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BTG
BTG
BTG - Bytes Technology Group - Unaudited Consolidated Interim Financial
Results For The Six Months Ended 31 August 2007
BYTES TECHNOLOGY GROUP
(Incorporated in the Republic of South Africa)
Registration number 1911/003874/06
ISIN: ZAE000029526
Share code: BTG
Unaudited consolidated interim financial results for the six months ended
31 August 2007
HIGHLIGHTS FOR THE SIX MONTHS
- Revenue up 44%
- Operating profit up 8%
- Headline earnings per share up 12%
- Total net cash of R137 million
Income statements
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2007 2006 2007
Figures in R million Change (Unaudited) (Unaudited) (Audited)
Revenue 44 2 836 1 963 4 088
Operating profit before 8 170 157 325
goodwill adjustment,
impairment and
financial income and
expense
Financial income 31 30 50
Financial expense (18) (30) (43)
Capital items (7) - (5)
Goodwill adjustment and - - (69)
impairment
Financial lease - - (18)
settlement
Profit before taxation 176 157 240
Income tax expense - (56) (46) (77)
normal tax
Income tax expense - (12) (10) (10)
STC
Profit for the period 108 101 153
Attributable to:
Equity holders of 103 96 143
Bytes
Minority interest 5 5 10
Profit for the period 108 101 153
Weighted number of 169,3 165,4 166,1
shares in issue
(million)
Earnings per share - 5 61,1 58,1 85,9
basic (cents)
Earnings per share - 10 50,5 46,0 66,1
diluted (cents)
Dividends paid per 56,0 45,0 45,0
share (cents)
Headline earnings per 12 65,2 58,1 120,9
share - basic (cents)
Headline earnings per 18 54,2 46,0 98,8
share - diluted (cents)
Notes
Basis of preparation
The consolidated financial statements have been prepared in accordance
with IAS 34 - Interim Financial Reporting. The accounting policies used
in the preparation of these interim results are consistent with those
used in the annual financial statements for the year ended 28 February
2007.
1. Capital items
The group has disposed of its interest in Plato Computer Services Limited
in the UK which was classified as held-for-sale at 28 February 2007. The
related foreign currency reserve of R6 million has consequently been
expensed in the income statement. At date of disposal the net asset value
of the assets held-for-sale had deteriorated by a further R1 million
giving rise to an aggregate loss on disposal of R7 million.
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
Figures in R million (Unaudited) (Unaudited) (Audited)
2. Headline earnings
Attributable earnings are
reconciled to headline
earnings as follows:
Attributable to equity 103 96 143
holders of Bytes
Capital items 7 - 5
Goodwill adjustment and - - 69
impairment
Deferred tax assets raised - - (16)
Headline earnings 110 96 201
The headline earnings
calculation for the year
ended 28 February 2007 has
been restated following the
issue of Circular 08/2007 on
Headline Earnings. The
deferred taxation raised on
tax losses not previously
recognised on business
combinations has now been
excluded from headline
earnings in line with the
new circular.
3. Diluted earnings
Diluted earnings and diluted
headline earnings have been
calculated on the basis that
Kagiso Strategic Investments
(Pty) Limited (Kagiso)
exercised its full option on
22% of the shares in Bytes
Technology Group South Africa
(Pty) Limited.
Earnings attributable to
equity holders of Bytes are
reconciled to diluted earnings
as follows:
Earnings attributable to 103 96 143
equity holders of Bytes
Additional 22% minority (14) (14) (26)
interest
Diluted earnings 89 82 117
Headline earnings are
reconciled to diluted headline
earnings as follows:
Headline earnings 110 96 201
Additional 22% minority (14) (14) (27)
interest
Diluted headline earnings 96 82 174
The basis of calculation of
the comparative period have
been restated to be consistent
with the basis used in the
current year.
4. Reconciliation between
number of shares used for
earnings per share and diluted
earnings per share.
Weighted average number of 169,3 165,4 166,1
shares in issue
Dilutive options 8,3 13,3 10,2
Number of shares used to 177,6 178,7 176,3
calculate dilution
5. Acquisitions
During the period the group acquired a number of operations, namely
Mailing Facilities, Mastermed and a 51% interest in East Rand Document
Solutions for an aggregate consideration of R22 million. The combined
revenue and operating profit of these operations for the previous
financial year amounted to R43 million and R4 million respectively. In
the period under review these acquisitions contributed R20 million to
revenue and R3 million to operating profit.
