| Tue 26 Aug 2008, 9:08 | | SBG - Simeka Business Group - Condensed Audited Annual Financial Results |
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SBG
SBG
SBG - Simeka Business Group - Condensed Audited Annual Financial Results
For The Year Ended 31 May 2008
SIMEKA BUSINESS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2003/012583/06)
Share code: SBG ISIN code: ZAE000074878
("SIMEKA" or the "company" of the "group")
Condensed Audited Annual Financial Results For The Year Ended 31 May 2008
Highlights
- Revenue up 34%
- Headline earnings up 46% to R66 million from R45 million
- HEPS (weighted in issue and to be issued) up to 15,5 cents from 12,0
cents
- Cashflow from operations up 190%
- Cash resources up 83%
CONSOLIDATED INCOME STATEMENT
Audited Audited
Year ended Year ended
31 May 31 May
2008 2007
R`000 R`000
Revenue 597 397 446 986
Earnings before interest, impairment, 92 383 72 438
taxation, depreciation and amortisation
("EBIITDA")
Depreciation (8 240) (6 399)
Amortisation (1 780) (681)
Impairment of goodwill (17 446) (1 143)
Interest on liabilities due to vendors - (81)
Net finance costs (5 602) (6 091)
Income from associate company 548 621
Discontinued operations 17 688 249
Profit before tax 77 551 58 913
Taxation (19 513) (13 375)
Profit for the year 58 038 45 538
Minority interest (3 486) (657)
Earnings attributable 54 552 44 881
Impairment of goodwill 16 308 710
Profit on disposal of subsidiary and associate (4 658) -
Profit on sale of property, plant and - (79)
equipment
Headline earnings after tax 66 202 45 512
Amortisation of intangible asset 1 780 600
Operating leases - straight lining 422 608
Interest on liabilities due to vendors (IAS39) - 81
Attributable adjusted headline earnings 68 404 46 801
Number of shares (`000`)
-Weighted in issue 403 241 359 147
-Weighted in issue and to be issued 427 405 377 924
Headline Earnings per share (cents)
- Weighted in issue 16,4 12,6
- Weighted in issue and to be issued 15,5 12,0
Earnings per share (cents)
- Weighted in issue 13,5 12,5
- Weighted in issue and to be issued 12,8 11,8
Adjusted Headline Earnings per share (cents)
- Weighted in issue 16,9 13,0
- Weighted in issue and to be issued 16,0 12,4
CONSOLIDATED BALANCE SHEET
Audited Audited
As at As at
31 May 31 May
2008 2007
R`000 R`000
ASSETS
Non-current assets 407 932 255 521
Property, plant and equipment 24 839 11 308
Goodwill 320 069 235 378
Intangible assets 46 635 1 136
Investment 305 -
Investment in associate company 5 476 1 380
Deferred taxation 10 608 6 319
Current assets 202 827 142 801
Inventory 11 974 15 491
Trade and other receivables 118 249 85 712
Financial assets 221 1 295
Cash resources 72 383 40 303
Total assets 610 759 398 322
EQUITY AND LIABILITIES
Capital and reserves 344 289 251 514
Share capital 42 39
Foreign currency translation reserves 1 051 73
Share premium 189 775 165 353
Accumulated profit 119 621 76 824
Amounts due to vendors in shares 33 800 9 225
Minority interest (635) 1 812
Total equity 343 654 253 326
Non-current liabilities 109 717 58 150
Financial liabilities 93 271 58 150
Deferred Taxation 16 446 -
Current liabilities 157 388 86 847
Amounts due to vendors 46 241 5 650
Trade and other payables 83 418 52 920
Financial liabilities 14 762 14 045
Taxation payable 8 235 9 827
Bank overdraft 1 358 1 608
Provisions 3 374 2 797
Total equity and liabilities 610 759 398 322
Net asset value per share (cents) 83,3 65,0
Net tangible asset value per share (cents) (5,4) 4,17
CONSOLIDATED CASHFLOW STATEMENT
Audited Audited
Year ended Year ended
31 May 31 May
2008 2007
R`000 R`000
Net cash flows from operations 63 922 22 064
Net cash flows from investing activities (17 610) (51 462)
Net cash flows from financing activities (13 981) 51 606
Net increase in cash and cash equivalents 32 331 22 208
Cash and cash equivalents at beginning of year 38 694 16 486
Cash and cash equivalents at end of year 71 025 38 694
CONSOLIDATED STATEMENT OF CHANGE OF EQUITY
Audited Audited
Year ended Year ended
31 May 31 May
2008 2007
R`000 R`000
Capital and reserves - opening balance 253 326 199 027
Shares issued 38 025 27 179
Treasury shares (13 600) -
Payment of vendor liabilities (9 225) -
Acquisition of subsidiaries and businesses 33 800 (17 867)
Minorities interest (2 447) (375)
Foreign currency translation reserves 978 73
Accumulated profit 42 797 45 289
Capital and reserves - closing balance 343 654 253 326
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
INTRODUCTION
The directors of Simeka are pleased to present the audited financial results
for the year ended 31 May 2008 ("the year").
