| Thu 20 Nov 2008, 9:07 | | SPS - Spescom Limited - Preliminary Reviewed Results For The Year Ended 30 |
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SPS
SPS
SPS - Spescom Limited - Preliminary Reviewed Results For The Year Ended 30
September 2008
Spescom Limited
(Registration number 1987/001083/06
Share code: SPS & ISIN: ZAE000017919
PRELIMINARY REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2008
SALIENT FEATURES
- Total reported revenue of R361 million (2007: R385 million)
- Continued improvement in operating profit of R14 million (2007: R1,3 million)
- Headline earnings per share increased by 49,1% to 10,3 cents
- Cash generated by operating activities of R47,3 million (2007: R16 million)
- 28,7% improvement in tangible NAV to 64,7 cents per share
- 29% (2007: 21%) revenue contribution from proprietary technology
- Global recognition of Spescom`s locally developed product suite
- Capability underpinned by skills in voice, video and data
SUMMARISED CONSOLIDATED INCOME STATEMENT
Reviewed Audited
year ended year ended
30/09/08 30/09/07
R`000 R`000
Total revenue 361 229 385 171
Continuing operations
Turnover 358 196 380 085
Cost of sales (189 132) (241 427)
Gross profit 169 064 138 658
Operating expenses (152 837) (134 433)
Earnings before interest and taxation 16 227 4 225
Investment income 2 763 1 737
Finance charges (4 543) (4 626)
Earnings before non-trading activities 14 447 1 336
Non-trading activities - 20 053
Operating profit 14 447 21 389
Taxation (7 080) (610)
Net profit after tax 7 367 20 779
Profit from associate - 3 826
Net profit for the period from 7 367 24 605
continuing operations
Discontinued operation
Loss for the period from discontinued - -
operation
Profit for the year attributable to 7 367 24 605
equity holders of the parent
Reconciliation of headline earnings
Net earnings attributable to ordinary 7 367 24 605
shareholders
Headline earnings adjustments 40 (19 630)
- Loss on sale of property, plant and 40 423
equipment
- Profit on sale of Enterprise - (20 053)
Informatics
Headline earnings 7 407 4 975
Number of shares in issue 78 768 056 78 768 056
Number of shares on which earnings per 72 230 513 72 314 237
share is calculated
Number of shares on which diluted 73 205 254 75 632 951
earnings per share is calculated
Ratio analysis cents per cents per
share share
Earnings per share:
- basic, for the profit for the year 10,2 34,0
attributable to ordinary equity holders
of the parent
- basic, for the profit from 10,2 34,0
continuing operations for the year
attributable to ordinary equity holders
of the parent
- basic, for the loss from - -
discontinued operations
- diluted, for the profit for the year 10,1 32,5
attributable to ordinary equity holders
of the parent
Headline earnings per share:
- Headline earnings per share from 10,3 6,9
continuing operations
Net asset value per share 93,5 75,2
CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
year ended year ended
30/09/08 30/09/07
R`000 R`000
OPERATING ACTIVITIES
Cash generated by operations 32 437 30 042
Working capital changes 14 873 (14 053)
Cash generated by operating activities 47 310 15 989
Net finance costs paid (1 781) (2 889)
Taxation (paid)/refunded (5 657) 1 366
Net cash flow from operating activities 39 872 14 466
INVESTING ACTIVITIES
Investment to maintain operations (21 907) (12 401)
Proceeds from sale of investment 12 457 -
Repayment of loans 471 12 465
Net cash flow from investing activities (8 979) 64
FINANCING ACTIVITIES
Bank financing and facilities (9 546) (7 905)
Net cash flow from financing activities (9 546) (7 905)
Net change in cash and cash equivalents 21 347 6 625
Effects of foreign exchange 485 (112)
Cash and cash equivalents:
- At beginning of year 21 886 15 373
- At end of year 43 718 21 886
SUMMARISED CONSOLIDATED BALANCE SHEET
Reviewed Audited
as at as at
30/09/08 30/09/07
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 48 733 35 522
Intangible assets 16 563 14 789
Investments and loans 5 680 7 151
Deferred taxation 13 404 13 972
84 380 71 434
Current assets 129 923 186 690
Inventories 13 870 18 617
Taxation prepaid 136 66
Trade and other receivables 72 199 146 121
Cash and cash equivalents 43 718 21 886
TOTAL ASSETS 214 303 258 124
Capital and reserves
