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IFW
IFW
IFW - InfoWave - 2007 Audited Results and Final Distribution Announcement
INFOWAVE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1998/017276/06)
Share Code: IFW & ISIN Code: ZAE000016440
("InfoWave")
2007 AUDITED RESULTS AND FINAL DISTRIBUTION ANNOUNCEMENT
- 44% INCREASE IN REVENUE
- 20% INCREASE IN PROFIT FROM OPERATIONS
- 19% INCREASE IN PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
- 17% INCREASE IN EARNINGS PER SHARE
- 17% INCREASE IN DIVIDEND
- RETURN ON EQUITY 40%
CONSOLIDATED INCOME STATEMENT for the year ended 28 February 2007
Audited Audited
28 February 28 February
2007 2006
R R
REVENUE 49 299 739 34 397 588
Cost of sales (23 547 499) (16 427 756)
Gross profit 25 752 240 17 969 832
Administrative, selling and other (17 667 839) (11 208 472)
costs
Profit from operations (before 8 084 401 6 761 360
interest)
Interest income 193 771 141 889
Preference dividend received 266 988 273 309
Revaluation of listed preference (906 462) 308 074
shares
Finance costs (10 252) (1 572)
Profit from associate 535 671 46 975
Profit before taxation 8 164 117 7 530 035
Taxation (2 378 054) (2 522 539)
Profit for the year after taxation 5 786 063 5 007 496
Attributable to minorities 151 215 -
Profit for the year attributable to 5 937 278 5 007 496
equity shareholders of the company
Earnings per year (cents) 6.87 5.87
Headline earnings per share (cents) 6.84 5.87
Fully diluted earnings per share 6.85 5.74
(cents)
Reconciliation between earnings and
headline earnings:
Profit for the year 5 937 278 5 007 496
Profit on sale of fixed assets (27 157) -
Headline earnings 5 910 121 5 007 496
CONSOLIDATED BALANCE SHEET as at 28
February 2007
Audited Audited
28 February 28 February
2007 2006
R R
ASSETS
Non-current assets 4 003 777 1 367 199
Property and equipment 1 092 188 614 020
Intangible assets 1 343 566 341 681
Investment in associated company 793 222 213 702
Goodwill 58 709 -
Deferred taxation asset 716 092 197 796
Current assets 15 748 678 16 149 295
Accounts receivable 8 099 588 7 127 116
Taxation paid in advance - 92 310
Listed preference shares 3 660 282 4 566 744
Current portion of loan to 117 228 108 950
associated company
Cash resources 3 871 580 4 254 175
Total assets 19 752 455 17 516 494
EQUITY AND LIABILITIES
Issued capital 8 621 8 582
Share premium 261 867 460 924
Share based payment reserve 477 832 463 216
Accumulated profit 15 194 386 12 446 569
Equity attributable to ordinary 15 942 706 13 379 291
shareholders
Minority interest 440 340 -
Total equity 16 383 046 13 379 291
Non-current liabilities - 203 042
Deferred taxation liability - 203 042
Current liabilities 3 369 409 3 934 161
Accounts payable 2 095 425 3 034 064
Provisions 962 849 803 189
Taxation payable 311 135 96 908
Total equity and liabilities 19 752 455 17 516 494
STATEMENT OF CHANGES IN EQUITY for the year ended 28 February 2007
SHARE-
SHARE SHARE ACCUMULATED BASED
CAPITAL PREMIUM PROFIT PAYMENT
RESERVE
Group R R R R
Balance at 28 8 405 105 190 10 006 238 133 789
February 2005
Profit for the 5 007 496
year
Shares issued 177 355 734
during the year
Recognition of 329 427
share-based
payment
Dividend paid (2 567 165)
Balance at 28 8 582 460 924 12 446 569 463 216
February 2006
Subsidiary 5 937 278
acquired Profit
for the year
Shares issued 120 247 694
during the year
Shares (81) (446 751)
repurchased
during the year
Recognition of 14 616
share-based
payment
Dividend paid (3 189 461)
Balance at 28 8 621 261 867 15 194 386 477 832
February 2007
ATTRIBUTABLE MINORITY TOTAL
TO EQUITY INTEREST EQUITY
HOLDERS
Group R R R
Balance at 28 10 253 622 10 253 622
February 2005
Profit for the 5 007 496 5 007 496
year
Shares issued 355 911 355 911
during the year
Recognition of
share-based 329 427 329 427
payment
Dividend paid (2 567 165) (2 567 165)
Balance at 28 13 379 291 13 379 291
February 2006
Subsidiary 591 555 591 555
acquired
Profit for the 5 937 278 (151 215) 5 786 063
