| Tue 17 Feb 2009, 15:15 | | SBG - Simeka - Reviewed Condensed Consolidated Interim Financial Results For The |
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SBG
SBG
SBG - Simeka - Reviewed Condensed Consolidated Interim Financial Results For The
Six Months Ended 30 November 2008 And Further Cautionary Announcement
Simeka Business Group Limited
Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: SBG & ISIN: ZAE000074878
("Simeka Business Group", "the group" or "Simeka")
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS
ENDED 30 NOVEMBER 2008 AND FURTHER CAUTIONARY ANNOUNCEMENT
Highlights
EBITDA up 37%
Revenue up 27%
Headline earnings up 25%
Cash reserves increased to R94 million
Tangible net asset value per share increased 272% to 9,1 cents
from (5,3) cents
Consolidated condensed income statement
Audited
Six months Six months Year ended
to to
30 November 30 November 31 May
2008 2007 2008
R`000 R`000 R`000
Revenue 393 044 309 657 584 801
Earnings before interest, 80 322 58 495 92 383
taxation, depreciation and
amortisation ("EBITDA")
Depreciation (4 595) (4 031) (8 240)
Amortisation (1 660) (568) (1 780)
Impairment of - (568) (17 446)
intangibles/goodwill
Net finance costs (12 511) (5 083) (5 602)
Income from associate 2 065 - 548
company
Discontinued operations - - (17 688)
Profit before taxation 63 620 48 245 77 551
Taxation (16 064) (12 606) (19 513)
Profit for period 47 556 35 639 58 038
Attributable to:
Equity holders of the 42 732 35 377 54 552
company
Minority interest 4 824 262 3 486
Headline earnings
calculation:
Profit attributable to 42 732 35 377 54 552
equity holders of the
company
Adjusted for:
Profit on sale of property, (83) 3 -
plant and equipment
Impairment of - 568 16 288
assets/goodwill
Profit on sale of (33) (1 949) (4 638)
associate/subsidiaries
Headline earnings 42 617 33 999 66 202
Adjusted headline earnings
calculation:
Headline earnings 42 617 33 999 66 202
Adjusted for:
Amortisation 1 195 568 1 780
Operating leases
- straight lining (103) (231) 422
Adjusted headline earnings 43 709 34 336 68 404
Number of shares (`000)
- Weighted in issue 483 546 387 712 403 241
- Weighted in issue and to 524 942 423 252 427 405
be issued
Headline earnings per share
(cents)
- Headline earnings per 8,8 8,8 16,4
share
- Diluted headline earnings 8,1 8,0 15,5
per share
Adjusted headline earnings
per share (cents)
- adjusted headline earnings 9,1 8,9 16.9
per share
- Diluted adjusted headline 8,4 8,1 16.0
earnings per share
Earnings per share (cents)
- Earnings per share 8,8 9,1 13,5
- Diluted earnings per share 8,1 8,4 12,8
Consolidated condensed cash flow statement
Audited
Six months Six months Year ended
to to
30 November 30 November 31 May
2008 2007 2008
R`000 R`000 R`000
Net cash flows from 53 596 37 034 63 922
operating activities
Net cash flows from (23 201) 27 179 (17 610)
investing activities
Net cash flows from (7 408) (23 759) (13 982)
financing activities
Net increase in cash 22 986 40 454 32 330
resources
Cash resources at beginning 71 025 38 695 38 695
of period
Cash resources at end of 94 011 79 149 71 025
period
Consolidated condensed balance sheet
Audited
Six months Six months As at
to to
30 November 30 November 31 May
2008 2007 2008
R`000 R`000 R`000
ASSETS
Non-current assets 515 616 392 647 407 933
Property, plant and 32 823 21 335 24 839
equipment
Goodwill 409 306 365 201 320 069
Intangible assets 45 162 - 46 635
Investments 306 306 306
Other financial assets 3 598 - -
Investment in associate 12 757 - 5 476
company
Deferred taxation 11 664 5 805 10 608
Current assets 314 857 257 469 202 828
Inventory 13 404 20 339 11 974
Trade and other receivables 207 442 156 171 118 471
Cash resources 94 011 80 959 72 383
Total assets 830 473 650 116 610 761
EQUITY AND LIABILITIES
Capital and reserves 508 238 344 605 344 290
Share capital 296 453 165 618 189 818
Non-distributable reserves 238 185 1 051
Accumulated profit 162 353 112 202 119 621
Amounts due to vendors in 49 194 66 600 33 800
shares
Minority interest 4 189 2 072 (635)
Total Equity 512 427 346 677 343 655
Non-current liabilities 134 152 120 699 109 717
Interest-bearing liabilities 123 419 120 699 93 271
Deferred taxation 10 683 - 16 446
Current liabilities 183 894 182 740 157 389
Non-interest-bearing - 44 701 46 241
liabilities due to vendors
Trade and other payables 150 971 88 899 86 965
Interest-bearing liabilities 25 664 9 101 14 590
