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SBG
SBG
SBG - Simeka - Reviewed Consolidated Financial Results For The Six Months Ended
30 November 2007
SIMEKA BUSINESS SOLUTIONS GROUP LIMITED
(formerly Simeka BSG Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: SBG ISIN: ZAE000074878
("Simeka")
REVIEWED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 NOVEMBER
2007
Highlights
HEPS weighted in issue and to be issued up 31% to 8 cents per share
Headline earnings up 55%
Revenue up 44%
EBITDA up 67%
Cash reserves increased to R79 million
CONSOLIDATED INCOME STATEMENT
Audited
Six months to Six months to Year ended
30 November 30 November 31 May
2007 2006 2007
R`000 R`000 R`000
Revenue 309 657 215 177 446 986
Earnings before interest,
taxation, depreciation and
amortisation ("EBITDA") 58 495 35 058 73 081
Depreciation (4 031) (3 474) (6 399)
Amortisation (568) (606) (681)
Impairment of intangibles (568) - (1 143)
Interest on liabilities due - (65) (81)
to vendors
Net finance costs (5 083) (1 683) (6 091)
Income from associate company - 336 621
Profit before taxation 48 245 29 566 59 307
Taxation (12 606) (7 264) (14 018)
Profit for period 35 639 22 302 45 289
Attributable to:
Equity holders of the company 35 377 21 903 44 774
Minority interest 262 399 515
Headline earnings 33 999 21 903 45 405
Adjusted headline earnings 34 336 22 574 46 775
Headline earnings
calculation:
Profit attributable to equity
holders of the company 35 377 21 903 44 774
Adjusted for:
Profit on sale of property,
plant and equipment 3 - (79)
Impairment of assets 568 - 710
Profit on sale of associate (1 949) -
Headline earnings 33 999 21 903 45 405
Adjusted headline earnings
calculation:
Headline earnings 33 999 21 903 45 405
Adjusted for:
Interest on liabilities due - 65 81
to vendors (IAS39)
Amortisation 568 606 681
Operating leases
- straight lining (231) - 608
Adjusted headline earnings 34 336 22 574 46 775
Number of shares (`000)
- Weighted in issue 387 712 354 217 359 147
- Weighted in issue and to be 423 252 360 675 377 924
issued
Headline earnings per share
(cents)
- Weighted in issue 8,8 6,2 12,6
- Weighted in issue and to be 8,0 6,1 12,0
issued
Adjusted headline earnings
per share (cents)
- Weighted in issue 8,9 6,4 13,0
- Weighted in issue and to be 8,1 6,3 12,4
issued
Earnings per share (cents)
- Weighted in issue 9,1 6,2 12,5
- Weighted in issue and to be 8,4 6,1 11,8
issued
CONSOLIDATED CASH FLOW STATEMENT
Audited
Six months to Six months to Year ended
30 November 30 November 31 May
2007 2006 2007
R`000 R`000 R`000
Cash flows from operations
EBITDA 58 495 35 058 73 081
Net interest paid (5 083) (1 748) (6 341)
Income statement movements (2 618) - (555)
Increase in inventory (606) (3 092) (2 639)
Increase in trade and other (32 333) (51 512) (16 639)
receivables
Increase in trade and other 12 164 24 741 (14 781)
payables
Taxation paid 7 015 (1090) (10 060)
Net cash flows from 37 034 2 357 22 064
operations
Net cash flows from investing 27 179 (569) (51 462)
activities
Net cash flows from financing (23 759) 9 397 51 606
activities
Net increase in cash 40 454 11 185 22 208
resources
Cash resources at beginning 38 695 16 486 16 486
of period
Cash resources at end of 79 149 27 671 38 694
period
CONSOLIDATED BALANCE SHEET
Audited
Six months to Six months As at
to
30 November 30 November 31 May
2007 2006 2007
R`000 R`000 R`000
ASSETS
Non-current assets 392 647 231 437 255 521
Property, plant and equipment 21 335 11 340 11 308
Goodwill 365 201 210 059 235 378
Intangible assets 306 3 781 1 136
Investment in associate company - 2 137 1 380
Deferred taxation 5 805 4 120 6 319
Current assets 257 469 167 938 142 802
Inventory 20 339 15 944 15 491
Trade and other receivables 156 171 121 105 87 008
Cash resources 80 959 30 889 40 303
Total assets 650 116 399 375 398 323
EQUITY AND LIABILITIES
Capital and reserves 346 677 213 450 253 326
Share capital 39 36 39
Non-distributable reserves 185 - 72
Share premium 165 579 144 771 165 355
Accumulated profit 112 202 53 953 76 824
Amounts due to vendors in shares 66 600 12 619 9 225
Minority interest 2 072 2 071 1 811
Non-current liabilities 120 699 62 361 58 150
Interest-bearing liabilities 120 699 62 361 58 150
Current liabilities 182 740 123 564 86 847
Non-interest-bearing liabilities
due to vendors 44 701 5 098 5 650
Trade and other payables 85 576 90 444 52 293
Interest-bearing liabilities 9 101 10 390 14 046
Taxation payable 38 230 12 289 9 827
Bank overdraft 1 809 3 218 1 608
Provisions 3 323 2 125 3 423
Total equity and liabilities 650 116 399 375 398 323
Net asset value per share (cents) 88,62 59,09 65,0
Net tangible asset value per (5,3) 0,37 4,17
share (cents)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited
Six months to Six months to Year
ended
30 November 30 November 31 May
2007 2006 2007
R`000 R`000 R`000
Capital and reserves 253 326 199 027 199 027
Shares issued 225 6 594 27 251
Payment of vendor liabilities (225) - -
Acquisition of subsidiaries and 57 600 - (17 867)
businesses
Minorities interest 262 399 140
Reduction in shares due to - (14 473) -
vendors
FCTR 112 - -
Net profit for period 35 377 21 903 44 774
Capital and reserves 346 677 213 450 253 326
Commitments:
Equipment and premises - rental 6 801 4 590 7 231
Note:
Weighted number of shares in issue and to be issued includes shares for all
acquisitions weighted to warranted profits in accordance with the company`s
contractual commitment to issue such shares during the relevant accounting
period.
