVIEW
Your directors are again pleased to report on a further year of progress
for the group. In the aggregate, operating results have been satisfactory
with nearly all operations meeting expectations. Group revenue improved by
18% to over R4 billion for the first time, with organic growth accounting
for over 70% of the increase.
The last year was yet again characterised by increased levels of
competition and margin pressures, exacerbated in the case of several of the
group`s operations by a worsened exchange rate. Nevertheless, the group
continues to maintain a high level of confidence that opportunities to
sustain growth in the Information Technology market will continue to
present themselves.
FINANCIAL RESULTS
Operating profit improved by 16% to R325 million (R281 million), with an 8%
(8.1%) margin being achieved in spite of the margin pressures mentioned
above.
Net finance income of R7 million was particularly satisfactory in
comparison with a net expense of R15 million in the previous year. A
further improvement is anticipated in the coming year.
In October last year the board took the decision to exit the Plato business
in the United Kingdom and as a result has impaired the investment in this
operation, negatively impacting attributable earnings by R56 million. With
the disposal of the company anticipated within the next month or so, this
closes the chapter on this unsatisfactory investment.
Adjusted headline earnings per share, considered to be a more accurate
measure of sustainable earnings, increased by 18% to 129.6 cents (109.4
cents). However, basic earnings per share reduced by some 19% to 85.9 cents
(105.7 cents), reflecting the effect of the Plato impairment referred to
earlier. It is encouraging to note that the group`s operating profit in the
United Kingdom (notwithstanding the loss of R7,2 million sustained by
Plato) increased by almost 100% to R35 million (R18 million), partially on
the back of the acquisitions mentioned later.
Strong cash flows remained a feature during the year, producing an improved
positive net cash position at year end of R149 million (R77 million), which
amount was after expenditures of R65 million on acquisitions, R46 million
in capex and the investment of around R58 million in our growing finance
operation. The board has accordingly decided to increase the dividend
payment by 24% to 56 cents per share (45 cents) with cover, based on
adjusted headline earnings, reducing slightly to 2,3 times (2,4 times).
OPERATIONAL PROGRESS
Excellent progress was recorded in virtually all of our operations
(excluding Plato) with the exception of Specialised Solutions where the
deferral of certain deals, amongst other factors, contributed to a slight
worsening of results. This operation is however well positioned to achieve
meaningful growth in the period ahead. Of particular note were the
improvements achieved in the group`s Systems Integration and Managed
Services businesses whilst very good results were maintained or improved on
by Document Solutions, People Solutions, Outsource Services, Digital
Healthcare Solutions and Communication Systems.
Our international operations overall had an excellent year and are expected
to continue this trend in the year ahead. The group`s rapidly growing asset
financing business is now starting to have a material positive impact on
results and will increasingly do so over the next few years.
The directors are satisfied that the group is in very good shape and well
positioned for future sustainable growth.
ACQUISITIONS
The group continues to maintain an acquisition strategy. During the year
under review four businesses were acquired, the most noteworthy being the
acquisition of Xclusive Solutions and Vantage Business Systems, two Xerox
concessionaires in the United Kingdom. Together with our existing
operations, the group is now positioned as one of the foremost Xerox
partners worldwide.
All of the acquisitions are performing well in line with expectations and
will assist in meeting the group`s growth aspirations. A further operation,
which will complement our healthcare IT business, was acquired with effect
from 1 March 2007.
The directors anticipate further acquisitions both locally and
internationally in the year ahead.
BLACK ECONOMIC EMPOWERMENT AND TRANSFORMATION
The directors continue to greatly appreciate the meaningful contribution of
their BEE partner, Kagiso, to the success of the group. Additionally we are
delighted to welcome to the board our first black female director, Ms
Keitumetse Matthews.
It is also with significant pride that the board recognises the group`s
achievements in the Financial Mail/Empowerdex Top 200 Listed Companies
Empowerment rankings, where Bytes Technology Group moved up to number eight
overall and was ranked number one in the ICT sector. These achievements are
the result of substantial transformation efforts throughout the group over
the past five years and bear testimony to the progress made in the group`s
empowerment initiatives.
