| Tue 3 Mar 2009, 8:00 | | DGC - DigiCore - Unaudited Interim Group Results For The Six Months Ended 31 |
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DGC - DigiCore - Unaudited Interim Group Results For The Six Months Ended 31
December 2008
DIGICORE HOLDINGS LIMITED
Registration number 1998/012601/06
JSE code: DGC & ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
Unaudited interim group results for the six months ended 31 December 2008
Operating profit margin UP 2%
Attributable earnings UP 13%
Headline earnings per share UP 12%
Commentary
The DigiCore board is satisfied to announce a reasonable performance in most of
our divisions and subsidiaries for the six months ended 31 December 2008.
The Group has managed to increase earnings per share by 12% to 26.3 cents per
share despite a dramatic downturn in the world economy and global new vehicle
sales slowing down during the interim period.
Our South African businesses have performed very well, and compensates to an
extent for the decline in exports. This confirms the importance of the earlier
strategies adopted in geographical, market and product diversification.
It can be seen from the performance of the United Kingdom and European
subsidiaries that they were more affected by the global financial crisis than
our business in South Africa. We have however seen an improvement in European
sales during the first two months of the new year.
Financial Results
Although turnover for the six months decreased by 7% from R309 million to R288
million for the period, we have managed to increase our operating profit margin
by 2% from 25% in 2007 to 27% in 2008.
This is mainly due to higher gross profit percentages achieved on the Groups
annuity based income streams, which now constitute 40% of our total revenue
opposed to 27% in the comparative period.
The revenue for 2007 also included the fulfilment of part of the SAPS tender,
for which no hardware revenue was included in the current reporting period. The
fulfilment of the next order will only be forthcoming in the second half of
the current year.
Cash and cash equivalents decreased from R108.4 million in June 2008 to R38.8
million due to an increase in working capital and investments made (fixed
assets and German subsidiary)
The working capital requirement increased by R52 million in the six months
ended 31 December 2008. This was mainly due to increased stock levels in raw
materials and finished goods being held for expected sales orders during our
annual factory shutdown period, long advance ordering cycles for components and
the slower demand from our distributor in Pakistan. The overstock of components
will be reduced to more acceptable levels in the next few months as we are
currently in the process to supply further units to the SAPS.
Local operations
Besides business from government tenders, the South African fleet management
business performed very well and this afforded us higher gross profit margins,
whilst overhead costs were contained. We have been pro-active in curbing costs
in all areas of the business by creating plans to increase efficiencies and
thus lowering costs per job completed.
We have put an embargo on hiring new employees and have no current intentions
to lay off any of our staff. We will redeploy our staff in our growing SVR
division.
A strategy to make ourselves more visible and accessible to the consumer was
put in place in our C-track (SVR) division by opening our first flagship
C-track fitment centre in Boksburg. Our brand building and other awareness
initiatives will continue as it has proved to have laid the foundation for our
future growth.
Probably our most important achievement in the period has been
that our annuity income in these operations have grown significantly.
Crime in South Africa, including vehicle theft, will probably not decline in
the current economic and political situation. We are well placed to assist the
public and insurance companies to retrieve their stolen vehicles due to our
higher than 90% recovery rate. The launch of our new low-cost C-track Insure in
October 2008 introduces a new product at a price affordable to all vehicle
owners.
International operations
The total number of units exported has declined by 60% compared to last year.
This reduction is mainly due to the unstable political and economic situation
in Pakistan. However these sales, mainly to the SVR market, were at low margins
and the decrease has therefore not affected our profitability in the same
proportion.
Fleet management unit sales to Europe and UK are also substantially lower than
last year. This is as a result of the previous reporting period including a
large number of units for a tender in the UK which has not been Share of
recognised income and expenses repeated in the current reporting period.
However, as in the case of Pakistan, these sales were at lower margins,
accordingly the decrease in profit has not been proportional.
Some good news is that unit sales to Nigeria grew by 68% for the period.
