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BCX
BCX
BCX - Business Connexion Group Limited - Unaudited group results for the six
months ended 30 November 2007
BUSINESS CONNEXION GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
Share code: BCX
ISIN: ZAE000054631
Creating value together
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2007
Highlights
- Revenue exceeds R2 billion for the 6 months
- Gross margin % maintained
- Positive operating cashflow
Condensed group balance sheet
Unaudited Unaudited Audited
30 November 30 November 31 May
R million 2007 2006 2007
ASSETS
Non-current assets
Property, furniture and
fittings, equipment
and vehicles 268,7 253,6 218,7
Investment property 19,1 10,5 19,1
Capitalised leased assets 27,2 7,7 43,8
Rental assets 1,6 2,8 2,6
Goodwill 125,8 113,5 112,5
Other intangible assets 98,5 110,7 97,3
Other long-term investments 133,8 130,6 131,0
Long-term loans and advances 0,4 2,4 2,4
Deferred tax assets 60,2 37,0 49,8
735,3 668,8 677,2
Current assets
Inventories 139,7 89,0 95,1
Trade accounts receivable 754,5 720,2 746,9
Other accounts receivable 97,1 135,8 110,8
Other accounts receivable -
sale of properties 69,2
Derivative and embedded
derivative assets 2,4
Prepayments 107,3 62,4 61,6
Tax prepaid 1,6 0,5
Bank balances and cash 526,3 562,4 585,8
Non-current assets held for 31,9 31,9 31,9
sale
1 656,8 1 674,9 1 632,6
TOTAL ASSETS 2 392,1 2 343,7 2 309,8
EQUITY AND LIABILITIES
Equity attributable to parent 1 342,5 1 294,9 1 343,7
shareholders
Minority interests 120,5 108,3 116,4
Total shareholders` equity 1 463,0 1 403,2 1 460,1
Non-current liabilities
Interest-bearing long-term 7,4 26,0 26,0
liabilities
Interest free long-term 105,1 121,0 121,0
liabilities
Post-retirement obligations 8,8 6,9 8,6
Provisions 0,8 4,6 0,9
Deferred tax liabilities 1,3 6,9 0,5
123,4 165,4 157,0
Current liabilities
Short-term borrowings and bank
overdrafts 39,1 7,2 22,8
Trade accounts payable 194,7 184,9 311,1
Other accounts payable 537,1 560,7 338,0
Provisions 1,8 1,2 1,5
Tax 15,9
Non-current liabilities held 17,1 21,1 19,3
for sale
805,7 775,1 692,7
TOTAL EQUITY AND LIABILITIES 2 392,1 2 343,7 2 309,8
Condensed group income statement
Unaudited Unaudited Audited
Six months Six Year
months
ended ended ended
30 November 30 31 May
November
R million 2007 2006 2007
Revenue 2 004,2 1 726,3 3 551,1
Cost of sales 1 438,5 1 241,9 2 536,4
Gross profit 565,7 484,4 1 014,7
Operating expenses 459,3 387,8 796,2
Operating profit before
depreciation
and amortisation 106,4 96,6 218,5
Depreciation and 64,5 42,6 110,0
amortisation
Operating profit 41,9 54,0 108,5
Investment income 29,3 25,2 59,3
Profit before interest 71,2 79,2 167,8
paid
Interest paid 4,3 17,6 26,0
Profit before exceptional 66,9 61,6 141,8
items
Exceptional gains 2,9 54,9 59,7
Profit before tax 69,8 116,5 201,5
Tax 26,8 11,6 34,2
Profit for the year 43,0 104,9 167,3
Profit attributable to
equity holders of
the parent 36,7 81,3 136,9
Profit attributable to 6,3 23,6 30,4
minority interests
Profit for the year 43,0 104,9 167,3
Earnings per share (cents) 14,5 32,3 54,4
Diluted earnings per share 14,1 31,4 52,6
(cents)
Dividend per share (cents) 15,0 15,0 15,0
Calculation of headline
earnings (R million)
Profit attributable to
equity holders of
the parent 36,7 81,3 136,9
Loss/(profit) on sale of
property, furniture
and fittings, equipment 1,1 (0,1)
and vehicles
Profit on sale of land and (52,0) (48,0)
buildings
Fair value adjustment of (8,6)
investment property
Tax effect on sale of land
and buildings 3,5 6,7
Minority effect of
headline earnings
adjustments (0,3) 12,3 13,2
