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STO
STO
STO - Set Point - Audited Results for the year ended 31 August 2007 and
dividend declaration
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")
Audited Results for the year ended 31 August 2007
- HEPS (from continuing operations) up 37% to 7,8 cents
- Resumption of dividend payment - 2 cents
- Strong liquid balance sheet and positive cash flow
Consolidated income statements
Audited year ended 31 August 2007
Continuing Discontinued
Total operations operations
R`000 R`000 R`000
Revenue 407 544 293 741 113 803
Cost of sales (251 477) (151 873) (99 604)
Gross profit 156 067 141 868 14 199
Selling and administration (121 068) (95 796) (25 272)
expenses
Other operating income 2 155 2 110 45
Other operating expenses (17 057) (1 620) (15 437)
Impairment of goodwill (3 960) - (3 960)
Profit/(loss) on disposal of 32 61 (29)
plant and equipment
Foreign exchange transaction (610) (601) (9)
(losses)/gains
Share option cancellation - - -
expenses
Impairment of long term (9 000) - (9 000)
receivable
Impairment of patent (1 846) - (1 846)
Amortisation of intangible (1 673) (1 080) (593)
assets
Operating profit/(loss) 20 097 46 562 (26 465)
Net finance costs (6 913) (4 983) (1 930)
Finance income 10 041 9 965 76
Finance costs (16 954) (14 948) (2 006)
Profit/(loss) before taxation 13 184 41 579 (28 395)
Taxation (9 871) (15 007) 5 136
Profit/(loss) after taxation 3 313 26 572 (23 259)
Loss on disposal of (3 509) - (3 509)
discontinued operations (net
of taxation)
(Loss)/profit for the year (196) 26 572 (26 768)
Attributable to:
Equity holders of Set Point (330) 26 438 (26 768)
Minority interests 134 134 -
(196) 26 572 (26 768)
Shares in issue
Weighted average number of 338 873
ordinary shares in issue
(000`s)
Fully diluted weighted 340 068
average number of ordinary
shares in issue (000`s)
Basic and diluted basic (0,1) 7,8 (7,9)
earnings per share (cents)
Headline and diluted headline 2,5 7,8 (5,3)
earnings per share (cents)
2007
Reconciliation of headline Gross Taxation Net
earnings:
Earnings 11 402 (11 732) (330)
Adjusted for: 7 422 1 336 8 758
Attributable to discontinued
operations
- loss on disposal of Mineral 1 081 (313) 768
Mining
- loss on disposal of 567 - 567
Tribology
- deferred taxation loss on - 2 174 2 174
sale of patents
- loss on disposal of plant 29 (8) 21
and equipment
- goodwill impairment 3 960 - 3 960
- intangible asset impairment 1 846 (535) 1 311
7 483 1 318 8 801
Attributable to continuing
operations
- (profit)/loss on disposal (61) 18 (43)
of plant and equipment
18 824 (10 396) 8 428
Consolidated income statements (Contd)
Audited year ended 31 August 2006
Continuing Discontinued
Total operations operations
R`000 R`000 R`000
Revenue 315 665 224 627 91 038
Cost of sales (189 122) (105 298) (83 824)
Gross profit 126 543 119 329 7 214
Selling and administration (106 680) (80 336) (26 344)
expenses
Other operating income 4 343 4 174 169
Other operating expenses (20 685) (5 208) (15 477)
Impairment of goodwill (11 330) (2 946) (8 384)
Profit/(loss) on disposal of (563) (501) (62)
plant and equipment
Foreign exchange transaction (322) (332) 10
(losses)/gains
Share option cancellation (439) (439) -
expenses
Impairment of long term - - -
receivable
Impairment of patent (5 607) - (5 607)
Amortisation of intangible (2 424) (990) (1 434)
assets
Operating profit/(loss) 3 521 37 959 (34 438)
Net finance costs (11 907) (10 788) (1 119)
Finance income 5 373 5 096 277
Finance costs (17 280) (15 884) (1 396)
Profit/(loss) before taxation (8 386) 27 171 (35 557)
Taxation (5 242) (10 740) 5 498
Profit/(loss) after taxation (13 628) 16 431 (30 059)