Share capital and premium 45 283 45 283
Non-distributable reserves (35) (5 816)
Distributable reserves/(accumulated 22 302 14 935
losses)
Ordinary shareholders` equity 67 550 54 402
Non-current liabilities 27 831 25 042
Contract advances and deferred 3 290 450
maintenance revenue
Deferred taxation 3 377 1 876
Interest bearing liabilities 21 164 22 716
Current liabilities 118 922 178 680
Current portion of interest bearing 1 631 9 626
liabilities
Taxation 5 332 4 221
Trade and other payables 57 126 120 184
Provisions and deferred maintenance 54 833 44 649
revenues
Total equity and liabilities 214 303 258 124
SEGMENTAL ANALYSIS
Reviewed Audited
30/09/08 30/09/07
R`000 R`000
Sector turnover
Enterprise application and integration 273 841 261 146
solutions
Communication integration activities 22 725 85 082
Services and other 61 630 33 857
358 196 380 085
Operating profit
Enterprise application and integration 12 440 2 208
solutions
Communication integration activities 119 488
Services and other 3 668 1 529
16 227 4 225
Geographic turnover
Africa 345 981 369 636
Europe 12 215 8 306
USA - 1 643
Other - 500
358 196 380 085
Proprietary Technology
Own IP 104 140 79 374
3rd Party IP 254 056 300 711
358 196 380 085
NOTES TO THE SUMMARISED FINANCIAL STATEMENTS
Basis of presentation
The financial statements have been prepared in terms of International Financial
Reporting Standards (IFRS) applicable at 30 September 2008. The accounting
policies used in the preparation of the results are consistent in all material
respects with those adopted in the annual financial statements for the year
ended 30 September 2008.
Listing requirements
The financial statements have been prepared in accordance with the listing
requirements of the JSE Limited.
Auditors` review
The external auditors, Ernst & Young Inc, have issued their review opinion on
the group`s preliminary results for the year end 30 September 2008, and this
unqualified review opinion is available for inspection at the company`s
registered office.
Our review was conducted in accordance with the International Standard on Review
Engagements 2410, "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity, and nothing has come to our attention that
causes us to believe that the accompanying interim financial information does
not present fairly, in all material respects, the financial position of the
entity as at 30 September 2008, and of its financial performance and its cash
flows for the twelve-month period then ended in accordance with International
Financial Reporting Standards.
STATEMENT OF CHANGES IN EQUITY
ATTRIBUTABLE TO EQUITY HOLDERS OF THE
PARENT
Distributable Share Share
reserves capital premium
R`000 R`000 R`000
Balance as at 30 September (9 670) 684 44 599
2006
Revaluation of land and
buildings net of
depreciation
Share based payments
reserve
Foreign currency
translation profit
realised on sale of
investment
Foreign currency
translation loss arising
on consolidation
Net profit for the period 24 605
Balance as at 30 September 14 935 684 44 599
2007
Revaluation of land and
buildings net of
depreciation
Share based payments
reserve
Foreign currency
translation loss arising
on consolidation
Net profit for the period 7 367
Balance as at 30 September 22 302 684 44 599
2008
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
Non-distributable
reserves Total
R`000 R`000
Balance as at 30 September 20 802 56 415
2006
Revaluation of land and (90) (90)
buildings net of
depreciation
Share based payments 441 441
reserve
Foreign currency (26 896) (26 896)
translation profit
realised on sale of
investment
Foreign currency (73) (73)
translation loss arising
on consolidation
Net profit for the period 24 605
Balance as at 30 September (5 816) 54 402
2007
Revaluation of land and 4 947 4 947
buildings net of
depreciation
Share based payments 695 695
reserve
Foreign currency 139 139
translation loss arising
on consolidation
Net profit for the period 7 367
Balance as at 30 September (35) 67 550
2008
COMMENTARY
Financial review
Spescom`s financial position continues to strengthen, as it benefits from
engagements with new and existing blue chip customers. The group`s focus on its
core competencies in business communications solutions and services is paying
off.
