| Mon 12 Nov 2007, 8:44 | | MIX - Telimatrix - Reviewed consolidated interim f |
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MIX
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MIX - Telimatrix - Reviewed consolidated interim financial information and
illustrative pro forma financial information of Telimatrix Limited for the six
months ended 30 September 2007
TELIMATRIX LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/013858/06)
JSE code: MIX & ISIN: ZAE000104683
("TeliMatrix" or "the company" or "the Group")
REVIEWED CONSOLIDATED INTERIM FINANCIAL INFORMATION AND ILLUSTRATIVE PRO FORMA
FINANCIAL INFORMATION OF TELIMATRIX LIMITED FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2007
Background
The company will be listed on Monday 12 November 2007 following the
acquisition from Control Instruments Group Limited ("CIGL") of their fleet
management businesses ("OmniBridge") with effect from 1 October 2007. Full
details of this transaction are contained in the pre-listing statement of the
Group published on 13 September 2007. To illustrate the financial performance
of the Group, pro forma results have been presented as if this acquisition had
been effective for the entire reporting period.
Pro forma results
* Pro forma adjusted annualised HEPS up 24%
* EBITDA for 6 months R80,3 million
* Acquisition of UK businesses completed
* Merger of Matrix Vehicle Tracking and OmniBridge under the TeliMatrix
umbrella was completed
* Listing process complete
The results are reported in two segments being:
* TeliMatrix - represents the vehicle tracking and recovery business in
South Africa operated through Matrix Vehicle Tracking (Proprietary)
Limited ("Matrix"); and
* OmniBridge - represents the fleet management business in:
- South Africa; and
- United Kingdom and Europe.
Pro forma financial information
The unaudited pro forma financial information has been compiled for
illustrative purposes only, from the audited or reviewed underlying financial
information of the respective entities and by its nature may not fairly
reflect the financial results or position of TeliMatrix after the acquisition
of OmniBridge. The pro forma financial information is the responsibility of
the directors of TeliMatrix. An unqualified reporting accountant`s report has
been issued on the pro forma financial information by the Group`s reporting
accountants.
Pro forma income statement for the six months ended 30 September 2007
Consolidation
(R`000) TeliMatrix(1) OmniBridge(2) Adjustments(3)
Revenue 138 872 183 057 -
Cost of sales (55 045) (58 727) -
Gross profit 83 827 124 331 -
Other operating income - 2 830 -
Other operating expenses (44 656) (85 979) -
Operating profit before 39 171 41 182 -
depreciation and amortisation
Depreciation and amortisation (3 492) (5 712) -
Amortisation arising from the
purchase price
allocations required by IFRS - (5 022) (5 700)
3
Profit before interest and tax 35 679 30 447 (5 700)
Finance income 270 472 -
Finance costs (4 316) (1 186) (6 658)
Profit before tax 31 633 29 733 (12 357)
Income tax expense (12 428) (14 363) 3 584
Net profit for period 19 205 15 370 (8 774)
Reconciliation of headline
earnings
Net profit 19 205 15 370 (8 774)
Profit on sale of fixed assets - - -
Negative goodwill on - (4 407) -
acquisitions
Tax effect of negative goodwill - 2 909 -
Headline earnings 19 205 13 872 (8 774)
Headline earnings 19 205 13 872 (8 774)
IFRS 3 Adjustments (after tax) 3 515 4 047
Other once off adjustments as a
result of the
transaction with CIGL 2 583 3 240 -
Adjusted headline earnings(6) 21 789 20 627 (4 727)
Number of shares in issue (000)
Earnings per share (cents)
Headline earnings per share
(cents)
Adjusted headline earnings per
share (cents)(6)
Pro forma Pro forma
6 months 12 months
ended ended
(R`000) 30 September 31 March 2007(5)
2007(4)
Revenue 321 929 578 837
Cost of sales (113 772) (226 795)
Gross profit 208 158 352 042
Other operating income 2 830 14 992
Other operating expenses (130 635) (238 430)
Operating profit before depreciation and 80 353 128 604
amortisation
Depreciation and amortisation (9 204) (14 886)
Amortisation arising from the purchase
price
allocations required by IFRS 3 (10 722) (21 662)
Profit before interest and tax 60 427 92 056
Finance income 742 595
Finance costs (12 160) (22 168)
Profit before tax 49 009 70 483
Income tax expense (23 207) (24 907)
Net profit for period 25 802 45 576
Reconciliation of headline earnings
Net profit 25 802 45 576
Profit on sale of fixed assets - (3 118)
Negative goodwill on acquisitions (4 407) (1 881)
Tax effect of negative goodwill 2 909 -
Headline earnings 24 304 40 577
Headline earnings 24 304 40 577
IFRS 3 adjustments (after tax) 7 562 15 380
Other once off adjustments as a result of
the
transaction with CIGL 5 823 4 835
Adjusted headline earnings(6) 37 689 60 792
Number of shares in issue (000) 640 000 640 000
Earnings per share (cents) 4,0 7,1
Headline earnings per share (cents) 3,8 6,3
Adjusted headline earnings per share 5,9 9,5
(cents)(6)
Notes to the Pro Forma Income Statement
1. Extracted from the reviewed consolidated financial results of TeliMatrix
for the six months ended 30 September 2007.