Headline earnings 37,5 45,0 100,2
Weighted average number of
shares in
issue (000s) 253 733 250 782 251 601
Headline earnings per 14,8 18,0 39,8
share (cents)
Diluted weighted average
number of shares
in issue (000s) 259 911 259 121 260 327
Diluted headline earnings
per share (cents) 14,4 17,4 38,5
Condensed group statement of changes in equity
Share Foreign Equity
and currency Distri- attributable
capital translation butable to parent
R million premium reserve reserves shareholders
Balance at 31
May 2006 - 321,9 (2,4) 911,9 1 231,4
audited
Net movement
not recognised
through the
income 2,4 19,2 21,6
statement
Foreign
exchange loss
arising on
consolidation 2,4 2,4
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts 17,3 17,3
IFRS share-
based payments 1,9 1,9
Minority
interest on
dividend
received
from
subsidiaries
Net movement
recognised
through
the income 41,9 41,9
statement
Attributable
profit per
income 81,3 81,3
statement
Dividend paid (39,4) (39,4)
Balance at 30
November 2006 -
unaudited 321,9 973,0 1 294,9
Net movement
not recognised
through the
income 1,5 (10,1) (8,6)
statement
Foreign
exchange loss
arising on
consolidation 2,8 2,8
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts (12,0) (12,0)
IFRS share-
based payments 1,9 1,9
Minority
interest on
foreign
exchange loss (1,3) (1,3)
Minority
interest on
dividend
received
from
subsidiaries
Net movement
recognised
through
the income 57,4 57,4
statement
Attributable
profit per the
income
statement 55,6 55,6
Dividend paid 1,8 1,8
Balance at 31
May 2007 - 321,9 1,5 1 020,3 1 343,7
audited
Net movement
not recognised
through the
income 0,1 (3,8) 3,9 0,2
statement
Foreign
exchange loss
arising on
consolidation (5,1) (5,1)
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts 0,1 3,3 3,4
IFRS share-
based payments 0,6 0,6
Minority
interest on
foreign
exchange loss 1,3 1,3
Minority
interest on
dividends
received from
subsidiaries
Net movement
recognised
through
the income (1,4) (1,4)
statement
Attributable
profit per the
income
statement 36,7 36,7
Dividend paid (38,1) (38,1)
Balance at 30
November 2007 -
unaudited 322,0 (2,3) 1 022,8 1 342,5
Table continues:...
Total
share-
Minority holders`
R million interest equity
Balance at 31 May
2006 - audited 85,7 1 317,1
Net movement not
recognised
through the
income statement (1,0) 20,6
Foreign exchange
loss arising on
consolidation 2,4
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts 17,3
IFRS share-based
payments 1,9
Minority interest
on dividend
received
from subsidiaries (1,0) (1,0)
Net movement
recognised
through
the income 23,6 65,5
statement
Attributable
profit per
income statement 23,6 104,9
Dividend paid (39,4)
Balance at 30
November 2006 -
unaudited 108,3 1 403,2
Net movement not
recognised
through the
income statement 1,3 (7,3)
Foreign exchange
loss arising on
consolidation 2,8
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts (12,0)
IFRS share-based
payments 1,9
Minority interest
on foreign
exchange loss 1,3
Minority interest
on dividend
received
from subsidiaries
Net movement
recognised
through
the income 6,8 64,2
statement
Attributable
profit per the
income
statement 6,8 62,4
Dividend paid 1,8
Balance at 31 May
2007 - audited 116,4 1 460,1
Net movement not
recognised
through the
income statement (2,2) (2,0)
Foreign exchange
loss arising on
consolidation (5,1)
Treasury shares
and related
reserves
held by a
subsidiary and
share
purchase trusts 3,4
IFRS share-based
payments 0,6
Minority interest
on foreign
exchange loss (1,3)
Minority interest
on dividends
received from
subsidiaries (0,9) (0,9)