Simeka continued its positive growth trend and again outperformed
expectations, recording three years of consistent growth in headline
earnings of more than 20% year-on-year. Revenue increased 34% to R597,4
million. Headline earnings increased 46% to R66,2 million translating into
headline earnings per share weighted in issue and to be issued ("HEPS") of
15,5 cents from 12,0 cents while adjusted headline earnings per share
weighted in issue and to be issued ("adjusted HEPS") was 16,0 cents.
Strong long-term contracts from a wide customer base and diversified
services offering enabled Simeka to withstand the difficult market
conditions.
GROUP PROFILE
Simeka is a black-empowered provider of diversified business support
services and technology solutions. Following the integration into the group
of the acquisitions (see `Business Combinations` below) and of SAB&T Ubuntu
Holdings Limited ("SUHL") (see `Post balance sheet events` below), the
group`s operations have been further aligned into two key divisions:
- Technology and
- Business Support Services
Simeka is able to offer bespoke client solutions by combining the niche
offerings of its major brands. The group`s strategy is to encourage
collaboration between the major brands within each focus area to offer a
comprehensive business solution to clients.
BLACK ECONOMIC EMPOWERMENT ("BEE")
Simeka is majority black-owned and managed, with at least 90% of the group`s
board of directors being black. 30% of directors are black females. The
group`s BEE platform is a strong competitive advantage and a key contributor
to ongoing growth.
NAME CHANGE
As previously announced on 22 May 2008 the change of name from Simeka
Business Solutions Group Limited to Simeka Business Group Limited was
approved by shareholders at a general meeting held on that day and came into
effect on 23 June 2008.
FINANCIAL RESULTS
Revenue increased to R597,4 million from R446,9 million for the previous
year ended 31 May 2007, while headline earnings grew by 46% to R66,2 million
from R45,5 million.
The group has maintained its net current asset position at 31 May 2008. Net
asset value per share increased to 83,3 cents from 65,0.
DIVIDEND
The group`s dividend policy is currently under review. The board is pleased
to disclose its intention to declare and pay a dividend during the current
year ending 31 May 2009. Further details will be disclosed to shareholders
in due course.
BASIS OF PREPARATION
The consolidated annual financial statements have been prepared in
accordance with International Financial Reporting Standards. The accounting
policies of the group comply with IAS 34 and the 1973 Companies Act ("Act")
and are based on appropriate accounting policies, consistently applied with
those in the prior year, which are supported by reasonable and prudent
judgments and estimates.
The annual impairment test on goodwill was performed by an independent
expert, and based on the forecasted net profit after tax of the group; there
has been no material impairment on continued operations. However as a result
of the sale of Spec Systems and discontinued division of ICSS goodwill
totaling R15,6 million was written-off during the year.
AUDIT OPINION
The audited consolidated annual financial results have been audited by the
company`s auditors, PKF (Pta) Inc and their unqualified audit report is
available for inspection at the company`s registered office.
