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STO
STO
STO - Set Point - Unaudited Interim Results and renewal of cautionary
Set Point Technology Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/014334/06)
Share code: STO & ISIN: ZAE000013629
("Set Point" or "the Company" or "the Group")
Unaudited Interim Results for the six months ended 28 February 2007 and renewal
of cautionary announcement
Condensed consolidated income statements
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 28 February 31 August
2007 2006 2006
R000 R000 R000
Revenue* 183 376 132 026 279 644
Cost of sales (110 142) (59 701) (158 063)
Gross profit 73 234 72 325 121 581
Administrative expenses (57 966) (50 985) (104 254)
Other operating income 594 1 071 4 174
Other operating expenses (23 090) (835) (20 411)
Includes
- Goodwill impairment (615) - (11 330)
- Impairment of intangible (8 704) - (5 607)
assets
- Fair value adjustment of (9 900) - -
non-current receivable **
- Seran investigation and (2 493) - -
associated costs
- Loss on disposal of plant - (37) (563)
and equipment
- Amortisation of intangible (912) (606) (2 204)
assets
Operating (loss)/profit (7 228) 21 576 1 090
Finance income 4 017 1 716 5 101
Finance expense (8 149) (6 175) (14 974)
(Loss)/profit before taxation (11 360) 17 117 (8 783)
Taxation (3 701) (5 849) (5 105)
(Loss)/profit after taxation (15 061) 11 268 (13 888)
from continuing operations
(Loss)/profit from (3 569) (611) 260
discontinued operations (net
of taxation)
Profit/(loss) after taxation 391 (611) 260
Goodwill impairment in (3 960) - -
discontinued operation
(Loss)/profit for the period (18 630) 10 657 (13 628)
Attributable to:
Equity holders of Set Point (18 688) 10 519 (14 060)
Minority interests 58 138 432
(18 630) 10 657 (13 628)
(Loss)/earnings per share (5.6) 3.8 (4.6)
(cents)
Diluted (loss)/earnings per (5.4) 3.7 (4.6)
share (cents)
Calculation of headline
(loss)/earnings
(Loss)/profit attributable to (18 688) 10 519 (14 060)
equity holders of Set Point
Adjusted for: 13 272 26 15 711
(Profit)/loss on disposal of (10) 37 563
plant and equipment
Intangible impairment 8 704 - -
Goodwill impairment 4 575 - 16 937
Taxation effects of the above 3 (11) (1 789)
Headline (loss)/earnings (5 416) 10 545 1 651
Headline (loss)/earnings per (1.6) 3.8 0.5
share (cents)
Diluted headline (loss)/ (1.6) 3.7 0.5
earnings per share (cents)
Shares in issue
Weighted average number of 335 469 280 119 302 961
ordinary shares in issue
(000`s)
Diluted weighted average 343 602 283 017 304 843
number of ordinary shares in
issue (000`s)
* Total Revenue 219 497 136 337 315 665
Less : Discontinued operations 36 121 4 311 36 021
Continued operations 183 376 132 026 279 644
** The fair value adjustment of the non-current receivable represents the
difference between the estimated fair value of the claim which the Company has
against the vendors of the business of Seran at 28 February 2007 and its value
at 31 August 2006. The recognition of the claim/receivable has been limited to
the market value of 30m Set Point shares at the reporting date, pledged to
secure the claw back claim.