Loss on disposal of - - -
discontinued operations (net
of taxation)
(Loss)/profit for the year (13 628) 16 431 (30 059)
Attributable to:
Equity holders of Set Point (14 060) 15 999 (30 059)
Minority interests 432 432 -
(13 628) 16 431 (30 059)
Shares in issue
Weighted average number of 302 961
ordinary shares in issue
(000`s)
Fully diluted weighted 304 483
average number of ordinary
shares in issue (000`s)
Basic and diluted basic (4,6) 5,3 (9,9)
earnings per share (cents)
Headline and diluted headline 0,5 5,7 (5,2)
earnings per share (cents)
2006
Reconciliation of headline Gross Taxation Net
earnings:
Earnings (8 818) (5 242) (14 060)
Adjusted for: 17 500 (1 789) 15 711
Attributable to discontinued
operations
- loss on disposal of Mineral - - -
Mining
- loss on disposal of - - -
Tribology
- deferred taxation loss on - - -
sale of patents
- loss on disposal of plant 62 (18) 44
and equipment
- goodwill impairment 11 330 - 11 330
- intangible asset impairment 5 607 (1 626) 3 981
16 999 (1 644) 15 355
Attributable to continuing
operations
- (profit)/loss on disposal 501 (145) 356
of plant and equipment
8 682 (7 031) 1 651
Condensed consolidated statement of changes in equity
Audited Audited
year ended year ended
31 August 31 August
2007 2006
R`000 R`000
Opening balances 120 277 87 422
Recognised income and expense
Loss for the year attributable to equity (330) (14 060)
holders of Set Point
Transactions with shareholders
Share based payments 343 45
Dividends - (8 921)
Treasury shares issued 300 1 552
Shares acquired by share trust - (95)
Shares issued 1 080 56 387
Acquisition of minority interests (4 129) (2 053)
Equity attributable to equity holders of 117 541 120 277
Set Point
Minority interests 498 389
Total equity 118 039 120 666
Condensed segmental information
Impairment
of intan-
Segment Segment gible
assets liabilities assets
R`000 R`000 R`000
Analytical Services 64 295 22 050 -
Fluid Handling 103 171 29 045 -
Mining - continued operations 47 764 13 880 -
Mining - discontinued 10 140 13 141 5 806
operations
Central Services 1 691 35 559 -
Consolidation entries (47) 219 -
adjustments and intra group
elimination
227 014 113 894 5 806
Condensed segmental information (Contd)
Segment Segment
revenue result
R`000 % R`000 %
Analytical Services 93 468 22,9 28 593 154,9
Fluid Handling 151 221 37,1 31 229 169,3
Mining - continued 95 096 23,3 7 310 39,6
operations
Mining - discontinued 113 803 27,9 (28 113) (152,3)
operations
Central Services - (20 286) (109,9)
Consolidation entries (46 044) (11,2) (284) (1,6)
adjustments and intra group
elimination
407 544 100,0 18 449 100,0
Consolidated balance sheets
Audited Audited
year ended year ended
31 August 31 August
2007 2006
R`000 R`000
Assets
Non-current assets 73 523 130 722
Plant and equipment 27 334 31 805
Goodwill 40 099 45 480
Intangible assets 1 171 12 206
Receivable - 33 486
Deferred taxation 4 919 7 745
Current assets 158 410 171 908
Inventories 51 373 51 331
Trade and other receivables 70 344 77 306
Bank balances and cash 36 693 43 271
Total assets 231 933 302 630
Equity and liabilities
Total equity 118 039 120 666
Non-current liabilities 12 001 26 710
Purchase consideration payable - 9 479
Interest bearing liabilities 8 126 14 238
Provisions and accruals 3 875 2 993
Current liabilities 101 893 155 254
Interest bearing liabilities 8 254 4 970
Purchase consideration payable 11 321 3 163
Trade and other payables 73 583 84 672
Taxation liability 8 735 225
Bank overdraft - 62 224
Total equity and liabilities 231 933 302 630
Shares in issue (net of treasury 342 040 336 740
shares) (000`s)
Net asset value per share (cents) 34,36 35,72
