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MFL
MFL
MFL - Metrofile Holdings Limited - Unaudited group results for the six months
ended 31 December 2008
Metrofile Holdings Limited
Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MFL ISIN: ZAE000061727
("Metrofile Holdings" or "the company" or "the group")
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
HIGHLIGHTS
Revenue up 10%
EBITDA up 9%
Normalised HEPS up 16%
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited
6 months
ended
31 December
R`000 Note 2008
Revenue 179 703
Operating income before interest,
taxation and depreciation (EBITDA) 58 044
Depreciation (5 880)
Operating profit before finance
costs and exceptional items 52 164
Net finance costs (27 311)
Finance income 1 744
Finance costs (19 592)
Interest paid on loans (23 644)
Interest received relating to
financial instruments 1 4 052
Fair value adjustments on
financial instruments 2 (9 463)
Once off reversal of finance
cost provision
Exceptional items
Profit before taxation 24 853
Taxation (7 341)
Profit for the period 17 512
Attributable to:
Equity holders of the parent 17 512
Minority interest
Attributable profit 17 512
Further information
Number of ordinary shares
in issue (thousands) 393 997
Weighted average number
of ordinary shares
in issue (thousands) 393 997
Earnings per ordinary share (cents) 4,44
Headline earnings per
ordinary share (cents) 4,44
Normalised headline earnings per
ordinary share (cents) 6,17
Unaudited Audited
6 months 12 months
ended ended
31 December 30 June
R`000 2007 2008
Revenue 163 531 329 935
Operating income before interest,
taxation and depreciation
(EBITDA) 53 282 106 291
Depreciation (5 286) (10 752)
Operating profit before finance
costs and exceptional items 47 996 95 539
Net finance costs (18 419) (22 638)
Finance income 2 481 5 138
Finance costs (22 947) (44 832)
Interest paid on loans (24 708) (50 157)
Interest received relating to
financial instruments 1 761 5 326
Fair value adjustments on
financial instruments 2 047 4 780
Once off reversal of finance
cost provision 12 276
Exceptional items 2 368
Profit before taxation 29 577 75 269
Taxation (8 019) (15 956)
Profit for the period 21 558 59 313
Attributable to:
Equity holders of the parent 21 558 59 313
Minority interest
Attributable profit 21 558 59 313
Further information
Number of ordinary shares
in issue (thousands) 393 997 393 997
Weighted average number
of ordinary shares
in issue (thousands) 393 997 393 997
Earnings per ordinary share (cents) 5,47 15,05
Headline earnings per
ordinary share (cents) 5,47 14,44
Normalised headline earnings per
ordinary share (cents) 5,31 10,45
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
as at
31 December
R`000 Note 2008
ASSETS
Non-current assets
Property, plant and equipment 235 052
Goodwill 3 160 499
Deferred tax asset 195
Current assets 83 453
Inventories 13 250
Trade receivables 48 976
Other receivables 6 326
Financial instruments - fair value of
interest rate swaps 4 2 158
Bank balances 12 743
Total assets 479 199
EQUITY AND LIABILITIES
Equity capital and reserves
Equity attributable to equity
holders of parent 147 127
Non-current liabilities 252 157
Interest-bearing liabilities 5 243 916
Deferred taxation liability 8 241
Current liabilities 79 915
Trade payables 10 406
Other payables 20 933
Deferred revenue 4 708
Provisions 3 644
Taxation 9 295
Interest-bearing liabilities 5 30 929
Interest-bearing provisions
479 199
Net asset value per ordinary
share (cents) 37,34
Unaudited Audited
as at as at
31 December 30 June
R`000 2007 2008
ASSETS
Non-current assets
Property, plant and equipment 183 348 205 559
Goodwill 160 499 160 499
Deferred tax asset 111
Current assets 117 016 104 156
Inventories 9 848 10 502
Trade receivables 46 425 48 335
Other receivables 5 371 4 881
Financial instruments - fair value of
interest rate swaps 8 889 11 621
Bank balances 46 483 28 817
Total assets 460 863 470 325
EQUITY AND LIABILITIES
Equity capital and reserves
Equity attributable to equity
holders of parent 91 641 129 396
Non-current liabilities 291 814 267 648
Interest-bearing liabilities 280 439 257 342
Deferred taxation liability 11 375 10 306
Current liabilities 77 408 73 281
Trade payables 8 988 8 471
Other payables 13 510 22 254
Deferred revenue 3 798 4 186
Provisions 3 812 4 693
Taxation 5 920 4 347
Interest-bearing liabilities 28 835 29 330
Interest-bearing provisions 12 545
460 863 470 325
Net asset value per ordinary
share (cents) 23,26 32,84
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
R`000 2008 2007 2008
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash generated from operations
before net working capital changes 59 049 57 350 107 120
(Decrease)/increase in net
working capital (4 746) (6 444) 3 989