SEGMENTAL REPORTING
The Business Support Services division contributed 60% of group revenue,
while the Technology division contributed the balance of 40%.
BUSINESS COMBINATIONS
Adcheck (Pty) Ltd ("Adcheck")
In light of global focus on mobile applications and the continued growth
expected in the telecoms sector - for instance a move to PDA`s/cell phones
from laptops/pc`s - the group invested in Adcheck during the year. A leader
in South Africa, Adcheck provides custom developed mobile applications which
enables a company`s sales force to access and synchronize real time data
through cell phones. The transaction was a strategic investment by Simeka to
penetrate the field of mobile solutions, a high-growth profitable niche
area.
On 1 April 2008, Simeka acquired 50% of the shares and claims on loan
account against Adcheck. The cost of the acquisition was R5,0 million up to
a maximum of R45 million over a period of three years. The initial payment
of R5 million is to be settled by the issue of 5 million Simeka shares at
R1.00 per share.
Adcheck financial information - 31 May 2008
R`000
Non-current assets 5 327
Current assets 13 626
Non-current liabilities 2 490
Current liabilities 6 102
Equity 10 362
Profit after tax for the two 951
months ended 31 May 2008
Revenue 5 964
Included in income from associates is R475,500 being 50% attributable
contribution from Adcheck.
ITQ (Pty) Ltd ("ITQ")
ITQ, a wholly owned subsidiary of Simeka, and Mindkey (Pty) Ltd (`Mindkey`),
a bespoke outsource development company, have entered into a joint venture
in terms of which the parties transferred contracts into a new company
called ITQ Business Solutions (Pty) Ltd (`ITQ BS`). Simeka has a 50,01%
shareholding in ITQ BS through ITQ, and Mindkey the remaining 49,99%. The
transaction was effective 1 December 2007.
Premium Ideas (Pty) Ltd ("Premium Ideas")
On 1 June 2007, Simeka acquired 100% of the shares and voting rights in
Premium Ideas and its underlying foreign operation in Nigeria. The cost of
acquisition amounted to R144 million, payable in cash of R86,4 million and
the balance in Simeka shares of R1.55 each to the total value of R57,6
million.
50% of the purchase price was paid during the year. The balance becomes
payable when Premium Ideas achieves certain milestones as per the sale
agreement by no later than 30 June 2008, which has occurred. The outstanding
cash portion of R43,2 million attracted interest at year-end of R3,0 million
in terms of the provisions of the sale agreement. Post year-end, an amount
of R28,8 million has been settled by the issue of 18580645 Simeka shares,
and Simeka has secured a long-term loan with Investec Bank Limited for the
balance of the outstanding cash amount (inclusive of interest) of R46,2
million.
Mint Net (Pty) Ltd ("Mint")
During the year Simeka established a Microsoft division. In line with
strategy to invest further into growing its Microsoft competencies, the
group acquired 52% of Mint with effect from 1 December 2007 for a
consideration of R5,140 million which was payable in cash. Simeka has the
option to purchase up to 80% of the shares in Mint. Simeka has merged the
existing Microsoft division into Mint for additional equity to consolidate
the group`s Microsoft initiatives in the local and Middle East markets and
further leverage Mint`s strong brand, accreditation and reputation as being
in the top 5% of Microsoft partners.
Independent Computer Support Services ("I-CSS")
On the 14 December 2007, Simeka made the decision not to renew the in-
warranty bench contract with Hewlett Packard in view of the poor performance
of the bench division of I-CSS and the consistent margin pressures. The ICSS
bench division has subsequently discontinued trading. This resulted in an
attributable loss on discontinued operations as indicated below and
impairment of goodwill of R5,6 million for the year ended 31 May 2008,
although this has no effect on headline earnings or headline earnings per
share.