Consolidated cash flow statements
Audited Audited
year ended year ended
31 August 31 August
2007 2006
R`000 R`000
Cash flows from operating activities 43 501 19 650
Cash generated by operations 50 876 43 478
Finance income 9 021 5 373
Finance costs (15 948) (10 839)
Taxation paid (423) (8 674)
Dividends paid
- ordinary shareholders - (8 921)
- minority shareholders (25) (767)
Cash flows from investing activities (11 817) (8 858)
Investment to expand operations
Acquisition of business/investment in - (5 418)
subsidiary
Investment to maintain operations
Replacement of property, plant and (14 020) (9 288)
equipment
Disposals of property, plant and 2 203 430
equipment
Cash flows from financing activities (2 495) (5 755)
Proceeds from issue of shares 1 076 (156)
Shares issued by treasury 331 10
Shares purchased by treasury - (95)
Acquisition of minorities (825) (500)
Payment to vendors in respect of (3 838) (4 018)
purchase consideration payable
Proceeds from non-current receivables 3 256 360
Payment in respect of long term (54) -
provisions
Decrease in interest bearing debt non- (11 544) (80)
current
Interest bearing debt raised 9 103 -
Decrease in interest bearing debt - (1 276)
current
Discontinued operations 28 618 (26 545)
Cash flows from operating activities (15 090) (24 200)
Cash flows from investing activities (2 281) (3 979)
Cash flows from financing activities 19 500 (1 400)
Cash flows from disposal of 26 489 3 034
discontinued operation
Cash and cash equivalents
Net cash and cash equivalents 57 807 (21 508)
generated/(utilised)during the year
At beginning of year (18 953) 2 555
Cash in business disposed (2 161) -
At end of year 36 693 (18 953)
Group review
PROFILESet Point has three core activities:
- Analytical Services operates through specialised laboratories which
offer expert analysis for the precious metals exploration industry and
for condition monitoring of fluids.
- Fluid Handling supplies medium technology products and services to the
petrochemical and mining industries.
- Mining Technologies comprises the manufacture of hopper wheels, skip and
cage guides and skip and cage rollers.
DISPOSALSShareholders were informed at the time of the interim results
announcement that Set Point had disposed of Mineral Mining with effect from 1
March 2007. The consideration payable included the return of 4 million Set
Point shares originally issued to the vendor of Mineral Mining.
Agreement was reached in May 2007 to clawback a portion of the original Seran
purchase consideration. A total of 30 million shares were returned and, as
detailed below, an agreement concluded that these shares be sold, with the
cash consideration being paid to Set Point.
As announced on 23 August 2007, Set Point disposed of Seran Engineering and
Supplies with effect from 30 August 2007. The consideration payable of R20,5
million has been received and in addition, the debtors and creditors were
retained and are being collected and settled in the ordinary course of
business.
MINEWORKERS INVESTMENT COMPANYShareholders have been advised that MIC has
acquired the above 34 million shares at 65 cents per share for a total
consideration of R22,1 million payable to Set Point. This investment by MIC
represents a 10% shareholding in the company and increases the group`s BEE
shareholding to 25%. The board is particularly pleased to have the broad-
based MIC as a substantial shareholder in the group. Paul Nkuna, the CEO of
MIC, has joined the board as a non-executive director.
GROUP FINANCIAL RESULTSHeadline earnings per share from continuing and
discontinued operations increased from 0,5 cents to 2,5 cents per share.