Net movement
recognised
through
the income 6,3 4,9
statement
Attributable
profit per the
income
statement 6,3 43,0
Dividend paid (38,1)
Balance at 30
November 2007 -
unaudited 120,5 1 463,0
Group segmental analysis
Unaudited Unaudited Audited
Six months Six Year
months
ended ended ended
30 30 31 May
November November
R million 2007 2006 2007
BUSINESS GROUPINGS
ANALYSIS
Revenue
Services 923,0 918,6 1 819,9
Business applications 261,6 231,0 447,6
Technology infrastructure 751,7 541,8 1 228,2
Communications 67,9 34,9 55,4
2 004,2 1 726,3 3 551,1
Operating profit
Services 54,2 77,1 148,6
Business applications 15,3 (0,2) 17,7
Technology infrastructure 39,1 (5,6) 9,4
Communications (6,8) (7,0) (24,3)
Central functions (59,9) (10,3) (42,9)
41,9 54,0 108,5
GEOGRAPHICAL SEGMENTAL
ANALYSIS
Revenue
South Africa 1 845,3 1 586,5 3 288,5
Rest of Africa 124,4 118,2 226,3
United Kingdom 34,5 21,6 36,3
2 004,2 1 726,3 3 551,1
Operating profit
South Africa 34,2 48,5 95,4
Rest of Africa 6,1 5,1 13,6
United Kingdom 1,6 0,4 (0,5)
41,9 54,0 108,5
Condensed group cash flow
statement
Unaudited Unaudited Audited
Six months Six Year
months
ended ended ended
30 30 31 May
November November
R million 2007 2006 2007
Net cash flow
from/(utilised in)
operating activities 64,3 (172,8) (135,1)
Net cash flow (utilised
in)/from
investing activities (103,2) 138,9 153,5
Net cash flow utilised in
financing activities (20,6) (146,7) (175,6)
Net changes in cash and
cash equivalents (59,5) (180,6) (157,2)
Cash and cash equivalents
at beginning
of the period 585,8 743,0 743,0
Cash and cash equivalents
at end
of the period 526,3 562,4 585,8
Other group salient information
Unaudited Unaudited Audited
30 30 31 May
November November
2007 2006 2007
Number of shares in issue 262 637 262 637 262 637
(000s)
Less: shares held in share
purchase trust
and fellow subsidiary as 7 068 10 564 9 674
treasury shares
255 569 252 073 252 963
Number of options in issue 11 550 15 358 14 594
(000s)
Number of dilutive options 6 178 8 339 8 726
(000s)
Net asset value per share 557,0 534,3 555,9
(cents)
(Total shareholders`
equity divided by
number of shares in issue)
R million R million R
million
Contingent liabilities
Performance guarantees 22,9 16,8 10,7
Asset finance recourse 24,5 20,4
deals
Other 9,5 9,6 9,5
Guarantee provided to a
funder of
Gadlex (Pty) Limited
secured by
Gadlex`s shareholding in
Business
Connexion (Pty) Limited 78,9 67,0 70,9
Capital commitments
Capital 70,5 37,6 79,1
Operating lease 212,3 212,3 224,2
The group results are prepared in accordance with IAS 34, Interim Financial
Reporting. The accounting policies used in the preparation of these financial
statements are consistent with those used in the annual financial statements
for the year ended 31 May 2007, which comply with International Financial
Reporting Standards and the manner required by the Companies Act, 1973 as
amended.
In the current year the group adopted IFRS 7 Financial instruments:
Disclosures, which is effective for annual reporting periods beginning on or
after 1 January 2007 and the consequential amendments to IAS 1 Presentation of
Financial Statements. The impact of the adoption of IFRS 7 and the changes to
IAS 1 will be to expand the disclosures provided in the financial statements
for the year ending 31 May 2008 regarding the group`s financial instruments
and management of capital. The adoption of other interpretations as issued by
the International Financial Reporting Interpretations Committee, which are
effective for the current year, has not led to any changes in the group`s
accounting policies.