2. Represents the consolidated results of OmniBridge for the six months
ended 30 September 2007, based on the following:
- Reviewed results of the continuing operations of Control Instruments
Omnibridge (Proprietary) Limited ("CI OmniBridge") for the six months ended 30
September 2007;
- Audited results of CI Omnibridge Limited ("OmniBridge UK") for the four
months ended 30 September 2007 adjusted to represent six months.
3. Consolidation adjustments represent:
- Adjustment to the interest expense to reflect the debt position of the
merged businesses on the date of the merger of approximately R190 million;
- In terms of IFRS 3: Business Combinations, a preliminary purchase price
allocation exercise has been completed, resulting in the identification and
valuation of intangibles included in the acquisition (effective date: 1
October 2007). Intangibles have been assumed to be amortised over an average
period of five years. This represents the amortisation of intangibles arising
on the acquisition of OmniBridge (consisting of CI OmniBridge and OmniBridge
UK). Upon finalisation of the purchase price allocation exercise, the value
attached to the intangibles could differ from that presented in this pro forma
financial information.
4. Reflects the pro forma results as if the acquisitions had been effective
1 April 2007.
5. Reflects the pro forma income statement presented in the pre-listing
statement dated 13 September 2007.
6. The adjusted headline earnings figures represent the results after
adjustments to eliminate:
- The IFRS 3 amortisation expense in respect of intangible assets with
definite useful lives.
- Any other costs related to the transaction with CIGL which are not
representative of the Group going forward, amounting to R5,8 million and
comprising the following:
i. Write off of distribution rights previously acquired from TeliMatrix
amounting to R447 000;
ii. Costs related to the early exercise of share options arising from
the de-grouping of CI OmniBridge from CIGL amounting to R858 000;
and
iii. Normalisation of the tax liability through elimination of the
following:
* S45 tax liability within CI OmniBridge arising due to CI OmniBridge no
longer forming part of CIGL, amounting to R1,9 million; and
* STC tax liability in Matrix relating to the special dividend payable in
terms of the merger agreement amounting to R2,6 million.
Pro forma balance sheet at 30 September 2007
(R`000)
ASSETS
Non-current assets
Property, plant and equipment 54 284
Goodwill 560 588
Intangible assets 152 618
Financial assets 4 872
Deferred tax asset 3 892
Total non-current assets 776 254
Current assets
Inventory - other 51 243
Inventory held in client vehicles 20 886
Trade and other receivables 111 395
Loans to related parties 45 097
Restricted cash 1 000
Total current assets 229 621
Total assets 1 005 875
EQUITY
Share capital and reserves attributable to equity 588 202
holders of the company
LIABILITIES
Non-current liabilities
Borrowings 139 221
Deferred income tax liability 31 717
Provisions 15 302
Total non-current liabilities 186 240
Current liabilities
Trade and other payables 105 941
Tax payable 18 893
Loans from shareholders 20 667
Borrowings 58 024
Bank overdraft 6 760
Provisions 21 148
Total current liabilities 231 433
Total liabilities 417 673
Total equity and liabilities 1 005 875
Number of shares in issue (000) 640 000
Net asset value per share (cents) 91,9
Net tangible asset value per share (cents) (19,5)
Notes to Pro Forma Balance Sheet
The pro forma balance sheet of TeliMatrix is presented after taking into
account the acquisition of the minority interests in Matrix held by Kagiso
Strategic Investments (Proprietary) Limited and the acquisition of OmniBridge
from CIGL.