Cash generated from operations 54 303 50 906 111 109
Net finance costs paid (17 848) (19 592) (39 694)
Normal taxation paid (4 543) (4 966) (15 926)
Net cash inflow from operating
activities 31 912 26 348 55 489
Net cash outflow from investing
activities (35 042) (13 353) (39 189)
Net cash outflow from financing
activities
Loans repaid (13 491) (6 761) (27 614)
Loans raised 547 118
Net (decrease)/increase in cash
and cash equivalents (16 074) 6 352 (11 314)
Cash and cash equivalents at the
beginning of the period 28 817 40 131 40 131
Cash and cash equivalents at the
end of the period 12 743 46 483 28 817
Represented by:
Bank balances 12 743 46 483 28 817
STATEMENT OF CHANGES IN EQUITY
Share Share
R`000 capital premium
Balance at 1 July 2007 2 421 502 904
Profit for the six months
ended 31 December 2007
Balance at 31 December 2007 2 421 502 904
Profit for the six months
ended 30 June 2008
Balance at 30 June 2008 2 421 502 904
Profit for the six months
ended 31 December 2008
IFRS 2 equity reserve relating to share schemes
Currency movement on foreign subsidiary
Balance at 31 December 2008 2 421 502 904
Accumu-
lated
R`000 losses Total
Balance at 1 July 2007 (435 242) 70 083
Profit for the six months
ended 31 December 2007 21 558 21 558
Balance at 31 December 2007 (413 684) 91 641
Profit for the six months
ended 30 June 2008 37 755 37 755
Balance at 30 June 2008 (375 929) 129 396
Profit for the six months
ended 31 December 2008 17 512 17 512
IFRS 2 equity reserve relating to
share schemes 192 192
Currency movement on
foreign subsidiary 27 27
Balance at 31 December 2008 (358 198) 147 127
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
R`000 2008 2007 2008
Profit to ordinary shareholders 17 512 21 558 59 313
Capital profit on disposal
of investments (2 368)
Profit on sale of plant and equipment (15) (26) (46)
Headline earnings 17 497 21 532 56 899
RECONCILIATION OF NORMALISED HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
R`000 2008 2007 2008
Headline earnings 17 497 21 532 56 899
Non-recurring reversal of
finance cost provision 875 (12 276)
Fair value adjustments on
financial instruments 9 463 (2 048) (4 780)
Tax effect of fair
value adjustment (2 650) 573 1 338
Normalised headline earnings* 24 311 20 933 41 181
* Normalised headline earnings are adjusted for non-trading items relating to
financial instruments and MGX legacy issues; these earnings represent the
results of the normal business operations and are included to give clarity to
investors.
Notes:
1. This represents cash received on the interest rate swaps.
2. This is the mark to market change in the fair value of the interest rate
swap contracts held by the group. This is not a cash flow item and is not
regarded as a normal trading item. If the swaps had been able to be hedge
accounted under IFRS, this charge would have gone through reserves. The cash
flow benefit from the swaps amounted to R4,052 million for the six month
period and has totalled R8,222 million over the period of the swaps to date.
This is reflected in a separate line in the income statement and treated as
a credit to interest paid.
3. Goodwill arose from the acquisition of the 35% minority shareholding in
Metrofile (Pty) Limited and is assessed for impairment on an annual basis.
4. This is the current fair value of the interest rate swap contracts at the
interim reporting date.
5. Long-term interest-bearing liabilities include the Metrofile Senior and
Mezzanine loans. Short-term interest-bearing liabilities include the
portions of the Metrofile Senior and Mezzanine loans payable in one year.
All borrowings are JIBAR linked and are approximately 85% hedged by way of
the interest rate swaps (30 June 2008 - 75%).
6. No segmental analysis has been reported as the group traded in only one
segment and only in Southern Africa.
7. All the assets have been pledged as security against certain loans to the
group.
COMMENTARY ON RESULTS
Metrofile Holdings profile
Established in 1983, Metrofile is the market leader in South Africa for on and
off-site records management and information storage. The only company to
provide full end-to-end solutions, Metrofile services customers across all
sectors of the economy.
Metrofile`s extensive range of services enables companies and organisations to
use, store and recycle their records and information quickly, intelligently and
cost effectively - freeing up valuable physical and human resources. Our
services include records management, backup management, image processing, paper
management and an extensive range of information solutions including the supply
and maintenance of scanning and document handling equipment, software
development, online storage, hosting, consultancy and training.