PROSPECTS
Your board anticipates further progress for the group in the coming year
and whilst the challenges referred to earlier in this report are
anticipated to continue, the group has many opportunities open to it to
ensure ongoing growth. The strength of the group`s relationships with its
technology partners will continue to assist in attaining this objective.
BOARD OF DIRECTORS
In addition to the appointment of Ms Keitumetse Matthews, the board is also
delighted to extend a warm welcome to Mr Neil Murphy, Group Managing
Director of the United Kingdom operations. This appointment reflects the
increasing importance to the group of its offshore activities. Furthermore,
with effect from 1 March 2007, Mr Douglas Ramaphosa`s status changed from
non-executive to executive director, following his appointment as Managing
Director of the group`s Specialised Solutions operation.
ACKNOWLEDGEMENTS
We continue to be indebted to all of our stakeholders for their continued
support. In particular we endeavour to meet the high expectations of our
customers, many of whom have been our partners for several decades. We will
strive to continue to deserve their ongoing business and support.
To the remainder of our stakeholders we express our profound gratitude.
DIVIDEND
In keeping with its strong belief in the importance of rewarding
shareholders for their faith in the group and recognising the strong
trading and cash performances of its continuing operations, the board has
declared a dividend of 56 cents per share.
In accordance with STRATE`s settlement procedures, the following dates will
apply to the dividend:
2007
Last date to trade ordinary shares "cum" Friday, 11 May
dividend
Ordinary shares trade "ex" dividend Monday, 14 May
Record date Friday, 18 May
Payment date Monday, 21 May
Dividend cheques in payment of this dividend to certificated shareholders
will be posted to shareholders on the Payment date. Electronic payment to
certificated shareholders will be undertaken simultaneously.
Shareholders who have dematerialised their share certificates will have
their accounts at their CSDP or broker credited on Monday, 21 May 2007.
In the case of certificated shareholders, notice of any change of address
of shareholders must reach the transfer secretaries, Computershare Investor
Services 2004 (Pty) Limited, on or before Friday, 11 May 2007.
Share certificates may not be dematerialised and/or rematerialised between
Monday, 14 May 2007 and Friday, 18 May 2007, both days inclusive.
In accordance with the company`s articles of association, the directors
have determined that dividends amounting to less than R10.00 due to any one
holder of the company`s shares will not be paid, unless otherwise requested
in writing, but aggregated with other such amounts and donated to a charity
to be nominated by the directors.
REVIEW BY INDEPENDENT AUDITORS
The group`s auditors, KPMG Inc., have reviewed these year-end results.
Their unqualified review report is available for inspection at the
company`s registered office during normal office hours.
ANNUAL REPORT AND ANNUAL GENERAL MEETING
The company`s 95th annual general meeting will be held in the Boardroom,
Bytes House, Avenues North, 6 Mellis Road, Rivonia on Thursday, 19 July
2007 at 9H30. Further details of the annual general meeting will be
included in the annual report for the year ended 28 February 2007 to be
posted to shareholders on or about 31 May 2007.
On behalf of the board
Dr Bill David Redshaw Peter Riskowitz
Venter
Chairman Chief executive Group financial
officer director
24 April 2007
Directors
Dr WP Venter (Chairman)*, PD Redshaw (Chief Executive Officer)^,
RJ Abraham, RJ Griggs^, KST Matthews*,
NR Murphy, SM Pityana*, DC Radley*, DM Ramaphosa,
PR Riskowitz, Dr HA Serebro*, RE Venter*, PL Wilmot*
* Non-executive ^ British
Secretaries
BTG Management Services (Pty) Limited
per Ms E Viljoen
Sponsor
Nedbank Capital
BYTES
(Incorporated in the Republic of South Africa)
Registration number 1911/003874/06
ISIN: ZAE000029526
Share code: BTG
The annual financial results are also available on the internet at
www.bytes.co.za
Date: 24/04/2007 15:00:01 Produced by the JSE SENS Department.
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