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MMG
MMG
MMG - MICROmega - Unaudited Interim Results For The Six Months
Ended 30 June 2008
MICROmega Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/003821/06
Share code MMG & ISIN ZAE000034435
("MICROmega" or "the Company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
- Increase In Revenue 68%
- Increase In Attributable Profits Per Share 84%
- Increase In Headline Earnings Per Share 28%
- Increase In Net Asset Value Per Share 30%
- Increase In Net Tangible Asset Value Per Share 38%
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
R(`000) R(`000) R(`000)
Revenue 386 314 229 320 483 174
Operating Profit 45 342 25 700 54 354
Net finance income 1 083 3 836 1 798
Share of profits of associates 587 123 (162)
Profit before taxation 47 012 29 659 55 990
Taxation expense (9 292) (8 217) (14 400)
Profit after taxation 3 37 720 21 442 41 590
Attributable to:
Ordinary shareholders 36 141 19 907 40 401
Minorities 1 579 1 535 1 189
Reconciliation of headline earnings
Profit attributable to ordinary 36 141 19 907 40 401
shareholders
Profit on disposal of property, (69) (52) (114)
plant and equipment
Profit on sale of subsidiary - (2 565) (2 559)
Income from write off of loan accounts - - (77)
Profit on disposal of investments - - (464)
Impairment of intangible assets - - 122
Impairment of investments - - 32 500
Impairment of loan - 1 047 (28 959)
Negative goodwill on business 2 (13 001) - -
combination
Headline earnings 23 071 18 337 40 850
Headline earnings per share (cents) 23.99 18.81 41.91
Earnings per share (cents) 37.57 20.42 41.45
Diluted earnings per share (cents) 37.18 20.13 40.96
Weighted average number of shares 96 184 97 499 97 464
Diluted weighted average number of 97 211 98 904 98 644
shares
Total number of shares in issue 96 759 97 801 98 169
ABRIDGED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
R(`000) R(`000) R(`000)
ASSETS
Non-current assets 164 194 108 761 103 361
Property, plant and equipment 74 637 27 458 25 197
Intangible assets 64 666 57 595 59 762
Deferred tax asset 11 378 8 073 6 583
Investments 8 176 8 661 8 099
Loans receivable 5 337 6 974 3 720
Current assets 247 894 160 926 172 595
Inventories 102 491 41 810 39 278
Trade and other receivables 122 801 86 244 81 668
Current portion of loans receivable 637 - 168
Foreign exchange contracts - - 186
Cash and cash equivalents 21 965 32 872 51 295
TOTAL ASSETS 412 088 269 687 275 956
EQUITY AND LIABILITIES
Equity 228 876 177 694 193 683
Equity holders` interest 217 183 164 777 184 476
Minorities interest 6 407 4 608 4 262
Non-distributable reserves 5 286 8 309 4 945
Non-current liabilities 37 960 22 539 5 812
Borrowings 37 960 22 539 5 812
Current liabilities 145 252 69 454 76 461
Taxation 10 433 5 427 5 868
Trade and other payables 124 687 61 567 57 886
Current portion of borrowings 9 830 910 12 257
Provisions 302 1 550 450
TOTAL EQUITY AND LIABILITIES 412 088 269 687 275 956
Net asset value per share (cents) 236.54 181.69 197.30
Net tangible asset value per share 169.71 122.80 136.42
(cents)
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
R(`000) R(`000) R(`000)
Cash generated by operations 38 064 27 260 56 696
Movement in working capital (15 506) (18 904) (17 748)
Net finance income 1 174 3 959 1 711
Taxation paid (7 146) (8 697) (13 396)
Net cash from operating activities 16 586 3 618 27 263
Net cash used in investing activities (22 606) (21 099) (33 739)
Loans raised - - 11 227
Loans repaid (18 440) (10 835) (11 667)
Treasury shares (repurchased)/sold (4 870) 5 527 2 550
Net cash used in financing activities (23 310) (5 308) 2 110
Net increase/(decrease) in cash and (29 330) (22 789) (4 366)
cash equivalents
Represented as follows:
Cash and cash equivalents at beginning 51 295 55 661 55 661
of the year
Cash and cash equivalents at end of 21 965 32 872 51 295
period
Net increase/(decrease) in cash and (29 330) (22 789) (4 366)
cash equivalents
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Share- Revalu- Foreign Deal
capital premium based ation currency differ-
payment reserve transla- ences
reserve tion reserve
reserve
R(`000) R(`000) R(`000) R(`000) R(`000) R(`000)
Balance at 1 January 963 187 168 806 1 793 - -
2007
Foreign currency trans- 2
lation difference
Revaluation of proper- 866
ty, plant and equipment
Deferred tax effect on (169)
revaluation
Creation of non-distri- 1 000
butable reserve - deal
differences
Employee share options 45 647
- value of services
provided
Issue of shares 12 3 391
Share issue expenses (9)
Treasury shares sold 7 2 543
Recognised directly in 982 193 138 1 453 2 490 2 1 000
equity
Net profit for the year
Balance at 31 December 982 193 138 1 453 2 490 2 1 000
2007
Foreign currency trans- (2)
lation difference
Movement in minority
interests on business
combination
Employee share options 39 343
- value of services
provided
Issue of shares 8 1 401
Share issue expenses (12)
Treasury shares repur- (22) (4 848)
chased
Recognised directly in 968 189 718 1 796 2 490 - 1 000
equity
Net profit for the
period
Balance at 30 June 2008 968 189 718 1 796 2 490 - 1 000
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Minority Accumulated Total
interest (loss)/
earnings
R(`000) R(`000) R(`000)
Balance at 1 January 3 073 (49 045) 144 758
2007
Foreign currency trans- 2
lation difference
Revaluation of proper- 866
ty, plant and equipment
Deferred tax effect on (169)
revaluation
Creation of non-distri- (1 000) -
butable reserve - deal
differences
Employee share options 692
- value of services
provided
Issue of shares 3 403
Share issue expenses (9)
Treasury shares sold 2 550
Recognised directly in 3 073 (50 045) 152 093
equity
Net profit for the year 1 189 40 401 41 590
Balance at 31 December 4 262 (9 644) 193 683
2007
Foreign currency trans- (2)
lation difference
Movement in minority 566 566
interests on business
combination
Employee share options 382
- value of services
provided
Issue of shares 1 409
Share issue expenses (12)
Treasury shares repur- (4 870)
chased
Recognised directly in 4 828 (9 644) 191 156
equity
Net profit for the 1 579 36 141 37 720
period
Balance at 30 June 2008 6 407 26 497 228 876
NOTES
1.Basis of Preparation
The abridged unaudited consolidated results for the six months ended 30 June
2008 have been prepared in accordance with International Financial Reporting
Standards (IFRS).