year
Shares issued 247 814 247 814
during the year
Shares (446 832) (446 832)
repurchased
during the year
Recognition of 14 616 14 616
share-based
payment
Dividend paid (3 189 461) (3 189 461)
Balance at 28 15 942 706 440 340 16 383 046
February 2007
CASH FLOW STATEMENT for the year ended 28 February 2007
Audited Audited
28 February 28 February 2006
2007
R R
CASH FLOWS FROM
OPERATING ACTIVITIES
Profit from operations
(before interest and 8 084 401 6 761 360
dividends)
Adjustment for:
Share-based payment 14 616 329 427
expense
Profit on sale of (27 157) -
equipment
Depreciation and 848 473 535 594
amortisation
Cash generated from
operations, before work 8 920 333 7 626 381
capital changes
Working capital changes
(Increase) / decrease (211 702) (457 641)
in receivables
(Decrease) / increase
in payables and (1 627 602) 568 280
provisions
Cash generated from 7 081 029 7 737 020
operations
Taxation paid (2 792 856) (2 597 794)
Interest income 193 771 141 889
Finance Costs (10 252) (1 572)
Preference dividend 266 988 273 309
received
Dividend paid to (3 189 461) (2 567 165)
shareholders
Net cash inflow from 1 549 219 2 985 687
operating activities
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisition of (751 772) (464 029)
equipment on expansion
Investment in (833 826) (424 849)
intangible assets
Proceeds on disposal of 37 522 -
equipment
(Increase) / decrease
in investment in (52 127) 29 324
associated company
Acquisition of (640 691) -
subsidiary
Proceeds on issue of 261 340 -
subsidiary shares
Net cash outflow from (1 979 554) (859 554)
investing activities
CASH FLOWS FROM
FINANCING ACTIVITIES
Repurchase of company`s (446 832) -
shares
Proceeds of share 247 814 355 911
issues
Net cash (outflow) /
inflow from financing (199 018) 355 911
activities
Net (decrease) / (629 353) 2 482 044
increase in cash
resources
Cash resources at 4 254 175 1 772 131
beginning of year
Cash resources on 246 758 -
acquisition of
subsidiaries
Cash resources at end 3 871 580 4 254 175
of year
REPORT TO STAKEHOLDERS
Financial results
Revenue grew 44% over the prior year to R49,3 million. Organic growth was
22% and ApplyIT, in which InfoWave acquired a 63,8% stake with effect from
1 March 2006, contributed R7,6 million (22%).
InfoWave (Pty) Limited and InfoWave Internet Solutions (Pty) Limited
performed well in the period under review growing revenue by 21% due to
strong demand for project work and maintaining operating margins. Although
ApplyIT contributed an operating loss before tax of R0,2 million to the
group, its performance is a significant improvement over its historic
performance prior to its acquisition.This is in line with the group`s
projection on which the investment was based. The purchase price was R0,5
million up front with a further R8,6 million contingent on meeting
stringent revenue growth thresholds over two years. No earn out was payable
in respect of the first year. The start up company InfraSoft, which markets
the DevMan product in the public sector, underperformed against
expectations due to longer than expected sales cycles and contributed an
operating loss before tax of R0,2 million. The market has expressed very
positive sentiments about the product and
increased focus is being placed on closing the sales opportunities. The
share of profits after tax from the associated company, Adapt-IT, which
focuses in the public sector grew to R0,5 million, exceeding expectations.
Surplus cash is invested in listed preference shares which devalued by R0,6
million after tax.
A deferred taxation asset which relates to the assessed loss in ApplyIT has
been recognised at year end as it is probable that ApplyIT will become
profitable in the financial year ending 28 February 2008. The group`s share
of the deferred tax credit in the income statement is R0,3 million.
Profit attributable to ordinary shareholders grew 19% to R5,9 million (R5
million) while earnings per share grew by 17% to 6,87 (5,87) cents per
share.
