| Fri 22 Apr 2005, 13:36 | | RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2005 |
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DataPro Group - Reviewed Results For The Six Months Ended 28 February 2005,
Audited Results For The Period Ended 31 August 2004 And
Declaration Of Dividend
DataPro Group Limited
(Formerly Casey Investment Holdings Limited)
(Registration No: 1998/016433/06)
Share code: DTP ISIN code: ZAE000058061
(`DataPro Group` or `the company`)
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2005, AUDITED RESULTS FOR
THE PERIOD ENDED 31 AUGUST 2004 AND DECLARATION OF DIVIDEND
Balance Sheets Reviewed as Audited as Audited as
at at at
28 February 31 August 29 February
2005 2004 2004
R`000 R`000 R`000
ASSETS
Non-current assets 69 214 -- --
Property, plant and 18 967 -- --
equipment
Intangible assets 48 558 -- --
Deferred taxation 1 689 -- --
Current assets 10 503 135 37
Inventories 402 -- --
Inter-group debtors -- -- 34
Trade and other receivables 6 418 125 --
Cash and cash equivalents 3 683 10 3
Total assets 79 717 135 37
EQUITY AND LIABILITIES
Capital and accumulated loss 48 533 (7 682) (7 246)
Share capital and premium 75 237 23 573 23 573
Accumulated loss (26 704) (31 255) (30 819)
Non-current liabilities 11 497 4 694 4 338
Long term borrowings 8 708 -- --
Shareholder loans - non 2 789 4 694 4 338
interest bearing
Current liabilities 19 687 3 123 2 945
Trade and other payables 10 046 2 378 2 945
Short term borrowings 7 641 745 --
Bank overdraft 2 000
Total equity and liabilities 79 717 135 37
Ordinary shares in issue at 228 980 74 980 74 980
period end (`000)
Net asset value per share 21.2 (10.3) (9.7)
(cents)
Net tangible asset value per (0.01) (10.3) (9.7)
share (cents)
Income Statements Reviewed for Audited for Audited for
the six the six the year
months ended months ended
28 February ended 29 February
2005 31 August 2004
R`000 2004 R`000
R`000
Revenue 49 996 100 33 499
Cost of sales (27 083) -- (29 523)
Gross profit 22 913 100 3 976
Operating expenses (15 051) (554) (6 347)
EBITDA 7 862 (454) (2 371)
Amortisation of goodwill (88) -- --
Loss on disposal of assets -- -- (295)
Depreciation (2 000) -- (137)
Operating profit/(loss) 5 774 (454) (2 803)
Finance charges (1 325) -- (450)
Investment income 102 18 --
Net profit/(loss) before 4 551 (436) (3 253)
taxation
Taxation -- -- --
Net profit/(loss) for the 4 551 (436) (3 253)
period
Calculation of headline
earnings
Net profit/(loss) for the 4 551 (436) (3 253)
year
Adjustments for:
Amortisation of goodwill 88 -- --
Write off of investment -- -- 2 091
Loss on disposal of asset -- -- 295
Headline earnings/(loss) for 4 639 (436) (867)
the period
Weighted average shares in 228 980 74 980 74 980
issue
Earnings/(loss) per share 2.0 (0.6) (4.3)
ordinary share (cents)
Headline earnings/(loss) per 2.0 (0.6) (1.2)
ordinary share (cents)
Dividend per share (cents) 1.0 -- --
Fully diluted information
(Note 1)
Weighted average shares in 229 209 229 209 229 209
issue (`000)
Earnings/(loss) per share 2.0 (0.2) (1.4)
ordinary share (cents)
Headline earnings/(loss) per 2.0 (0.2) (0.4)
ordinary share (cents)
Notes
1. Vantage Capital Group, a BEE shareholder in DataPro Group, have been
granted an American call option to subscribe for up to 2 295 641 new
ordinary shares at an exercise price based on the 30 day weighted average
share price immediately preceding the exercise of the option, less a 10%
discount, exercisable on or before 28 February 2006. In addition Vantage
Capital Group have a call option against DG Reed and JC Herbst for 1 569
783 shares in order that they may increase their shareholding to 25% over
an 18 month period ending 28 February 2006.