Condensed consolidated statements of changes in equity
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 28 February 31 August
2007 2006 2006
R000 R000 R000
Opening balances 120 277 86 949 87 422
Recognised income and expense
(Loss)/profit for the period (18 688) 10 519 (14 060)
attributable to equity holders
of Set Point
Transactions with shareholders
Share based compensation - 22 22 45
share options
Dividends - (5 562) (8 921)
Treasury shares issued - - 1 552
Shares acquired by share trust - - (95)
Shares issued - 25 437 56 387
Minority equity transactions (2 109) - (2 053)
Equity attributable to equity 99 502 117 365 120 277
holders of Set Point
Minority interests 422 625 389
Total equity 99 924 117 990 120 666
Segmental information
Six months ended 28 February 2007
Segment
Impairment results
Segment of (including
Segment liabi- intangible Segment impair-
assets lities assets revenue ments)
R`000 R`000 R`000 R`000 R`000
Analytical 106 449 16 912 - 38 968 9 741
Services
Fluid Handling 83 994 36 706 - 72 256 14 841
Mining Services 86 054 70 364 12 664 111 423 (8 142)
-Continuing 54 324 40 674 8 704 75 302 (8 709)
operations
-Discontinued 31 730 29 690 3 960 36 121 567
operations
Central Services 94 562 103 154 615 - (23 100)
-Overheads 615 (10 707)
-Fair value (9 900)
adjustment of
non-current
receivable
-Seran (2 493)
investigation
costs
Deferred 5 090 - - - -
taxation
Consolidation (121 889) (72 800) - (3 150) -
entries,
adjustments and
intra group
elimination
254 260 154 336 13 279 219 497 (6 660)
Consolidated balance sheets
Unaudited at Unaudited at Audited31
28 February 28 February August2006
2007 2006 R000
R000 R000
Assets
Non-current assets 98 427 152 627 130 722
Plant and equipment 32 519 26 221 31 805
Goodwill 40 507 96 206 45 480
Intangible assets 1 711 15 291 12 206
Receivables 18 600 7 599 33 486
Deferred taxation 5 090 7 310 7 745
Current assets 155 833 128 736 171 908
Inventories 71 953 42 565 51 331
Trade and other receivables 78 604 66 670 77 306
Non-current assets held for 3 376 - -
sale
Cash and cash equivalents 1 900 19 501 43 271
Total assets 254 260 281 363 302 630
Equity and Liabilities
Total equity 99 924 117 990 120 666
Share capital 3 367 3 077 3 367
Share premium 109 433 77 316 109 433
Premium on minority equity (9 107) (4 945) (6 998)
transactions
Reserves 1 803 1 758 1 781
Retained earnings (5 994) 40 159 12 694
Minority interests 422 625 389
Non-current liabilities 11 438 56 405 26 710
Purchase consideration - 43 997 9 479
payable
Interest bearing 8 050 10 382 14 238
liabilities
Provisions and accruals 3 388 2 026 2 993
Current liabilities 142 898 106 968 155 254
Interest bearing 16 319 13 339 4 970
liabilities
Trade and other payables 96 791 53 717 87 835
Non-current liabilities 2 431 - -
held for sale
Taxation liability 1 333 654 225
Bank overdraft 26 024 39 258 62 224
Total equity and 254 260 281 363 302 630
liabilities
Non-current receivables
Included in non-current
receivables is an amount of
R18.6 million due by the
Seran vendor.
The recognition of the
receivable has been limited
to the fair value of the 30
million Set Point shares at
28 February 2007 with a
share price of 62 cents per
share.
Discontinued operation
With effect from 1 March
2007 the Group disposed of
the operations of the
Mineral Mining Division.
The assets, classified as
held for sale at 28
February 2007, and included
in the balance sheet above
were as follows:
Non-current assets held for 3 376
sale
Plant and equipment 1 705
Goodwill 4 973
Intangible assets 658
Goodwill impairment in (3 960)
anticipation of sale
Non-current liabilities (2 431)
held for sale
Non-current interest (728)
bearing liabilities
Deferred purchase (1 703)
consideration
Inventories 19 647
Trade and other receivables 10 506
Cash and cash equivalents 2 161
Trade and other payables (27 259)
Proceeds on disposal 6 000
Shares in issue
(net of treasury shares) 336 740 307 619 336 740
(000`s)
Condensed consolidated cash flow statements
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 28 February 31 August
2007 2006 2006
R000 R000 R000
Cash flows from operating (2 651) (20 928) (4 930)
activities
Cash generated by operations 17 057 24 881 32 706
before working capital
changes
Increase in net working (15 990) (30 981) (13 808)
capital
Cash generated/(utilised) by 1 067 (6 100) 18 898
operations
Net finance costs (3 592) (2 284) (5 466)
Taxation paid (101) (6 745) (8 674)
Dividends paid (25) (5 799) (9 688)
Cash flows from investing (7 311) (5 058) (18 245)
activities
Acquisition of business - - (5 418)
Increase in investments (615) (365) -
Net replacement of property, (6 696) (4 693) (12 827)
plant and equipment
Cash flows from financing 6 423 23 503 (1 737)
activities
Proceeds from issue of shares - 25 437 (241)
Decrease in purchase (575) (25 500) (500)
consideration payable
Decrease in non-current 1 109 - 360
receivables
Decrease in interest bearing
debt
- non current (5 460) (4 020) (80)
Increase/(decrease) in
interest bearing debt
- current 11 349 27 586 (1 276)
Discontinued operations (1 632) - 3 404
Cash flows from operating (1 632) - 370
activities
Cash flows from disposal of - - 3 034
discontinued operation
Cash and cash equivalents
Net cash utilised (5 171) (2 483) (21 508)
At beginning of period (18 953) 2 555 2 555
At end of period (24 124) 72 (18 953)
Review of operations
PROFILE
Set Point has three divisions as follows:
Analytical Services operates through specialised laboratories which offer expert
analysis for the precious metals exploration industry and condition monitoring
of fluids.