The amounts included in the pro forma balance sheet have been extracted from
the:
- reviewed consolidated interim financial information of TeliMatrix at 30
September 2007;
- reviewed financial information of CI OmniBridge at 30 September 2007; and
- audited consolidated financial information of OmniBridge UK at 30
September 2007.
The acquisition of OmniBridge has been accounted for as follows:
- the fair value of the businesses acquired by TeliMatrix amounted to
R674.7 million.
- in terms of IFRS 3: Business Combinations, a preliminary purchase price
allocation exercise has been performed, resulting in the identification
and valuation of intangibles on the effective date of the acquisition 1
October 2007. The excess has been attributed to goodwill.
- the purchase price allocation will be finalised within 12 months from the
effective date of the acquisition.
- upon finalisation of the purchase price allocation exercise, the value
attached to the intangibles could differ from that presented in these pro
forma statements.
Commentary
Established in 1995, TeliMatrix is focused on all levels of vehicle
telematics, combining vehicle tracking, driver/passenger safety and recovery
services with a complete range of fleet management products and services.
The TeliMatrix group has:
* substantial annuity revenue streams from a subscriber base of more than
170 000;
* 59% of group revenue is recurring;
* 41% of group revenue is earned in foreign exchange;
* state-of-the art technology platforms and superior product development
capabilities have resulted in technology leadership in all of the areas
in which it operates;
* prominent international brands including Matrix, VDO Fleet Manager, VDO
FM and Datatrak; and
* operations in South Africa, the United Kingdom and Germany together with
a global distribution network selling in over 75 countries on six
continents.
TeliMatrix`s strategy is to leverage its profitable, cash generative
businesses by expanding its recurring revenue model through the worldwide
distribution network established and operated successfully over the past ten
years by OmniBridge. With significant critical mass, a global footprint, a
large subscriber base and a history of operating successfully in international
markets, TeliMatrix is ideally positioned to take advantage of significant
international and local growth opportunities.
Our listing on the Johannesburg Stock Exchange will increase investor and
general public awareness of TeliMatrix and its operations, both in South
Africa and internationally, and will provide the Group with the ability and
currency to grow its operations (organically and through acquisitions) and
take advantage of the opportunities available to it.
Matrix
Matrix is the leading GSM tracking and recovery service provider in South
Africa and has through the launch of its unique Crash Alert product become
synonymous with vehicle personal safety devices. Matrix has a full range of
tracking products servicing low to high-end needs, minimising Matrix`s
exposure to any single market segment. This was vital during the past
reporting period, during which the lower end of the vehicle market experienced
difficult trading conditions due to the slow-down in car sales caused by the
introduction of the National Credit Act and the rising interest rate
environment.
Matrix delivered a solid performance, with a 24% increase in operating profit
against the comparative period ended 31 December 2006, with good cash
generation from operating activities.
A revenue comparison between reporting periods is difficult due to a change in
accounting treatment of the revenue from sales of tracking devices. The
company now spreads the revenue and costs relating to the cash sale of
tracking units over the contractual service period of 12 months. In addition,
revenue from the sale of hardware (as opposed to service revenue) was impacted
by increased competition which necessitated more aggressive pricing in certain
specific markets.
An aggressive focus on value-added services should assist in Matrix
maintaining its strong growth record going forward.
OmniBridge
OmniBridge specialises in the design, development and sales of fleet
management products and services for the commercial vehicle market globally.