Coincidentally, unit sales to Malaysia and Indonesia also grew by 68%, although
from a low base.
In the current reporting period we concluded a deal to purchase the final 50%
shareholding in DigiCore Deutschland, which now becomes a wholly owned
subsidiary.
The future
The board is confident that we will have an improved second half of the
financial year. We trust that we will continue the roll out of units on
existing tenders in the second half of the year which should boost our Group
Services performance. We are further cautiously optimistic that additional
tenders will be won.
The fact that we own 100% of our Germany distributor and have opened our own
office in France will allow us to grow these markets more rapidly in the next
eighteen months.
We are also excited about our SVR business locally and internationally
and intend to establish DigiCore as a global competitor in this market.
New products and applications to be launched shortly also give us the
confidence that we can maintain our position in the global market.
In conclusion, our management teams across the group remain very positive that
we can weather the current economic storms. Our strategy will be to cut costs
without affecting longer term growth, preserve cash and seek opportunities
developing due to the economic downturn in terms of new markets and possible
acquisitions.
For and on behalf of the board
NA Gasa NH Vlok
Chairman Chief Executive Officer
3 March 2009
Abridged Consolidated Balance Sheet
As at As at As at
31 Dec 2008 31 Dec 2007 30 Jun 2008
R`000 R`000 R`000
(Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 268 662 163 582 222 199
Property, plant and equipment 86 948 46 177 50 053
Intangible assets - Goodwill 159 611 108 874 156 917
Investments 10 891 2 903 3 506
Deferred tax 11 212 5 628 11 723
Current assets 331 750 286 110 401 935
Inventories 102 077 88 050 89 974
Trade and other receivables 190 845 150 607 198 059
Current tax receivable 5 496
Cash and cash equivalents 38 828 47 453 108 406
Total assets 600 412 449 692 624 134
Equity and liabilities
Capital and reserves 492 906 343 345 464 756
Equity attributable to ordinary
shareholders 480 808 331 404 455 124
Share capital and premium 62 920 52 322 44 635
Distributable reserves 40 671 7 553 59 043
Retained income 377 217 271 529 351 446
Minority interest 12 098 11 941 9 632
Non-current liabilities 47 573 22 272 27 321
Interested bearing borrowings 47 573 22 272 26 809
Deferred tax - - 512
Current liabilities 59 933 84 075 132 057
Current portion of long-term
borrowings 9 408 5 446 6 998
Provisions and accruals 9 049 8 769 20 060
Taxation 8 180 18 423 19 374
Trade and other payables 33 296 51 437 85 625
Total liabilities 600 412 449 692 624 134
Net asset value per share
(cents) 223.4 155.0 212.8
Abridged Consolidated Income Statement
Six months
ended
31 Dec 2008 %
R`000 (Unaudited) growth
Revenue 287 873 (7)
Cost of sales and operating expenses 209 028
Net operating profit for the period 78 845
Investment income 1 785
Finance costs (719)
Net income from equity accounted
investments -
Profit before taxation 79 911 2
Income tax expense (23 198)
Net profit after tax 56 713 6
Attributable to:
Minority interest 2 466
Equity holders of the parent 54 247 13
Number of ordinary shares in issue (`000) 215 264
Weighted average number of ordinary
shares in issue (`000) 206 180
Fully diluted number of ordinary
shares in issue (`000) 217 669
Basic earnings per share (cents) 26.3 12
Headline earnings per share (cents) 26.0 12
Fully diluted earnings per share (cents) 24.9 11
Fully diluted headline earnings per share
(cents) 24.7 11
Interim dividend per share (cents) 6.0
Final dividend per share (cents)
Reconciliation between basic to
headline earnings:
Attributable earnings 54 247