The acquisitions had the following effect on the group`s assets and
liabilities:
Carrying Fair value Recognised
value adjustments values
Non-current assets 2 9 11
Current assets 4 - 4
Current liabilities (4) - (4)
Net identifiable assets and 2 9 11
liabilities
Goodwill on acquisition 16
Total purchase consideration 27
Less deferred purchase (5)
consideration
Consideration paid in cash 22
Balance sheets
31 August 31 August 28 February
2007 2006 2007
Figures in R million (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets 873 801 819
Property, plant and 124 121 114
equipment
Intangible assets 463 471 439
Loans receivable 114 70 91
Finance lease assets 87 70 77
Available-for-sale 24 20 24
investment
Deferred taxation assets 61 49 74
Current assets 1 216 1 113 1 115
Inventories 227 200 180
Loans receivable 36 34 37
Trade and other receivables 767 759 616
Assets classified as held- - - 19
for-sale
Cash and cash equivalents 186 120 263
TOTAL ASSETS 2 089 1 914 1 934
EQUITY AND LIABILITIES
Total equity 739 641 707
Equity holders of Bytes 717 627 689
Minority interest 22 14 18
Non-current liabilities 135 135 141
Borrowings and loans 18 50 39
Finance lease liabilities 87 70 77
Straight line lease accrual 27 15 21
Deferred taxation liability 3 - 4
Current liabilities 1 215 1 138 1 086
Borrowings and loans 67 34 62
Trade and other payables 1 071 897 926
Liabilities classified as - - 15
held-for-sale
Taxation 77 54 33
Bank overdraft - 153 50
TOTAL EQUITY AND LIABILITIES 2 089 1 914 1 934
Shares in issue at end of 170,0 165,8 168,3
period (million)
Net asset value per share 434,6 386,0 420,1
(cents)
Net tangible asset value per 162,3 101,2 159,2
share (cents)
Reconciliation of net cash/(debt)
31 August 31 August 28 February
2007 2006 2007
Figures in R million (Unaudited) (Unaudited) (Audited)
Non-current liabilities: (18) (50) (39)
Borrowings and loans
Finance lease liabilities (87) (70) (77)
Current liabilities: (67) (34) (62)
Borrowings and loans
Total debt per balance sheet (172) (154) (178)
Less related finance lease 87 70 77
assets
Less related loans receivable 36 34 37
Total debt (49) (50) (64)
Cash and cash equivalents 186 120 263
Bank overdraft - (153) (50)
Total net cash/(debt) 137 (83) 149
Abridged segmental analysis
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
Figures in R million (Unaudited) (Unaudited) (Audited)
Revenue
ICT Infrastructure and 1 767 934 1 965
Services
Software, Consulting and 603 580 1 167
Document Services
Specialised Equipment and 498 487 1 029
Services
Corporate and Other 3 2 3
Consolidation eliminations (35) (40) (76)
Total operations 2 836 1 963 4 088
Operating profit before
capital items
ICT Infrastructure and 85 59 121
Services
Software, Consulting and 67 67 123
Document Services
Specialised Equipment and 40 57 126
Services
Corporate and Other (18) (17) (33)
Consolidation eliminations (4) (9) (12)
Total operations 170 157 325
GEOGRAPHICAL SEGMENTS
Revenue by market
South Africa 1 540 1 494 3 011
United Kingdom 1 243 433 987
Rest of Africa 88 76 166
Consolidation eliminations (35) (40) (76)
Total operations 2 836 1 963 4 088
Operating profit before
capital items
South Africa 122 139 285
United Kingdom 40 14 35
Rest of Africa 12 13 17
Consolidation eliminations (4) (9) (12)
Total operations 170 157 325
A minor re-alignment of business units between the ICT Infrastructure and
Services and the Software, Consulting and Document Services segments has
resulted in a restatement of the comparative balances.