The accounting policies used are consistent with those used in the annual
financial statements for the year ended 31 December 2007.
2.Negative goodwill
The group purchased the entire share capital of Kolbenco (Proprietary)
Limited, effective 1 February 2008 for a total amount of R8 083 767. The
fair value of the net tangible assets of Kolbenco (Proprietary) Limited at
that date was as follows:
Property, plant and equipment 48 331 877
Deferred taxation 2 393 666
Inventories 24 711 814
Trade and other receivables 17 317 427
Borrowings (40 268 627)
Trade and other payables (22 565 206)
Cash and cash equivalents (8 835 699)
21 085 252
In terms of IFRS3, where the fair value of the assets exceed the purchase
consideration, then the resulting gain needs to be recognised immediately in
profit or loss on the acquisition date. The resulting gain recognised was
R13 001 495.
If the operations of Kolbenco had been consolidated since the start of the
financial period, namely 1 January 2008, then the consolidated profit after
taxation of the group would have decreased by R762 480 together with an
increase in turnover of R12 059 000.
3.Profit after taxation
The group`s profit after tax was negatively affected by the losses of the
start-up entities, namely Stable-Net (Proprietary) Limited and MICROmega
Technologies (Proprietary) Limited. The combined after tax loss of these
two operations for the first 6 month period of the 2008 financial year was
R3 045 104.
If these two operations had not been commenced then the group`s profit after
taxation would have been as follows: (R`000)
- On a fully consolidated basis 37 720
- Add back of the two start-up operations 3 045
Profit after taxation excluding the start-up operations 40 765
Further the salient financial information for the income statement would
have been as follows:
Including Excluding 6 Months
start-up start-up ended 30
operations operations June 2008
Headline earnings per share 23.99 27.15 18.81
Attributable earnings per share 37.57 40.74 20.42
Diluted earnings per share 37.18 40.31 20.13
Based on the numbers provided above, excluding start-up operations, headline
earnings per share would have increased by 44% together with an increase of
100% in the attributable earnings per share.
COMMENTARY ON RESULTS
We are pleased to report a 28% increase in headline earnings per share to 24
cents, a 68% increase in revenue and an 84% increase in attributable profit
per share. The group`s balance sheet continues to strengthen with an
increase of 30% in net asset value to 237 cents per share and an increase of
38% in net tangible asset value to 170 cents per share.
During the period under review the group incurred expenditure to invest in
the start up of two new businesses namely, Stable-Net and MICROmega
Technologies. The investment in these two operations had a negative impact
on headline earnings for the period of 3 cents per share. Without these
start up costs our growth in headline earnings per share would have been
44%. We are confident that the establishment costs on these two new
operations will generate strong revenues and more importantly profit during
the remainder of this financial year.
Trading conditions have been significantly tougher than previous periods and
we have experienced continuous pressure on our operating margins. Taking
into consideration our investment in our two start-up operations we are
pleased to report that we have managed to maintain an 8% after tax margin
from current operations. This is in line with last year`s performance for
the same period under review.
Our diversification strategy has worked well both in terms of preserving our
profit margins and ensuring that we have the ability to grow our earnings
base.
Our balance sheet strength and our significantly under-geared position will
allow us to continue to grow at the current rate by investing in the
scalability of our current operations and in the acquisition of
complementary businesses. We are confident that whilst the global economy is
currently under pressure we have secured good market share though a
portfolio of businesses that hold a unique strategic position in their
markets. Our philosophy is one of "owning" a hundred percent of one percent
of a market rather than being a marginal supplier in a large market where we
would have little capacity to influence our price point.
We recognise that trading conditions are not likely to improve materially
during the remaining half of the year but we are confident that our
operations are robust enough to continue to deliver good earnings growth for
our shareholders.
By order of the board
18 August 2008
Directors:
I G Morris (Chairman)
D M Carson (Non-executive)
P V Henwood (Non-executive)
R C Lewin (Non-executive)
J E Newbury (Executive)
Company Secretary: D J Case
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd
Sponsor: Investec Bank Limited
Auditor: KPMG Inc
Date: 18/08/2008 16:30:01 Produced by the JSE SENS Department.
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