Taxation payable 7 259 38 230 8 235
Bank overdraft - 1 809 1 358
Total equity and liabilities 830 473 650 116 610 761
Net asset value per share 86,0 88,62 83,3
(cents)
Net tangible asset value per 9.1 (5,3) (5,4)
share (cents)
Consolidated condensed statement of changes in equity
Audited
Six months Six months Year ended
to to
30 November 30 November 31 May
2008 2007 2008
R`000 R`000 R`000
Capital and reserves - 343 655 253 326 253 326
opening balances
Shares issued 106 635 225 38 025
Treasury shares - - (13 600)
Payment of vendor (33 800) (225) (9 225)
liabilities
Acquisition of subsidiaries 49 194 57 600 33 800
and businesses
Minorities interest 4 824 262 (2 447)
Reduction in shares due to -
vendors
Foreign currency translation (813) 112 979
reserve
Net profit for period 42 732 35 377 42 797
Capital and reserves 512 427 346 677 343 655
Commitments:
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 consolidated group interim financial statements have been
prepared in accordance with International Financial Reporting Standards ("IFRS")
and Interim Financial Reporting, including IAS34. The accounting policies of the
group comply with IFRS and the Companies Act of 1973 and are based on
appropriate accounting policies, consistently applied with those in the audited
financial statements for the prior year ended 31 May 2008, which are supported
by reasonable and prudent judgments and estimates.
Audit Review
The condensed consolidated group interim financial results have been reviewed by
Simeka Business Group`s auditors, PKF (Pta) Inc. The condensed consolidated
group interim financial statements and signed unqualified review opinion are
available for inspection at the company`s registered office.
Introduction
The directors of Simeka are pleased to present the results for the six months
ended 30 November 2008 ("the period").
Simeka continued to achieve solid growth in the prevailing difficult market
conditions. Headline earnings increased 25% to R42,6 million from R34,0 million
in the previous comparative period, translating into headline earnings per share
weighted in issue and to be issued ("HEPS") of 8,12 cents. Cash reserves
increased to R94 million.
Group profile
Simeka is a leading black empowered outsourcing and business support services
group with offices throughout South Africa, Africa, the Middle East and the UK.
In line with its strategic objective of leading the business support services
market, Simeka has retained and attracted a formidable skills pool with a depth
of experience and domain expertise.
The group has a strong Consulting and Outsourcing business underpinned by a
solid Technology competence in vertical markets. This ability to enhance service
and product offerings with deep technical expertise differentiates the group
from competitors. Simeka is able to offer bespoke client solutions through its
niche specialist offerings within its major brands, which can also be combined
for a more effective solution. The current group structure is therefore well-
suited both to the development of core expertise in focus areas as well as
proactive collaboration across the different offerings for integrated delivery.
Black Economic Empowerment ("BEE")
Simeka Business Group is majority black-owned and managed, with the majority of
the group`s executive directors being black. This BEE platform offers the group
a defined competitive advantage and is a key contributor to ongoing growth.
Notwithstanding that the group already enjoys this strong BEE profile, Simeka
remains committed to continually 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 R393,0 million, a 27% from the previous comparative
period, while EBITDA grew by 37% to R80,3 million from R58,5 million. With the
growth in EBITDA outperforming that in turnover, the ability of the group to
maintain healthy margins has been clearly reflected.
The group has significantly improved its net tangible asset per share with an
impressive increase to 9,1 cents from (5.3) from the previous comparative
period.
Operational Overview
Despite the economic downturn locally and internationally, Simeka has maintained
growth and exceeded previous growth benchmarks at consistent, above average
margins. This has been largely due to Simeka`s versatile structure, diverse
portfolio of businesses and significant annuity income base exceeding R2 billion
over the next 4 years.