Headline earnings increased by 48,9% to R7,4 million (2007: R5,0 million), with
a commensurate increase in headline earnings per share to 10,3 cents (2007: 6,9
cents).
The group reported profits of R7,4 million (2007: R24,6 million) with the
decrease being the direct result of the once off profit on the sale of
investment amounting to R20,0 million in 2007. Operating profit increased to
R14,4 million (2007: R1,3 million), confirming that Spescom has maintained the
momentum of its financial recovery. The group`s operating margin increased to
4,0% compared to 0,3% in 2007, benefiting from increased demand for its
proprietary products as well as the contribution of new service related
contracts.
Although revenue for the year ended 30 September 2008 showed a decrease of 6,2%
to R361,2 million (2007: R385,2 million), the group continued to gain market
share with Spescom DataFusion and Spescom DataVoice delivering strong revenue
growth of 40% and 25% respectively. Spescom Telecommunications and Spescom Media
IT were impacted by delayed customer spending but remain on a sound footing.
With its lower gearing levels and healthier cash balances during 2008, Spescom
incurred lower net finance charges of R1,8 million (2007: R2,9 million).
In line with the improved operating performance, Spescom`s balance sheet
continues to strengthen, with the debt to equity ratio decreasing from 60% to
33% during the year. Cash and cash equivalents doubled to R43,7 million (2007:
R21,9 million) as cash generated by operating activities increased to R47,3
million from R16,0 million a year ago. During the year, the group capitalised
development costs and acquired equipment for its managed services contracts,
thereby increasing its investments to maintain operations to R21,9 million
(2007: R12,4 million).
The 28,7% increase in Spescom`s tangible net asset value per share to 64,7 cents
(2007: 50,3 cents), can be attributed to the revaluation of land and buildings
owned by the group as well as improved profitability which has translated into
increased net working capital.
Strategic review
At the foundation of Spescom`s strategy is the group`s existing core
competencies and capabilities. Spescom`s focus is providing its customers with
tools and knowledge to improve the way in which they manage their own customers.
This is achieved by implementing relevant leading business communication
solutions including the full spectrum of contact centre solutions, recording and
measurement tools as well as turnkey broadcasting and telecommunications network
solutions. The group has an intimate understanding of its customers` external
and internal environments which is leveraged off its technical know-how to
provide innovative business solutions.
The success of Spescom`s strategy and value delivered to stakeholders is
predicated on the group`s ability to capitalise on its strengths. Based on its
extensive expertise across the business communications value chain and ongoing
investments in research and development, the group delivers innovative solutions
to its customers to improve their own efficiencies and competitive advantages.
Building, retaining and enhancing the quality of relationships with suppliers
and customers underpinned by high quality service delivery has also been
identified as a critical success factor.
Spescom`s ability to manage its talent pool is crucial to the long-term growth
of the group. Against the backdrop of ongoing specialist technology skills
constraints which impact all players in the information communication and
technology industry, Spescom`s skilled workforce provides a definitive
advantage. In order to maintain this competitive edge the group continued to
invest in its intellectual capital during the year. Career development,
mentorship programmes and learnerships are some of the mechanisms used to grow
its resource pool, while also supporting transformation of the workforce.
Operating review
Spescom DataVoice reported strong revenue growth and the increased demand for
its suite of proprietary products contributed to higher operating margins.