Segmental Report Data Services Voice Total
R`000 Services R`000
R`000
Revenue 46 380 3 616 49 996
Cost of sales (24 058) (3 025) (27 083)
Gross profit 22 322 591 22 913
Operating expenses (12 541) (2 510) (15 051)
EBITDA 9 781 (1 919) 7 862
Notes
The company does not separately identify assets or liabilities attributable to
the different segments of the business and accordingly no such information is
disclosed. The business is conducted mostly within South Africa and managed
centrally so there is therefore no meaningful basis for geographic segmentation.
Abridged Cash Flow Reviewed for Audited for Audited for
Statements the six the six the year
months ended months ended
28 February ended 29 February
2005 31 August 2004
R`000 2004 R`000
R`000
Net cash (outflow)/ inflow (7 079) (349) 2 327
from operating activities
Net cash (outflow)/inflow (4 816) -- 68
from investing activities
Acquisition of subsidiary (36 513) -- --
Net cash inflow from 50 081 356 2 090
financing activities
Net increase in cash and 1 673 7 4 485
cash equivalents
Bank balance/(overdraft) at 10 3 (4 482)
beginning of period
Cash and cash equivalents at 1 683 10 3
end of period
Statement of Changes in Share Share Accumulated Total
Equity Capital premium loss
R`000 R`000 R`000 R`000
Balance at 28 February 2003 75 23 498 (27 566) (3 993)
Loss for the year -- -- (3 253) (3 253)
Balance at 29 February 2004 75 23 498 (30 819) (7 246)
Loss for the six months -- -- (436) (436)
ended 31 August 2004
Balance at 31 August 2004 75 23 498 (31 255) (7 682)
Issue of shares for the 67 5 586 -- 5 653
acquisition of DataPro from
management vendors
Issue of shares for cash 87 48 037 -- 48 124
Write off of issue expenses (2 113) -- (2 113)
against share premium
Profit for the period -- -- 4 551 4 551
Balance at 28 February 2005 229 75 008 (26 704) 48 533
COMMENTARY
The company`s results for the six months ended 28 February 2005 are the first
set of results since the acquisition of DataPro (Proprietary) Limited
(`DataPro`) which was effective from 01 September 2004. The results also
reflect the change in the company`s year end to 31 August each year.
The accounting policies adopted for purposes of this interim report comply, and
have been consistently applied in all material respects, with South African
Statements of Generally Accepted Accounting Practice (GAAP). The results have
been reviewed by Grant Thornton and their unqualified review opinion is
available for inspection at the registered office of the company.
DataPro is an established first-tier Internet Service Provider that focuses on
the corporate market where its profitability is largely derived from annuity
based income that generates positive cash flows. DataPro also provides Voice-
Over-Internet-Protocol (`VOIP`) and is accordingly well positioned to take
advantage of the recent deregulation of the telecommunications industry.
FINANCIAL OVERVIEW
The directors are particularly pleased to announce the first set of interim
results reflecting earnings and headline earnings per share of 2.0 cents. As a
result, the directors have decided to declare a maiden interim dividend of 1
cent per share representing a dividend cover of two. Due to the fact that
results cannot be compared to the prior period, commentary has been limited to
the current results, with a comparison to the prior period of the main operating
subsidiary, namely DataPro.
Revenue grew to nearly R50 million for the six month period with a net profit
after tax of R4.5 million. Revenue generated from data services, and more
specifically the bulk breaking of bandwidth, accounted for 65% of total revenue,
which was 18% higher than the previous six months and 31% higher than the
corresponding period in the last financial year. Taking into account a measure
of deflation on revenue pricing, this growth represents a strong performance
showing a substantial increase in revenue in real terms. Contracted monthly
annuity revenue at 28 February 2005 was approximately R6.5 million.
Gross bandwidth margins, before and after sales commissions, increased over
prior periods due to critical mass, economies of scale and bulk purchasing-
power.