Fluid Handling supplies medium technology products and services to the
petrochemical and mining industries.
Mining Services comprises the manufacture, supply and repair of equipment and
the provision of services used in mining activities.
FINANCIAL RESULTS AND REVIEW OF OPERATIONS
Financial Results
Revenue growth from continuing operations improved 38.9% compared to the first
half of the previous financial year. This increase in revenue was achieved
across the board and with the exception of Seran, most operations exceeded their
budgets and the corresponding previous year at the operating profit level.
The Group recorded a headline loss of 1.6 cents per share for the period.
However if the results are adjusted for one-off items, namely the fair value
impairment of the receivable claim against the Seran vendors, the impairment of
intangibles in Seran and Mineral Mining (all non-cash items) and the Seran
investigation costs, HEPS would have been 2.1 cents per share. The poor
performance of the two of the three operating units in the Mining Services
Division and the associated impairments have unfortunately completely
overshadowed the excellent performance of all the other business units in the
Group.
As expected Seran recorded an operating loss of R3 million for the six months.
After current corrective action, it is envisaged that Seran will be profitable
by the financial year end. Including the Seran loss, the Mining Services
division made a small operating profit in the six months compared to an
operating loss of R11 million in the year to August 2006. It was considered
prudent to fully impair all intangibles within Seran.
All businesses within the Fluid Handling division produced results well above
budget. The operating profit of R14.8 million was 47% above the comparable
period.
Operating profits of R9.7 million for Analytical Services were also above budget
and 8% above their comparable period.
Net borrowings of R49 million were higher than previously reported. The increase
in inventories occurred in the main at Mineral Mining which has been sold and
inventory levels will be substantially lower at year end.
The Group is focused on achieving lower debt levels by the year end from
operating cash flows.
DISPOSAL OF MINERAL MINING
The rationalisation of the manufacturing operations at Seran resulted in a
reassessment of the strategic viability of retaining the Mineral Mining
division, and as a result, this division was sold effective 1 March 2007. The
division was sold back to the vendors for R3.6 million cash and the return of
the 4 million Set Point shares originally issued resulting in a capital loss of
R3.9 million.
DIRECTORATE
Since the last reporting date, Danisa Baloyi resigned as a non-executive
director, and Errol Gregor retired as Group CEO and resigned from the board.
Graeme Horsfield, the Group CFO, has been appointed Acting CEO.
BASIS OF PREPARATION
The condensed interim financial statements have been prepared in accordance with
IFRS and interpretation statements in issue and effective at 28 February 2007,
IAS 34 - Interim Financial Reporting and in compliance with the Listing
Requirements of the JSE Limited and the Companies Act of South Africa.
BEE TRANSACTION
As announced previously, the Group is in discussions with the Mineworkers
Investment Company (Pty) Limited who have expressed an interest in acquiring a
10% shareholding in the Group through the subscription of an issue of shares for
cash. The effect of this proposed transaction would result in a substantial
improvement in the debt equity ratio and an early resumption in the payment of
dividends. It will also increase the Group`s BEE shareholding to 25% as planned.
DIVIDENDS
No interim dividend has been declared.
RENEWAL OF CAUTIONARY
Shareholders are referred to the announcements dated 25 April and 8 May 2007,
and are advised to continue to exercise caution in dealing in the Company`s
shares.
PROSPECTS
While the Group expects to record a considerable improvement in HEPS for the
year as a whole, the result will be disappointing relative to the potential of
the Group and the existing sound performance of most of its operating units. If
the Group can achieve profitability at Seran and a reduction in central costs as
targeted, satisfactory earnings and a resumption of growth should occur in the
next financial year.
CS Seabrooke GJ Horsfield
Chairman Acting CEO
15 May 2007
Directors: CS Seabrooke*# (Chairman), MJ Smith (Deputy Chairman), GJ Horsfield
(Acting CEO), BH Kent*#, JM Judin*, GE Nel*#
(* Non-executive) (# Independent)
Company Secretary: ND Kennelly
Registered Office: 30 Electron Avenue, Isando 1601, (PO Box 856 Isando 1600)
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited (Reg
No: 1958/003546/06), Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO
Box 61051, Marshalltown 2107)
Sponsor: Investec Bank Limited, Registration number 1969/004763/06
www.setpoint.co.za
Date: 14/05/2007 14:31:04 Produced by the JSE SENS Department.
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