Metrofile Holdings is quoted in the "Support Services - Business Support
Services" sector of the JSE Limited ("JSE").
Strategy
Metrofile is focused on cross selling the group`s diverse offering to both new
and existing customers and the development of additional services that are
aligned with Metrofile`s existing core businesses.
Capacity is being increased to enable the group to meet the growing demand for
its products and services from customers affected by expanded regulatory and
governance obligations and requirements.
Metrofile`s growth strategy incorporates expansion into African countries where
existing customers have a need for similar services to those received in South
Africa. Metrofile has secured business from the Reserve Bank of Uganda and is
pursuing further opportunities within the public sector elsewhere in Africa.
Financial review
Results for the period were satisfactory with revenue increasing by 10% to
R179,7 million and EBITDA increasing by 9% to R58,0 million.
Although Headline earnings per share ("HEPS") reduced by 19% to 4,44 cents, the
more relevant measure is normalised HEPS. These are calculated after adjusting
HEPS for a number of once-off items that arose from the restructure of the old
MGX Group and also for the accounting effects of changes in the fair value of
the interest rate swaps. These changes would have been accounted for through
reserves if hedge accounting had been applied. Normalised HEPS for the period
increased by 16% to 6,17 cents (2007: 5,31 cents).
The group`s gearing has improved due to the reduction in loans and the increase
in reserves. Although cash has reduced by R16 million since 30 June 2008 due
to the investment in further facilities, cash generated by operations remains
strong. Metrofile is in compliance with all its bank covenants and current
projections indicate that the group will continue to meet the payment schedules
as recorded in the six year refinancing agreements concluded in 2006.
Metrofile has chosen to continue to account for the property portfolio on a
cost basis; however it should be noted that valuations are performed on an open
market basis annually. The market valuations performed in June 2008 indicate
that the fair value of the property portfolio is R78,7 million higher than
reflected in the balance sheet.
Growth in capacity
Additional storage facilities were commissioned during the 2008 calendar year.
Investment in new facilities and racking amounted to R29,5 million for the six
month period; however expenditure in this regard will be significantly lower in
the second period.
Accounting policies
Group results have been prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards ("IFRS"),
including IAS 34: Interim Financial Reporting, the requirements of the South
African Companies Act of 1973, as amended, and the Listing Requirements of the
JSE. The same accounting policies and methods of computation were
applied as in the prior year annual financial statements.
Related parties
There have been no changes to the arm`s length consulting agreement with the
Mineworkers Investment Company since the previous financial year. In terms of
the agreement, fees of R0,39 million were paid to the Mineworkers Investment
Company during the period under review (2007: R0,37 million).
Directorate and corporate governance
Mr Keshan Pillay resigned from the board of directors on 10 September 2008. The
board currently comprises two executive and five non-executive directors. An
additional non-executive director will be appointed shortly.
Dividends
No dividends have been declared for the current period. It is not the company`s
intention to declare or pay dividends in the foreseeable future.
Contingent liabilities
During 2006 a number of the group`s employees embarked on an illegal strike.
The matter was scheduled to be heard by the labour court during March 2008,
however the hearing did not go ahead and the company is waiting to hear if the
applicant will take further action.
Commitments
Operating lease commitments amount to R9,7 million for the next five years.
Metrofile (Pty) Limited had planned capital expansions of R50,6 million and
replacement projects of R10,5 million for the 2009 financial year. R35,5
million has been incurred for the six month period whilst R6,9 million has been
committed for the balance of the financial year.
Post-balance sheet events
No events material to the understanding of the report have occurred in the
period between the period end date and the date of this report.
Prospects
The slowdown in the economy is not expected to have any material effect on the
group`s steady growth in EBITDA and in normalised HEPS.
There will, however, be a time lag between the costs incurred for new storage
and service facilities and the returns generated by these facilities. This
will have an effect on this period`s operating margins.
CHRISTOPHER SEABROOKE GRAHAM WACKRILL
Chairman Chief Executive Officer
25 February 2009
Cleveland
Gauteng
Sponsor
Standard Bank
Transfer secretaries
Computershare Investor Services Limited
70 Marshall Street, Johannesburg, 2001
Directors
CS Seabrooke* (Chairman)
AP Nkuna* (Deputy Chairman)
GD Wackrill (CEO)
RM Buttle (CFO)
IN Matthews*
N Medupe*
SR Midlane*
* Non-executive
Company Secretary
LM Thompson
Registered office: 3 Gowie Road, The Gables, Cleveland, Johannesburg
www.metrofile.com
Date: 25/02/2009 17:10:01 Produced by the JSE SENS Department.
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