Discontinued Operations Audited Audited
Year ended Year ended
31 May 31 May
2008 2007
R`000 R`000
Revenue 12 595 53 032
Profit before taxation (17 687) 394
Taxation (2 894) (643)
Profit after taxation (14 793) (249)
Attributable to:
Minority interest (5 933) (142)
Equity holders of the company (8 860) (107)
Spec Systems
Simeka concluded a sale of business agreement for the sale of Spec Systems
for a consideration of R13,6 million with effect from 1 December 2007. This
resulted in a loss on sale of business and impairment of goodwill totaling
R7,4 million being realized for the year ended 31 May 2008, although this
has no effect on headline earnings and headline earnings per share.
Due to the high returns targeted by Simeka, the group decided to exit the
non-performing business as it failed to meet long-term criteria.
POST BALANCE SHEET EVENTS
SUHL
On 9 May 2008 Simeka made an offer to SUHL shareholders for the acquisition
of 100% of the issued share capital of SUHL for a purchase consideration of
up to 150 million Simeka shares. The offer was accepted by 94,3% of the SUHL
shareholders and accordingly Simeka invoked the provisions of section 440k
of the Companies Act. On 2 June 2008 Simeka gave notice to all the
shareholders who had not accepted the offer and on that date effectively
acquired 100% of SUHL issued shares by issuing 150 million Simeka shares to
SUHL shareholders in the ratio of 1:2.1 in full and final settlement of the
purchase price.
SUHL management have committed to a profit warranty of R30 million
attributable to equity holders for the period ended 31 May 2009, failing
which Simeka will be entitled to claw-back up to 60 million Simeka shares.
PROSPECTS
The group, including SUHL and Adcheck, has secured contracts in hand over
the next four to five years of more than R2 billion. Simeka intends to
continue to focus on driving and growing this already strong annuity revenue
stream.
Public sector remains a growth area for the group in future and a number of
contracts already realized through SUHL present exciting opportunities in
this regard.
The outsourcing industry is currently at the healthiest levels recorded for
the past five years, supporting Simeka`s excellent growth prospects.
Expansion into international markets is a natural development including the
African, Middle Eastern/Asian and UK markets. Simeka has a full
understanding of these markets and is equipped to operate successfully in
these regions.
Simeka has recently established an office in Bahrain as it is best situated
to service the Middle Eastern market and will act as a "springboard" for
cross-selling all the group`s services. This is part of the group`s strategy
to penetrate the fast growing economy in the Middle East. The group has
already secured a number of contracts in this market.
Simeka has to date invested in excess of R7,0 million in its Microsoft
Implementation competencies including Sharepoint Portal, ERP and CRM
solutions. This investment has allowed the group to immediately provide
these offerings in the Middle East. The year ahead will see further
investments to grow Simeka`s training competencies which include Microsoft,
Cisco and Novel.
The group remains committed to continued implementation of long-term
incentives to retain and attract staff.
APPRECIATION
We recognise and value the efforts of all directors, managers and staff who
have been integral to the group`s success. We welcome to the group all new
employees who have joined post year-end and look forward to working together
to continue Simeka`s success.
We also thank all our shareholders, business associates and particularly our
loyal business partners/customers for their invaluable ongoing support. We
will continue to strive to surpass our own benchmarks and exceed
expectations.
By order of the board
Mohammed Varachia Suren Singh
CEO CFO
26 August 2008
Directors
Dr PS Molefe (Chairman)*, M Varachia (CEO), S Singh (CFO), B Adam (Executive
Director), M Papiyana (Group Human Resources Director), A Evan (Chief Legal
Officer), N Singh (Executive Director), T Botha* (Deputy Chairman), KBJ
Molefe*, NY Mhinga*# (*Non-executive, # independent)
Registered office: Corner Naivasha and Rivonia Road, Sunninghill (PO Box
4307, Halfway House, Midrand, 1685)
Transfer secretaries: Link Market Services South Africa (Pty) Limited, 11
Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000)
Company secretary: Noelene Beryl de Koker, Corner Naivasha and Rivonia
Road), Sunninghill (PO Box 4307, Halfway House, Midrand, 1685)
Designated advisor: Java Capital (Proprietary) Limited
www.simekabusinessgroup.co.za or www.simekabg.co.za
Date: 26/08/2008 09:08:47 Produced by the JSE SENS Department.
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