Condensed cash flow statements
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
Figures in R million (Unaudited) (Unaudited) (Audited)
Operating activities 44 (62) 211
Cash generated by operations 196 193 386
(Increase)/decrease in working (50) (141) 10
capital
Net financial income 13 - 7
Taxation paid (16) (39) (111)
143 13 292
Dividends paid (99) (75) (81)
Investing activities (78) (112) (184)
Financing activities 7 43 88
(Decrease)/increase in cash (27) (131) 115
and cash equivalents
Cash and cash equivalents at 213 98 98
beginning of period
Cash and cash equivalents at 186 (33) 213
end of period
Supplementary information
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
Figures in R million (Unaudited) (Unaudited) (Audited)
Amortisation of intangible 8 6 14
assets
Depreciation of property, 22 21 41
plant and equipment
Foreign exchange gains - 1 1
Capital expenditure 29 26 46
Capital commitments - 1 -
Contingent liabilities 5 5 5
Operating lease commitments
Payable within the next 12
months:
- property 44 35 44
- plant, equipment and 10 8 10
vehicles
Less related straight-line (2) (4) (2)
lease accrual
52 39 52
Payable one to five years:
- property 135 120 138
- plant, equipment and 11 13 9
vehicles
Payable thereafter:
- property 77 101 95
Less related straight-line (25) (15) (21)
lease accrual
198 219 221
Total 250 258 273
Statements of changes in equity
Deferred
Share hedging Accumulated
Figures in R million capital Reserves reserve deficit
Balance at 28 February 2006 716 19 (5) (167)
(audited)
Total recognised income and 1 4 96
expense
Foreign currency 1
translation differences
Fair value adjustment to 4
cash flow hedge
Income and expense 1 4
recognised directly in
equity
Profit for the period 96
Transactions with 3 3 - (70)
shareholders
Dividend paid (70)
Share based payments 3
Issue of share capital 3
Balance at 31 August 2006 719 23 (1) (141)
(unaudited)
Total recognised income and 6 1 47
expense
Foreign currency 3
translation differences
Fair value adjustment to 3
available-for-sale
investment
Fair value adjustment to 1
cash flow hedge
Income and expense 6 1
recognised directly in
equity
Profit for the period 47
Transactions with 10 3 - (5)
shareholders
Dividend paid (5)
Share based payments 3
Issue of share capital 10
Balance at 28 February 2007 729 32 - (99)
(audited)
Total recognised income and 10 - 103
expense
Foreign currency 4
translation differences
Foreign currency 6
translation reversed on
disposal
Fair value adjustment to
available-for-sale
investment
Minority interest resulting
from business acquisition
Fair value adjustment to
cash flow hedge
Income and expense 10 -
recognised directly in
equity
Profit for the period 103
Transactions with 7 3 - (95)
shareholders
Dividend paid (95)
Share based payments 3
Issue of share capital 7
Balance at 31 August 2007 736 45 - (91)
(unaudited)
Statements of changes in equity
Premium on
minority Minority Total
equity
Figures in R million transactions Total interest equity
Balance at 28 February 27 590 14 604
2006 (audited)
Total recognised income 101 5 106
and expense
Foreign currency 1 1
translation differences
Fair value adjustment to 4 4
cash flow hedge
Income and expense 5 5
recognised directly in
equity
Profit for the period 96 5 101
Transactions with (64) (5) (69)
shareholders
Dividend paid (70) (5) (75)
Share based payments 3 3
Issue of share capital 3 3
Balance at 31 August 2006 27 627 14 641
(unaudited)
Total recognised income 54 5 59
and expense
Foreign currency 3 3
translation differences
Fair value adjustment to 3 3
available-for-sale
investment
Fair value adjustment to 1 1
cash flow hedge
Income and expense 7 7
recognised directly in
equity
Profit for the period 47 5 52
Transactions with 8 (1) 7
shareholders
Dividend paid (5) (1) (6)
Share based payments 3 3
Issue of share capital 10 10
Balance at 28 February 27 689 18 707
2007 (audited)
Total recognised income 113 8 121
and expense
Foreign currency 4 4
translation differences
Foreign currency 6 6
translation reversed on
disposal
Fair value adjustment to - -
available-for-sale
investment
Minority interest 3 3
resulting from business
acquisition
Fair value adjustment to - -
cash flow hedge
Income and expense 10 3 13
recognised directly in
equity
Profit for the period 103 5 108
Transactions with - (85) (4) (89)
shareholders
Dividend paid (95) (4) (99)
Share based payments 3 3
Issue of share capital 7 7
Balance at 31 August 2007 27 717 22 739
(unaudited)
Message to Stakeholders
Overview
Your directors are pleased to report on a further period of satisfactory
growth for the group, albeit at a lower rate than that achieved in the
comparable period in the previous year. The period under review was
characterised by a significant shift in the geographical split of revenue
and profit generation.