Revenue and profits were not as high as projected, due primarily to the
announcement in September 2004 by government of intended deregulation in the
telecommunications industry. Although this caused a significant drop in revenue
from DataPro`s Voice model, based on Call Back and Cellular Least-Cost Routing,
the deregulation has opened up the market to VOIP and the board of directors
resolved to make a significant investment in the future growth opportunities.
As a result, the company has incurred significant costs in gearing up for VOIP
business, by increasing the sales force by 100% and the technical and
administrative support departments by 54%. This has resulted in a 42% increase
in the salary expense when compared to the corresponding period in the last
financial year. The establishment of a reseller channel and increased marketing
expenditure accounted for another R880 000.
The total effect on earnings from increased salaries and related costs,
including marketing, amounted to approximately R4.6 million. This investment in
growth is estimated to have impacted earnings by approximately 2 cents per share
during the six-month period. Shareholders are referred to growth prospects
below. The directors, having taken into account the impact of these
investments, are confident in the financial health of the company to declare a
maiden interim dividend.
INDUSTRY AND BUSINESS OVERVIEW
The data services market, characterised by R1.2 billion of annual spend, is
primarily focused on providing Internet services and virtual private networks
(`VPN`s`) to corporate SA. At DataPro these services centre on providing
permanent Internet connections through the supply of leased lines or broadband-
ADSL. DataPro is a well established `annuity-based, bulk-breaking` business
that has operated for several years and is currently rated amongst the top five
South African first-tier Internet Service Providers (`ISP`s`). DataPro has a
substantial base of customers, a world class network infrastructure and a wide
range of quality products and services. DataPro currently services businesses
of all sizes on a countrywide basis.
More notably, the period under review has been marked by significant regulatory
changes that made DataPro`s Voice model based on Call Back and Cellular Least
Cost Routing redundant and, in turn, opened up the market to VOIP. Although the
latter offers significantly more opportunities, the positive impact of this
business is only expected to impact future results.
Anticipating the deregulation of the South African Market nearly 3 years ago,
DataPro started establishing interconnection agreements with various Telco`s,
acquiring the appropriate International licences, launched the Vox Telecom brand
and began building a VOIP infrastructure. This experience, coupled with
DataPro`s Internet platform, has given the group a clear edge in the market with
Vox Telecom as the market leader in the VOIP arena.
GROWTH PROSPECTS
Vox Telecom
DataPro`s Voice business, still in its infancy, is expected to contribute more
significantly to revenue and profit in the foreseeable future. Vox Telecom aims
to establish a niche market as an alternate low-cost operator to the current
incumbent.
Vox Telecom continues to be first to market by using its core competency of
speed as a competitive advantage and has successfully launched a Service
Provider Channel with over 80 resellers selling Voice solutions. These
resellers come from the Least-Cost-Routing and PBX industry and as such have a
formidable presence in the telecommunications industry. As of the date of this
report Vox has already contracted R2.3 million of monthly VOIP revenue that
should pass through the testing-phase in the ensuing months. This should see
current monthly revenue increase by at least 27%.
DataPro
Albeit that the data market has become extremely competitive where the top end
is saturated and all services are subject to industry pricing pressure,
DataPro`s ever-increasing data services annuity book should continue to improve
economies of scale and purchasing power while raising the inherent barriers to
entry. The price of bandwidth should continue to be lowered due to larger
volume discounts from improved bulk purchasing power, as well as industry
pricing pressure. Increased usage and users are expected to continue outpacing
the impact on industry pricing.
DataPro continue to see the Internet as a significant area of growth in SA. At
the end of 2002 an estimated 8,000 businesses were permanently connected to the
Internet. With the launch of broadband products like ADSL, the costs of being
connected to the Internet were lowered and there are now over 55,000 SA based
businesses permanently connected to the Internet, representing a growth of
47,000 businesses, achieved in only two and a half years, albeit in the lower
end of the market. DataPro were the first to launch a Business ADSL product
that has resulted in DataPro having the broadest range of ADSL products and a
clear dominance in the small to medium sector.
Strategic Value and Future Prospects
DataPro is well established, has formed strong strategic alliances, has a large
number of channels to market, good branding and technology know how. The
company has a solid growing base in the data market that is underpinned by being
contracted annuity business.