Profits from the division`s international sales more than doubled off a small
base after the successful restructuring of the division in the previous year.
Spescom DataVoice`s London office acts as the foothold for penetrating markets
in Europe and the United Kingdom. The division continued investing in research
and development to enhance its product offering, making its entry into the
emerging mobile voice recording market with the launch of Libra Mobile.
Providing strong evidence of its superior technology and skills, Spescom
DataVoice attracted a number of industry awards during the year. Qnique, the
proprietary contact centre agent optimisation software, was recognised with the
Proudly South African Homegrown Product of the Year award in 2007 as well as the
2008 South African National Business Award for Innovation through Technology. It
was also a finalist for the Best Technology Innovation Award at the 2008 EMEA
Contact Centre World Conference.
Spescom DataFusion showed accelerated revenue growth for the financial year, as
it delivered on several significant deals from large corporates in the retail,
financial services and media sectors. Its new managed services offering
generated solid annuity revenue flows. The division also benefited from strong
demand from outsourcing customers who are attracted to the scalability of
Spescom DataFusion`s offering. It bedded down the contact centre managed
services contract providing services to a major local financial institution,
attracting interest in this new line of business. Spescom DataFusion`s industry
and technical knowledge sets it apart as a value added partner earning it the
Avaya 2008 South African Business Partner of the Year award.
Spescom Media IT contributed to the group`s profitability, despite delayed
customer decisions on several key opportunities. The division made further
progress with its initiatives to service the broadcast market in the SADC
region. The outlook remains positive, buoyed by the advent of high density
television (HDTV) and imminent upgrades and investments by local broadcasters to
meet international standards ahead of the 2009 Confederations Cup continues.
Media IT is gaining recognition as the only local player with significant
integration skills in the broadcast space.
Although Spescom Telecommunications was impacted by a slowdown in the roll out
of telecommunication infrastructure during the period, the division has gained
valuable experience and knowledge which has improved its value proposition.
Spescom is investigating various options to leverage its skills and
relationships in the telecommunications sector to capitalise on the anticipated
opportunities which will be unlocked in the medium term.
Prospects
There is no doubt that the recent turmoil in the global financial market, which
has far reaching economic impacts, has introduced uncertainty into the domestic
economy. However, Spescom`s market positioning lends itself to implementing
solutions that deliver the efficiencies and competitive advantages that its
customers require, particularly in recessionary periods when discretionary
technology spend comes under pressure. Sales of the group`s proprietary product
suite in the international market are contributing foreign denominated earnings,
albeit off a low base. In addition, Spescom`s locally developed customer contact
products are relatively insensitive to currency fluctuations, providing the
group with an advantage compared to imports. The highly scalable nature of
Spescom`s solutions, presents further cost benefits to customers.
Spescom has shown good earnings growth. In addition, it has an extensive pool of
skills and a broad and flexible offering of products and services. Despite the
current economic downturn, Spescom believes that it is well positioned to grow.
Directorate
Ms H Sonn resigned as director on 28 February 2008 and Ms C Nkosi was appointed
as director on 1 June 2008.
Dividend
Bearing in mind the prevailing economic conditions the board considers it
important that cash generated from operations be reinvested in the businesses
and as such the board does not believe it is appropriate at this stage to
declare a dividend.
By order of the board
J Palmer
Chief Executive Officer 20 November 2008
Directors:
M C Mogase+ (Chairperson), P Fick, T Makore,
C Nkosi+, L Ogilvy+, J Palmer, P Vallet+
+ Non-executive
Registered Office:
Spescom Park, Cnr Alexandra Avenue and Second Road, Midrand, 1685.
Tel +27 (11) 266 1500
Registrar:
Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg, 2001.
Tel: +27 (11) 370 5000
www.spescom.com
20 November 2008
Sponsor: Investec Bank Limited
Date: 20/11/2008 09:07:34 Produced by the JSE SENS Department.
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