OmniBridges`s products offer the full suite of information for complete fleet
management including information about vehicle performance, driver
performance, fuel consumption, location, tracking and utilisation. OmniBridge
provides a wide range of solutions, primarily targeted at driver safety,
productivity and risk management.
Trading conditions during the period were favourable and the businesses
performed well with pro forma revenue growth in excess of 20%. Particularly
strong growth was experienced in the Middle East, South America and
Australasia with large deals being secured within the oil-and-gas sector.
Locally OmniBridge won a sizable tender in the Eastern Cape which combined
with other deals is contributing towards a healthy future pipe-line.
Following the acquisition of the fleet telematics business from Siemens,
OmniBridge has gained direct control of the associated worldwide distribution
network. The handover from Siemens has been concluded and the costs associated
with this process have been accounted for in this period.
A European branch office based in Germany has been established to further
support and service the European distribution network. This office will ensure
the acceleration of sales in the region. OmniBridge is well poised to grow its
sales and particularly its annuity revenue connections in Europe during 2008.
Datatrak
As part of the transaction with Siemens, OmniBridge UK acquired Datatrak which
is a vehicle tracking, fleet management and telematics business based in the
United Kingdom. It has its own proprietary network covering much of the UK.
During the period under review, Datatrak secured a five year renewal of a
major customer contract worth GBP5 million.
We believe that opportunities exist to utilise Matrix`s products to accelerate
the growth of Datatrak`s 19 000 strong subscriber base in the United Kingdom.
The bulk of Datatrak`s revenues are annuity based which fits in perfectly with
TeliMatrix`s group strategy.
CONSOLIDATED INTERIM FINANCIAL INFORMATION OF TELIMATRIX LIMITED FOR THE SIX
MONTHS ENDED 30 SEPTEMBER 2007
Condensed Consolidated Income Statements
Reviewed Reviewed Audited
6 months 6 months 9 months
ended ended ended
30 September 31 December 31 March
(R`000) 2007 2006 2007
Revenue 138 872 133 864 206 433
Cost of sales (55 045) (60 158) (89 683)
Gross profit 83 827 73 706 116 750
Operating expenses (48 148) (44 928) (68 691)
Operating profit 35 679 28 778 48 059
Finance income 270 179 363
Finance charges (4 316) (3 865) (6 502)
Profit before taxation 31 633 25 092 41 920
Income tax expense (12 428) (9 558) (15 735)
Profit for the period 19 205 15 534 26 185
Attributable to:
Equity holders of the company 14 604 11 332 19 655
Minority interest 4 601 4 202 6 530
19 205 15 534 26 185
Reconciliation of headline
earnings
Profit for the period 14 604 11 332 19 655
Loss on sale of fixed assets - - -
Headline earnings 14 604 11 332 19 655
Number of shares in issue (000) 240 000 240 000 240 000
Attributable earnings per share 6,1 4,7 8,2
(cents)
Headline earnings per share 6,1 4,7 8,2
(cents)
Diluted earnings per share 6,1 4,7 8,2
(cents)
Dividends per share (cents) 6,5 11,9 11,9
Condensed Consolidated Balance Sheets
Reviewed Reviewed Audited
30 September 31 December 31 March
(R`000) 2007 2006 2007
ASSETS
Non-current assets
Property, plant and equipment 11 598 11 757 12 885
Intangible assets 3 347 3 237 3 649
Total non-current assets 14 945 14 994 16 534
Current assets
Inventory - other 14 383 11 190 12 942
Inventory held in client vehicles 20 886 19 194 20 413
Trade and other receivables 21 909 11 170 13 126
Deferred cost 7 533 - -
Loans to related parties 31 575 - -
Restricted cash 1 000 1 000 1 000
Cash and cash equivalents 2 424 10 057 7 731
Total current assets 99 710 52 611 55 212
Total assets 114 655 67 605 71 746
EQUITY
Share capital and share premium 16 16 16
Accumulated deficit (100 431) (107 858) (99 535)
Share capital and accumulated (100 415) (107 842) (99 519)
deficit attributable to equity
holders of the company
Minority interest 17 408 15 646 17 974
Total equity (83 007) (92 196) (81 545)