Early indications are that Vox Telecom will grow quickly and the aim is to
maintain a leading position and dominate market share in the 2nd Tier
Telecommunication sector. It is anticipated that VOIP, through VoX Telecom,
will ultimately overtake the data business in the next year. The growth
strategy, based on Voice, will require continued investment by the company in
infrastructure, people and marketing, whilst maintaining the support of DataPro
Group shareholders.
ACQUISITION AND ISSUE OF SHARES FOR CASH
At a general meeting of shareholders held on 27 September 2004, shareholders
approved the acquisition of DataPro at a total cost of R41 652 500, which
purchase price was settled in cash of R36 million, paid to BOE Private Equity
Investments (Proprietary) Limited (`BOE`), and through the issue of 66 500 000
new ordinary shares at 8.5 cents per share to DataPro management vendors. In
addition, shareholders approved the issue of 87 500 000 new ordinary shares for
cash at 55 cents per share. A large portion of the proceeds from the issue of
shares for cash were utilised to fund the acquisition of DataPro from BOE.
Details of the above transactions were published in an abridged prospectus on
SENS and in the press on 03 September 2004. The above shares were issued on 18
October 2004.
CHANGE OF NAME
Following the acquisition of DataPro, the company transferred its listing to the
Alternative Exchange of the JSE Securities Exchange South Africa and changed its
name to DataPro Group Limited with effect from 18 October 2004.
DIRECTOR CHANGES
At the general meeting on 27 September 2004, pursuant to the approval of the
acquisition of DataPro, D Cameron resigned from the board, DG Reed was appointed
as Chief Executive Officer, GP Sweidan as operations director and M Krastanov as
a non-executive director. YT Moerane remained as non-executive chairperson and
JC Herbst as financial director.
In addition, MC Mogase has been appointed as a non-executive director, with CM
Lister-James as his alternate, with effect from 11 November 2004. K Chelius
resigned as director on 28 February 2005.
DIVIDENDS
The Board of Directors is pleased to announce that an interim dividend of 1 cent
per share (one cent), has been declared, and is payable on Monday, 23 May 2005
to shareholders recorded in the register of the company at the close of business
on Friday, 20 May 2005. The last date to trade `Cum` dividend will be Friday,
13 May 2005. `Ex` dividend trade will commence on Monday, 16 May 2005 and the
record date will be Friday, 20 May 2005.
Shareholders are advised that share certificates may not be dematerialised or
rematerialised between Monday, 16 May 2005 and Friday, 20 May 2005 both days
inclusive.
GENERAL
In accordance with AltX Listings Requirements, shareholders are advised of the
risks of investing in a company listed on the AltX and that the JSE does not
guarantee the viability or the success of a company listed on the AltX. In
terms of the JSE Listings Requirements, a Designated Advisor has to be retained
by the company. The Designated Advisor is required, inter alia, to attend all
board meetings held by the company to ensure that all the JSE Listings
Requirements and applicable regulations are complied with, approve the financial
director of the company and guide the company in a competent, professional and
impartial manner. If the company fails to retain a Designated Advisor it must
make arrangements to appoint a new Designated Advisor within 10 business days,
failing which the company faces suspension of trading of its securities. If a
Designated Advisor is not appointed within 30 days of its suspension, the
company faces the termination of its listing without an offer to minorities.
By order of the Board
YT Moerane DG Reed
Chairperson Chief Executive Officer
22 April 2005
Johannesburg
Registered Office
Arcay House, Number 3 Anerley Road, Parktown, Johannesburg, 2193
PO Box 62397, Marshalltown, Johannesburg, 2107
Directors
YT Moerane*, DG Reed, JC Herbst, GP Sweidan, M Krastanov*, MC Mogase*
(Alternate CM Lister-James)
* Non-executive
Designated Advisor Transfer Office
Arcay Corporate Services Computershare Investor Services 2004 (Proprietary)
Limited
Date: 22/04/2005 01:29:21 PM
Produced by the JSE SENS Department