COMMENTS
Basis of preparation
These condensed group interim consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards and
Interim Financial Reporting, including IAS34. The accounting policies of the
group comply with International Financial Reporting Standards ("IFRS") and the
1973 Companies Act ("Act") and are based on appropriate accounting policies,
consistently applied to those in the prior year, which are supported by
reasonable and prudent judgments and estimates.
Audit Review
The results have been reviewed by Simeka Business Solutions Group Limited`s
auditors, PKF (Pta) Inc. The condensed set of reviewed group financial
statements and signed unqualified review opinion are available for inspection at
the company`s registered office. There has been no change to the group`s
accounting policies for the period from the annual financial results for the
previous year.
Introduction
The directors of Simeka are pleased to present the interim results for the
period ended 30 November 2007. The interim results incorporate the acquisition
of Premium Ideas concluded during the year.
In line with the trading update published on 5 December 2007, Simeka performed
ahead of expectations once again. Headline earnings increased 55% to R34,0
million translating into headline earnings per share weighted in issue and to be
issued ("HEPS") of 8,0 cents, up 31%. Strong organic growth and the strategic
acquisition of Premium Ideas were the key drivers of the group`s excellent
performance.
Acquisition
As previously announced on 15 October 2007 and, during the interim period,
Simeka has acquired 100% of Premium Ideas (Proprietary) Limited for R144,0
million. The approval of the competition commission was obtained, and all
remaining conditions precedent were fulfilled rendering the transaction
unconditional.
Premium Ideas is a specialist in packaging and personalizing smart cards and
related business. Through the acquisition the group has captured more of the
value chain and is able to offer a more integrated service to customers.
Name Change
As previously announced on 23 November 2007, the change of name from Simeka BSG
Limited to Simeka Business Solutions Group Limited was approved by shareholders
at a general meeting held on that day and came into effect on 28 December 2007.
Group profile
Simeka is a black-empowered group servicing multiple industry sectors by
providing information, communication and technology ("ICT") business solutions.
Following the integration process the group`s operating entities are now aligned
with three key areas:
Consulting & Applications
Technology Solutions & Support
Secured Print and Payment Solutions
The group is differentiated from competitors by its ability to enhance commodity
offerings with deep technical skills and expertise. It is able to offer bespoke
client solutions through the niche specialist offerings within its major brands
that can be combined across multiple operations.
Each cluster is focused on achieving market leadership within its area of focus.
The current structure is suited both to the development of core expertise in
focus areas as well as proactive cross-collaboration within the clusters and
group to facilitate integrated service delivery.
Black Economic Empowerment ("BEE")
Simeka is majority black-owned and managed, with majority of the group`s
executive directors being black. The group`s BEE platform offers the group a
strong competitive advantage and a key contributor towards ongoing growth.
Notwithstanding that Simeka currently exceeds ICT Charter requirements, the
group is committed to enhancing its credentials in respect of all aspects of the
ICT Charter, for instance corporate social responsibility and affirmative
procurement.
Financial results
Turnover increased to R309,6 million from R215,1 million for the previous period
ended 30 November 2006, while EBITDA grew by 67% to R58,4 million from R35,0
million.
The group has maintained its net current asset position at 30 November 2007. Net
asset value per share increased from 59,1 cents to 88,6 cents.
Dividend
In line with group policy, no interim dividend has been declared for the period.
Segmental Reporting
The Consulting and Applications cluster contributes 44% of group revenue, while
the Technology Solutions and Support cluster contributes 10% and the Secured
Print and Payment Solutions cluster now contributes the balance of 46%.