LIABILITIES
Non-current liabilities
Interest bearing borrowings 41 925 41 730 34 098
Deferred income tax liability 9 414 12 256 10 164
Total non-current liabilities 51 339 53 986 44 262
Current liabilities
Trade and other payables 61 186 39 761 46 868
Shareholders for dividends 20 667 - -
Interest bearing borrowings 53 075 54 690 62 161
Bank overdraft 2 347 11 364 -
Income received in advance 9 047 - -
Total current liabilities 146 322 105 815 109 029
Total liabilities 197 661 159 801 153 291
Total equity and liabilities 114 655 67 605 71 746
Number of shares in issue (000) 240 000 240 000 240 000
Net asset value per share (cents) (41,8) (44,9) (41,5)
Net tangible asset value per (43,2) (46,3) (43,0)
share (cents)
Condensed Consolidated Cash Flow Statements
Reviewed Reviewed Audited
6 months 6 months .9 months
ended ended ended
30 September 31 December 31 March
(R`000) 2007 2006 2007
Net cash from operating activities 27 082 15 770 56 735
Net cash used in investing (1 902) (2 592) (5 703)
activities
Net cash used in financing (32 833) (18 512) (47 328)
activities
Net (decrease)/increase in cash and (7 653) (5 334) 3 704
cash equivalents
Cash and cash equivalents at 7 731 4 027 4 027
beginning of period
Cash and cash equivalents at end of 77 (1 307) 7 731
period
Condensed Consolidated Statement of Changes in Equity
Share Share Accumulated
(R`000) capital premium deficit
Balance at 1 July 2006 3 13 (90 599)
Profit for the period 26 185
Minority interest (6 530)
Dividends paid (28 591)
Balance at 31 March 2007 3 13 (99 535)
Net profit for the period 19 205
Minority interest (4 601)
Share capitalisation 2 (2)
Dividends to TeliMatrix (15 500)
shareholders
Dividends to minority shareholder -
Balance at 30 September 2007 5 11 (100 431)
Minority
(R`000) TOTAL interest TOTAL
Balance at 1 July 2006 (90 583) 11 443 (79 140)
Profit for the period 26 185 - 26 185
Minority interest (6 530) 6 530 -
Dividends paid (28 591) - (28 591)
Balance at 31 March 2007 (99 519) 17 974 (81 545)
Net profit for the period 19 205 - 19 205
Minority interest (4 601) 4 601 -
Share capitalisation
Dividends to TeliMatrix (15 500) - (15 500)
shareholders
Dividends to minority shareholder - (5 167) (5 167)
Balance at 30 September 2007 (100 415) 17 408 (83 007)
Notes to the condensed consolidated interim financial information
1. Basis of preparation
The condensed consolidated interim financial information ("interim
financial information") was prepared in accordance with International
Financial Reporting Standards ("IFRS") and IAS 34 - Interim Financial
Reporting and in compliance with the Listing Requirements of the JSE
Limited and the South African Companies Act (1973). The principal
accounting policies applied in the preparation of the interim financial
information have been consistently applied for all periods presented, as
used in the preparation of the last audited financial statements, with
the exception of the accounting for the cash sales of tracking units.
During the financial period under review, the Group started deferring
revenue relating to the cash sales of tracking units and the directly
related costs over the contract period. The comparative periods have not
been adjusted due to the financial impact being regarded as immaterial.
2. Subsequent events
The following subsequent events have occurred post the balance sheet
date:
- The company has acquired the 25% shareholding held in the operating
company Matrix from their black economic empowerment partner Kagiso
Strategic Investments (Proprietary) Limited in exchange for 80 000
000 shares in TeliMatrix.
- TeliMatrix acquired OmniBridge from CIGL in exchange for which the
company issued 320 000 000 shares.
- The company intends to list on the main board of the Johannesburg
Stock Exchange with effect from 12 November 2007.
3. Comparative figures
The company changed its year-end from 30 June to 31 March to facilitate
the transaction with CIGL and the subsequent listing of the company. The
comparative figures shown are therefore for the six months ended 31
December 2006, which were the first six months of the previous financial
period.