During the period under review, Simeka has been able to win new business in
excess of R150 million, to add to the already secured annuity business.
The group`s investment in Nigeria continues to deliver profits ahead of
forecast. Accordingly a further investment in excess of R10 million has been
made which will yield significant growth opportunities over the next 12-24
months.
Dividend
In line with group policy, no interim dividend has been declared for the period.
However the company intends to consider the declaration of a maiden dividend for
the financial year ending 31 May 2009, in line with previously stated
intentions.
Segmental Reporting
The Business Support Services division contributes 73% of group revenue, while
the Technology division contributes the balance of 27%.
Business Combination
SAB and T Ubuntu Holdings Limited ("SUHL")
On 1 June 2008, Simeka acquired 100% of the shares in SUHL and it`s underlying
subsidiaries. The cost of acquisition amounted to R 123,000,000 which was paid
by the issue of 150 000 000 shares at R0.82 each, of which 60 000 000 has been
pledged back to the company in lieu of the profit warranty to the financial year
ended 31 May 2009. Goodwill of R 62,718,298 arose due to expected synergies
between the assets of Simeka and SUHL. The acquisition of SUHL 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 will be accurately and fully determined by the next balance
sheet date being 31 May 2009.
Vendor Commitments
A total of R153,8 million in vendor liabilities was discharged during the
period, partly by the issue of shares and partly paid from cash generated from
operations and the raising of third party debt already included in the balance
sheet.
Share Repurchase
Shareholders are referred to the SENS announcement dated 28 November 2008
indicating the company`s intention to repurchase shares during a closed period,
and are advised that the company has extended the period to 31 May 2009 and if
required, a revised repurchase schedule will be published on SENS in due course,
subject to JSE approval, for the information of shareholders.
Post Balance Sheet Events
Mint Net (Pty) Ltd ("Mint Net")
As previously announced, Simeka concluded and implemented the agreement for the
acquisition of the remaining 48% of the issued shares in Mint Net ("the
acquisition") from Carel du Toit and The Grant Hodgkinson Family Trust ("the
vendors") for a total consideration of R2 589 475. The vendors are executive
directors of Mint Net. The effective date of the acquisition is 10 December
2008.
R2 189 475 of the purchase consideration for the acquisition has been settled in
cash. The balance of R400 00 has been settled by way of issue by Simeka of
ordinary shares at an issue price of 39 cents per share ("the consideration
shares").
The vendors may not trade in the consideration shares for a period of three
years from the effective date, after which no more than 33% of the consideration
shares may be traded in any year and no more than 10% in any month. In
addition, in the event of the vendors wishing to dispose of any consideration
shares they shall first offer such shares to the company.
Further cautionary
Financial effects relating to the Mint Net acquisition are in the process of
being finalised. Shareholders are advised to continue to exercise caution when
trading in the company`s shares until the financial effects are published by the
company.
Prospects
Following projected public sector spend over the next 12 - 18 months, Simeka
intends to entrench a strong foothold in the public sector arena. The group has
a proven track record and capacity to address large projects and solutions,
which positions Simeka well to achieve this strategic growth objective.
Further, it is intended that a significant portion of growth for the next 6
months will be achieved through extending inroads internationally, in particular
by rolling out the Microsoft solutions in the high growth, fast developing
Middle East.
Appreciation
We recognise and appreciate the efforts of all directors, managers and staff who
have been integral to the group`s success. We also welcome our new employees
from SUHL and look forward to working together to continue Simeka`s growth.
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
17 February 2009
Designated advisor
Java Capital (Proprietary) Limited
Directors
Dr PS Molefe (Chairman)*, M Varachia (CEO), S Singh (CFO), M Papiyana (Group
Human Resources Director), A Evan (Chief Legal Officer),N Singh, T Botha*
(Deputy Chairman), S Montsi*, B Adam*, KBJ Molefe*, NY Mhinga* (*Non-executive)
Registered office: Corner Naivasha and Rivonia Road (entrance in Kikuyu Street),
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 January, Corner Naivasha and Rivonia Road
(entrance in Kikuyu Street), Sunninghill (PO Box 4307, Halfway House, Midrand,
1685)
www.simekabusinessgroup.co.za
Date: 17/02/2009 15:15:01 Produced by the JSE SENS Department.
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