However, as the discontinued operations have been sold and the proceeds
received, it is more relevant to note the very satisfactory increase of 37%
in headline earnings per share from continuing operations to 7,8 cents per
share. Revenue from continuing operations increased by 31% to R294 million.
Costs of head office and shared services reflected an unacceptable increase
and corrective measures were implemented in the last quarter of the financial
year.
The group balance sheet is strong and liquid and reflects the effects of the
disposal of the group`s under-performing divisions during the year and the
resulting substantial improvement in liquidity and material reduction in
liabilities. The group had no net borrowings at the year end with net cash
exceeding R20 million. The only non-operational material cash outflow
anticipated in the period ahead is an amount of R11,3 million due to the
Letaba minorities at the end of November 2007
OPERATIONAL RESULTSAnalytical Services recorded a revenue increase of 37% to
R93 million and an improvement in operating profit of 21% to R28,6 million.
Revenue from Fluid Handling at R152 million was 33% higher than previously.
Gross margins showed a similar increase resulting in operating profit
improving by a commendable 37%.
The year under review being the first full year for Gopro and Reng, and the
disposals in Mining Technologies do not allow for meaningful comparisons.
However, on gross revenue of R95 million Gopro and Reng achieved acceptable
levels of profitability.
During the period the group`s short term and long term incentive plans were
reviewed. Short term EVA incentives are now in place in all of the group`s
operating units and at head office level. In addition share options were
allocated to senior executives throughout the group for the first time in a
number of years.
DIVIDENDBased on the results from continuing operations and the strength of
the balance sheet, the board has declared a dividend of 2 cents per share for
the year ended 31 August 2007.
In addition the previous dividend policy of considering the payment of an
interim and a final dividend annually covered approximately three times by
earnings has been re-instituted.
DIRECTORATEDanisa Baloyi resigned as a director on 26 March 2007 and Errol
Gregor resigned as a director and CEO on 8 May 2007.
Graeme Horsfield was appointed CEO from 1 June 2007.
Norman Kennelly was appointed acting CFO from 25 July 2007.
Des Seaton was appointed to the board as an independent non-executive
director on 28 May 2007. Paul Nkuna joined the board as a non-executive
director from 17 September 2007.
BASIS OF PREPARATIONThe condensed financial statements have been prepared in
accordance with IFRS and interpretation statements in issue and effective at
31 August 2007.
The group`s auditors, KPMG Inc, have audited these results and their
unqualified audit report dated 29 October 2007 is available for inspection at
the registered office of the company.
OUTLOOK FOR THE COMING YEARDemand for the group`s products and services
continues to grow. All divisions are operating profitably and expenses are
being closely controlled. The anticipated growth in those sectors of the
economy serviced by the group are expected to have positive spin offs for Set
Point.
The group anticipates meaningful real growth in headline earnings per share
from continuing operations in the coming year.
DIVIDEND DECLARATIONNotice is hereby given that dividend number 6 of 2 cents
per share has been declared in respect of the year ended 31 August 2007
Shareholders attention is drawn to the following dates.
Last day to trade to participate in the Friday 30 November 2007
dividend
Shares commence trading "ex dividend" Monday 3 December 2007
Record date Friday 7 December 2007
Dividend payment date Monday 10 December 2007
Share certificates may not be dematerialised or rematerialised between Monday
3 December 2007 and Friday 7 December 2007, both days inclusive.
CS Seabrooke GJ
HorsfieldChairman Chief Executive
Officer
Directors: CS Seabrooke* (Chairman), MJ Smith* (Deputy Chairman),
GJ Horsfield (Chief Executive Officer), D Seaton*^, P Nkuna*, BH Kent*^,
JM Judin*, GE Nel*^
(* Non-executive) (^ Independent)
Company Secretary: ND Kennelly
30 October 2007
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: 30/10/2007 15:31:12 Produced by the JSE SENS Department.
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