Operations
Operationally, the group has faced some major challenges, the key one being
a much higher level of staff turnover than in prior years, coupled with an
IT skills shortage in the market. We invested in growing direct staff
capacity and transformation as well as skills development and quality
assurance. The group invested in additional sales and marketing capacity.
Strategy
The group is firmly focused on the growth and health of the existing
businesses whilst simultaneously seeking substantial diversification
opportunities through mergers or acquisitions.
The board
There have been no changes in the composition of the board during the year.
BEE
InfoWave remains committed to genuine broad based transformation across all
aspects of the Department of Trade and Industry`s Codes of Good Practice.
We are in the process of obtaining an independent broad based rating.
InfoWave Holdings Limited is 25% black owned. The group comprises 53% black
employees. InfoWave continues to dedicate its corporate social investment
to education and specifically the Ebuta Trust.
Responsibility for annual financial statements
The directors are responsible for the preparation, integrity and
objectivity of annual financial statements and other information contained
in this annual report. The annual financial statements have been prepared
in accordance with International Financial Reporting Standards and in the
manner required by the Companies Act of South Africa and have been reported
on by Deloitte & Touche.
In discharging this responsibility, the group maintains suitable internal
control systems and adequate accounting records to provide reasonable
assurance that assets are safeguarded and that transactions are executed
and recorded in accordance with group policies. Appropriate accounting
policies supported by reasonable and prudent judgements have been applied
consistently with those of the prior year.
To the best of their knowledge and belief, based on the above, the
directors are satisfied that no material breakdown in the operating of the
systems of internal control has occurred during the year under review, and
the directors believe that the group will be a going concern for the year
ahead.
Post balance sheet events
There are no material events between the balance sheet date and the date of
this report.
Share capital
1 208 817 (2006: 1 167 029) shares were issued in respect of share options
exercised by employees in the year under review.
Pursuant to a special resolution passed at the annual general meeting held
on 26 May 2006, in terms of which general authority was granted for the
company to repurchase a maximum of 20% of its own shares, 812 421 shares
were purchased by the company, at a total cost of R0,45 million. These
shares have been cancelled.
As a result of the above transactions, the number of issued shares
increased from 85 820 784 to 86 217 180 shares.
Prospects
The prospects of the core business for the financial year ahead are
healthy. The group is well positioned to capitalise on its investment in
capacity in the core business. We will focus on the performance of ApplyIT
to ensure its success, sustainability and contribution to the group. We
will continue to pursue growth and diversification through acquisitive
opportunities.
Appreciation
InfoWave marked its 10th anniversary on 1 June 2006. We express our
appreciation to our customers for the success of our committed long-term
relationships with them. We also thank all employees of the group for their
dedication and hard work.
RP Collis T Dunsdon
Non-executive chairman Chief executive officer
Dividends
Ordinary dividend number 4
The company declared a dividend of 3,67 cents per share which was paid to
shareholders on 12 June 2006.
Ordinary dividend number 5
The board has set a policy of considering a dividend once annually after
the year-end. The board has declared a dividend on a dividend cover ratio
of 1,6 times as the group will have sufficient working capital to meet its
requirements after the dividend payment. Notice is hereby given that a cash
dividend of 4,29 cents per share ("the dividend") has been declared,
payable to shareholders recorded in the books of the company at close of
business on Friday, 8 June 2007.
The salient dates relating to the preference dividend are as follows:
Last day to trade cum Friday, 1 June 2007
Shares commence trading ex dividend Monday, 4 June 2007
Record date Friday, 8 June 2007
Payment of the dividend Monday, 11 June 2007
Share certificates may not be dematerialised or rematerialised during the
period Monday, 4 June 2007 to Friday, 8 June 2007, both days inclusive.
This dividend, having been declared after the year-end, has not been
provided for in the financial statements.
Registered office
Gleneagles Park
10 Flanders Drive
Mount Edgecombe
4300
Postal address
PO Box 2225
MECC
Mount Edgecombe
4301
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
PO Box 61051
Marshalltown
2107
Sponsor
Sasfin Corporate Finance
A division of Sasfin Bank Limited
Sasfin Place
13 - 15 Scott Street
Waverley
2090
Directors
RP Collis (Chairman), T Dunsdon (CEO), BR Carrilho, CL Jessop, MCB Lionnet,
CL von Pannier, P Aposporis, Dr AB Ravno, W Shuenyane
Date: 02/05/2007 14:00:05 Produced by the JSE SENS Department.
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