4. Business combinations
The acquisition of 100% of OmniBridge from CIGL
With effect from 1 October 2007, TeliMatrix acquired 100% of the issued
share capital of CI OmniBridge and Sunstore Limited (the holding company
of OmniBridge UK) for a consideration of R674,7 million settled by the
issue of 320 million TeliMatrix shares.
If these acquisitions had been effective from 1 April 2007, the Group`s
revenue would have increased by R183 million and the net profit would have
increased by R6,6 million.
Details of the net assets acquired are as follows:
(R`000)
Total purchase consideration 674,685
Fair value of assets acquired (114,097)
Goodwill 560,588
The assets and liabilities arising on acquisition are as follows:
Fair value Acquiree
on acquisition carrying value
Property, plant and equipment 42 686 41 170
Intangible assets 149 271 92 276
Financial assets 4 872 4 872
Deferred tax assets 3 892 3 892
Inventory - other 36 860 36 860
Trade and other receivables 81 954 81 954
Loans to related parties 13 522 13 522
Bank overdraft (6 838) (6 838)
Borrowings (102 245) (102 245)
Deferred income tax liability (22 303) (5 335)
Trade and other payables (40 820) (40 820)
Tax payable (11 394) (11 394)
Provisions (35 360) (35 360)
114 097 72 554
The fair values as included above have been provisionally determined by
management and will be finalised within 12 months from the effective date.
This is mainly due to the relatively short timeframe that has elapsed between
the time of issuing the interim financial information and the effective date
of 1 October 2007.
5. Changes to share capital
During the period under review the authorised and issued share capital of
the company was altered, as follows:
- 38 705 capitalisation shares of 1 cent each were issued to existing
shareholders;
- the authorised and issued share capital was subdivided in the ratio
500:1, into shares with a par value of 0,002 cents; and the
authorised share capital was increased to
1 000 000 000 shares of 0,002 cents each; and
- 52 500 000 capitalisation shares of 0,002 cents each were issued to
existing shareholders.
6 Headline, attributable and diluted earnings and dividends per ordinary
share
The calculations of headline, attributable and diluted earnings per
ordinary share are based on headline, attributable and diluted earnings
of R14,6 million (December 2006: R11,3 million), and a weighted average
of 240 000 000 (December 2006: 240 000 000) ordinary shares in issue. The
dividend per share was 6,5 cents per share (December 2006: 11,9 cents per
share) and is based on the dividends declared of R15,5 million (December
2006: R28,6 million) and 240 000 000 ordinary shares in issue for both
periods.
7. Changes in contingent liabilities
The Group has received connection incentives amounting to R68,8 million
(March 2007: R66,6 million) from Mobile Telephone Networks (Proprietary)
Limited for connecting subscribers. If the service fee is not paid for
the two year service contract period, the full amount of these connection
incentives becomes repayable. No loss is expected under this arrangement.
8. Independent review by the auditors
The condensed consolidated interim financial information has been
reviewed by our auditors, PricewaterhouseCoopers Inc., who have performed
their review in accordance with the International Standard on Review
Engagements 2410. A copy of their unqualified review report is available
for inspection at the registered office of the company.
On behalf of the Board
SR Bruyns SB Joselowitz
Chairman Chief Executive Officer
12 November 2007
TELIMATRIX LIMITED
(Reg. Num. 1995/013858/06)
Registered Office:
Matrix Corner, Howick Close, Waterfall Park, Midrand.
Directors:
SR Bruyns (Chairman); SB Joselowitz (CEO); R Botha; TE Buzer; RA Frew; R
Friedman; A Patel; HG Scott; CWR Tasker.
Company Secretary:
Probity Business Services (Proprietary) Limited.
Reporting Accountants:
PricewaterhouseCoopers Advisory Services (Proprietary) Limited.
Auditors:
PricewaterhouseCoopers Inc
Sponsor:
Java Capital (Proprietary) Limited
Date: 12/11/2007 08:43:58 Produced by the JSE SENS Department.
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