Commentary
Operating results
The group achieved revenue of R2 billion at the interim reporting period for
the first time. This represents a 16,1% growth in revenue on the back of
continued demand for products. The Technology Infrastructure competencies
increased revenue by 38,9% compared to the same period in the previous year.
The Services business has come under pressure. Longer sales cycles have meant
that the impact of the uncertain times of the previous year is going to be
with us for a while longer. It is also still too soon to realise any
significant returns on the group`s investment in its new data centre.
The Africa region continues to be a growth opportunity for the group, both in
doing business through the group`s presence in Africa as well as performing
work for the Africa based operations of existing customers.
The gross margin % has been maintained despite competition during the renewal
of contracts. The mix of revenue between services and product has a direct
impact on margins and the increased cost of scarce IT skills, higher than the
price increases obtained from customers, continues to put pressure on margins
over the life cycle of an outsource deal.
Profit before exceptional items increased by 8,3% to R66,8 million (2006 -
R61,7 million). The sale of the group`s commercial properties to Growthpoint
Properties Limited in the previous financial year has resulted in a
reallocation of R13,8 million between interest paid and operating expenses -
interest paid on an outstanding loan amount vs an operating rental payment.
Earnings per share, at 14,5 cents is 55,1% down from 32,3 cents achieved for
the comparative period mainly as a result of the profit on the sale of the
group`s commercial properties to Growthpoint in the previous period.
Headline earnings per share at 14,8 cents is 17,8% lower than the 18,0 cents
reported at November 2006.
The group`s continued focus on working capital management has ensured that the
balance sheet remained strong.
Corporate activity
The sale of the remaining property to Growthpoint Properties Limited is
expected to be concluded before the end of the current financial year.
Prospects
The group continued to improve its market position and has made progress
towards building a strong pipeline in new and continuing businesses.
Business Connexion enters 2008 a stronger and more competitive company. Our
financial priorities include driving a sustainable operating margin and
working capital improvement, building our strong presence in the oursource
arena, continuing to enhance our capabilities in higher margin businesses and
improving our service delivery. At the same time we will maintain our focus on
cost reduction, operational excellence, quality and client centricity.
The completion of the New Data Center 2 Upgrade Project will increase the Data
Center capacity by 300 equipment spots (50% increase) and will allow the
company to accommodate client growth. The risk associated with reliability of
power supply in South Africa will have a positive impact on our business as
utilising our data centres that meet high international standards for
outsourced IT services, will alleviate the risk to our clients.
Demand for products will potentially be affected by the general economic
uncertainty. The company`s business with established clients will not
necessarily see a similar reduction in demand as the group continues to
improve its market position and makes progress towards building a strong
pipeline. Demand from the Public Sector continues to be positive as a direct
consequence of the focus on improved delivery.
The group is planning to make key decisions regarding its future focus by the
end of the current financial year.
Executive directors: LB Mophatlane (Chief Executive Officer), MW Schoeman
(Chief Financial Officer)
Non-executive directors: AC Ruiters*# (Chairman), JF Buchanan#, NN Kekana, PA
Watt** and FL Sekha***#
* AC Ruiters was appointed on 21 September 2007, ** PA Watt a non-executive
director from 1 January 2008
*** FL Sekha was appointed on 30 November 2007
# Non-executive director acting in an independent capacity
Registered office: Business Connexion Park North, 789 16th Road, Randjespark,
Midrand, 1685
Postal address: Private Bag X48, Halfway House, 1685
Transfer office and transfer secretaries:
Link Market Services SA (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001
Sponsor: Rand Merchant Bank, A division of FirstRand Bank Limited, 1 Merchant
Place,
Cnr Fredman Drive and Rivonia Road, Sandton, 2196
www.bcx.co.za
Date: 27/02/2008 07:05:01 Produced by the JSE SENS Department.
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