The board has consistently reported that its strategy is to grow the
international component of its operations to around 30% of its total
revenue and 25% of its profit with the objectives of increased
diversification, higher growth and lower risk. Accordingly it is
gratifying to report that in the period under review, the group made
great strides towards achieving this strategy with the international
contribution to revenue and operating profit rising to 46% (25%) and 30%
(16%) respectively.
Results
Overall, revenue increased by 44% to R2,836 million (R1,963 million) due
mainly to a large Microsoft order secured from a parastatal in the United
Kingdom ("the NHS contract") of GBP41 million (roughly R580 million).
Adjusting for the NHS contract, referred to in more detail below, revenue
increased by around 16%, a satisfactory performance.
Operating profit increased by 8% to R170 million (R157 million) but at a
reduced operating margin of 6% (8%). Adjusting this figure for the NHS
contract, the percentage rises to 7,5%. Net interest income increased to
R13 million compared with a neutral position in the previous comparable
period. Headline earnings per share ("HEPS") improved by 12,2% from 58,1
cents to 65,2 cents with diluted HEPS increasing by 18% from 46,0 cents
to 54,2 cents.
Cash generation was again satisfactory with the group`s net cash position
moving from a negative R83 million in August 2006 to R137 million
positive over the 12 months, an improvement of R220 million of which R100
million was of a temporary nature, relating to the NHS contract.
Operations
The group`s South African operations showed a 12% reduction in operating
profits from R139 million to R122 million. Adverse exchange rate
movements, delayed orders and certain temporary supply issues in two of
our larger operations were the major contributing factors. It is
anticipated that in the second half, both operations will show
improvements. The remainder of the South African group continues to make
good progress.
In regard to the group`s international business, excellent growth was
achieved with operating profit increasing by 93% from R27 million to R52
million. In the case of the UK, the improvement was even more pronounced,
with a significant increase of 185% to R40 million. Trading in the rest
of Africa continues to present certain challenges which are receiving
appropriate attention.
UK NATIONAL HEALTH SERVICE ("NHS") CONTRACT
In July 2007, Bytes UK was awarded the much sought after three year
contract to provide Microsoft licensing and services to three of the five
NHS regions. This contract is valued at around GBP41 million (R580
million) per annum which, given the nature of the business, does not
generate Bytes` usual gross margin. Accordingly, such a contract tends to
distort both revenue and margin figures and was instrumental in reducing
the group`s operating margin as referred to earlier. The contract is
nevertheless very attractive and should, over the three-year period,
produce additional services revenue. This contract has resulted in our
Bytes UK operation becoming the UK`s largest Microsoft Large Account
Reseller and has enhanced our relationship with Microsoft.
ACQUISITIONS
The group spent some R22 million during the period on niche acquisitions
in South Africa and is exploring further opportunities locally and in
Europe.
Your board continues to believe that further consolidation of the IT
industry in South Africa is both inevitable and necessary and the company
will pursue any worthwhile opportunities that present themselves.
BLACK ECONOMIC EMPOWERMENT (BEE) AND TRANSFORMATION
We are proud of our industry leading position in the area of BEE and
transformation, notwithstanding which, we remain committed to further
progress.
Prospects
Margin pressures continue to present ongoing challenges, not only to
Bytes, but to many of the players in the IT industry. However, the
directors are of the opinion that Bytes is well placed to meet these
challenges based on the diversity of our offering and our geographical
spread.
The board is further of the view that a satisfactory level of headline
earnings growth will be achieved for the full year.
DIVIDEND
No dividend is proposed at the interim stage as the group`s policy is to
declare a single dividend at the end of the financial year. It is
expected that the dividend for the year is likely to increase by at least
the level of increase in headline earnings.
ACKNOWLEDGEMENTS
We again acknowledge the contribution of our customers, staff and
stakeholders to whom we are indebted and we will continue to strive to
meet, and hopefully exceed, their expectations.
By order of the board
Dr Bill Venter David Redshaw Peter Riskowitz
Chairman Chief Executive Group Financial
Officer Director
3 October 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
The annual financial results are also available on the internet at
www.btgroup.co.za
Date: 03/10/2007 14:33:12 Produced by the JSE SENS Department.
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