BUSINESS COMBINATION
On 01 June 2007, Simeka Business Solutions Group Limited, acquired 100% of the
shares in Premium Ideas (Proprietary) Limited and its underlying foreign
operation in Nigeria. The cost of acquisition amounted to R 144 million payable
in cash of R 86,4 million and shares of R 57,6 million. 50% of the purchase
price has been paid at the date hereof, and the balance is payable when Premium
Ideas achieves certain milestones as per the sale agreement by no later than 30
June 2008. Estimated goodwill of R 129,3 million arose due to expected synergy
between the business of Premium Ideas and Simeka`s Secured Print and Payment
Solutions cluster of subsidiaries, including Motoma Mithratech.
The acquisition of the subsidiary is based on provisional fair values as the
group has not yet accurately determined the identifiable assets, liabilities
and/or contingent liabilities. The fair value of the subsidiary and the
completion of the transaction will be accurately determined by 31 May 2008.
Vendor Commitments
A total of R5,6 million in vendor liabilities has been discharged during the
period, paid from cash generated from operations and issue of shares. An
additional amount of R77,0 million has been paid to vendors post the interim
period, of which R33,8 million was by issue of shares and the balance of R43,2
million was in cash.
POST BALANCE SHEET EVENTS
Premium Ideas
On 21 December 2007, the first cash payment R 43,2 million of the vendor
liability owing to the previous shareholders of Premium Ideas has been settled
by a long term loan through Investec Limited. The liability bears interest at
the JIBAR rate plus 5,5% and instalments are repayable quarterly over 60 months.
The effect on the balance sheet after the payment of the vendor liability and
providing for the Investec loan facility will be as follows:
Extracts of the balance sheet
Nov 2007 May 2007
Non Current liabilities
Other financial Liabilities 106 665 56 733
Current Liabilities
Vendor Liabilities 44 701 5 650
Other financial liabilities 21 057 13 248
ITQ
Simeka and Mindkey (Pty) Ltd, a bespoke outsource development company, have
entered into a joint venture whereby ITQ a wholly owned subsidiary of Simeka
will transfer one of its contracts while Mindkey will transfer all of its
business into a new company called ITQ Business Solutions. Simeka will have a
50.1% shareholding in ITQ Business Solutions, and Mindkey the remaining 49.9%.
The merger will be effective 01 December 2007. The financial impact will be an
increase in maintainable earnings and long term business continuity of ITQ
Business Solutions as well as a diversified client base in the financial
services sector.
Due to the returns and strategic direction required by Simeka, the Group decided
to exit the following non aligned businesses that did not meet the group`s
criteria over the long-term.
Spec Systems
Subsequent to year end, Simeka intends to sell the business of Spec Systems a
division of Xantium IT Services (Proprietary) Limited for a consideration of
approximately R10 million. The estimated negative impact on profit before tax at
31 May 2008 will be R 17,8 million arising from goodwill impairment, although
this will not effect headline earnings or headline earnings per share. The
transaction details and financial effects will be published on Sens in February
2008.
Independent Computer Support Services (I-CSS)
On the 14 December 2007, Simeka made the decision not to renew the in warranty
contract with Hewlett Packard in view of the poor performance of ICSS and the
consistent margin pressures. ICSS has subsequently discontinued trading. The
estimated financial impact of the restructuring of I-CSS will have a negative
impact on goodwill, additional direct costs from the restructuring and
recoveries of all inventories and debtors. An estimated loss on discontinued
operations and impairment of goodwill of R 19,0 million for the year ended 31
May 2008, although this will not effect headline earnings or headline earnings
per share.
Prospects
Simeka is confident that it will meet its yearly objectives and realise
continued shareholder value.
With secured contracts over the next three to five years in hand, Simeka will
continue to focus on driving and growing its already strong annuity revenue
stream which currently is in excess of 50%.
The concentrated effort to maintain and enhance financial stability will enable
Simeka to focus on organic growth and strategic acquisitions to complement
existing businesses and to further expansion into the mobile application space.
The group`s initial focus areas in mobility application will be on the medical
and financial services vertical, with the intention to own the Intellectual
Property and to secure annuity based contracts.
During the 6 months under review Simeka took a strategic decision to invest into
its Microsoft Implementation competencies including Sharepoint Portal, ERP and
CRM solutions.
The remainder of the year will see further investments to grow Simeka`s training
competencies which include Microsoft, Cisco and Novel, within the Consulting &
Applications cluster.
The TSS cluster is now ripe for acquisitive growth in the managed services
competency, deliberately moving away from the low margin repair business and
embracing the opportunity to offer value added IT solutions to our existing blue
chip customers in the Public and Private Sector.
The Secured Print and Payment Solutions has been significantly bolstered with
the integration of Premium Ideas, and the group`s strategic objective is to
expand this cluster to include virtual airtime distribution.
Appreciation
We recognise and appreciate the efforts of all directors, managers and staff who
have been integral to the group`s success.
Similarly we extend our gratitude to all our shareholders, business associates
and particularly to our loyal customers for their support. We will continue to
strive to exceed expectations.
By order of the board
Mohammed Varachia Suren Singh
CEO CFO
24 January 2007
Designated advisor
Java Capital (Proprietary) Limited
Date: 24/01/2008 12:28:02 Produced by the JSE SENS Department.
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