Profit on disposal of fixed asset (560)
Headline earnings 53 687 13
Six months Year
ended ended
31 Dec 2007 30 Jun 2008
R`000 (Unaudited) (Audited)
Revenue 309 246 684 790
Cost of sales and operating expenses (230 641) (480 688)
Net operating profit for the period 78 605 204 102
Investment income 790 3 016
Finance costs (1 353) (4 123)
Net income from equity accounted
investments - 128
Profit before taxation 78 042 203 123
Income tax expense (24 457) (56 875)
Net profit after tax 53 585 146 248
Attributable to:
Minority interest 5 777 5 768
Equity holders of the parent 47 808 140 480
Number of ordinary shares in issue (`000) 213 865 213 865
Weighted average number of ordinary
shares in issue (`000) 203 444 204 527
Fully diluted number of ordinary
shares in issue (`000) 213 865 218 676
Basic earnings per share (cents) 23.5 68.7
Headline earnings per share (cents) 23.3 64.7
Fully diluted earnings per share (cents) 22.4 64.2
Fully diluted headline earnings per share
(cents) 22.2 60.5
Interim dividend per share (cents) 6.0 6.0
Final dividend per share (cents) 13.0
Reconciliation between basic to
headline earnings:
Attributable earnings 47 808 140 480
Profit on disposal of fixed asset (423) (8 210)
Headline earnings 47 385 132 270
Abridged Consolidated Cashflow Statement
Six months Six months Year
ended ended ended
31 Dec 2008 31 Dec 2007 30 June 2008
R`000 (Unaudited) (Unaudited) (Audited)
Cash flows from operating
activities (36 315) 8 937 82 277
Cash generated from operating
activities 19 991 50 011 179 920
Net investment income 1 066 (563) (1 341)
Tax paid (28 896) (22 772) (65 808)
Dividends paid (28 476) (17 739) (30 494)
Cash flows from
investing activities (56 350) (12 453) (24 361)
Cash flows from financing
activities 23 087 (8 274) (8 753)
(Decrease)/increase in cash
and cash equivalents
for the period (69 578) (11 790) 49 163
Cash and cash equivalents at
the beginning
of the period 108 406 59 243 59 243
Cash and cash equivalents at
end of the period 38 828 47 453 108 406
Statement of changes in equity
Six months Six months Year
ended ended ended
31 Dec 2008 31 Dec 2007 30 June 2008
Share capital and premium
Share capital and premium at
the beginning of the period 44 635 13 368 13 368
Movement in Treasury shares (251) 219 (49 976)
Arising on shares issued for
the share trust - - 42 508
Arising on shares issued for
purchase of Digicore Ltd 18 536 - -
Arising on shares issued for
purchase of
Digicore Europe BV - 38 735 38 735
Share capital and premium at
the end of the period 62 920 52 322 44 635
Distributable reserves
Foreign currency translation
reserve
Balance at beginning of period 15 602 1 822 1 822
Arising during current period 749 3 326 13 780
Balance at end of period 16 351 5 148 15 602
Equity-settled share-based
payment reserve
Balance at beginning of period 5 200 711 711
Employee share option scheme - - (637)
Arising during current period - 1 694 5 126
Balance at end of period 5 200 2 405 5 200
Equity instrument to be issued
Balance at beginning of period 38 241 - -
Shares to be issued in respect
of Digicore Ltd
transaction (19 121) - 38 241
Balance at end of period 19 120 - 38 241
Distributable reserves at end
of period 40 671 7 553 59 043
Retained Income
Retained income at the
beginning of period 351 446 241 460 241 460
Movement in attributable
earning during the period 54 247 47 808 140 480
Dividends aid during the period (28 476) (17 739) (30 494)
Retained income at the end of
the period 377 217 271 529 351 446
Minority Interest
Balance at beginning of period 9 632 6 164 6 164
Movement through business
combinations - - (2 300)
Share of recognised income and
expenses 2 466 5 777 5 768
Minority interest at the end
of the period 12 098 11 941 9 632
Segmental Report
R`000 31 Dec 2008 31 Dec 2007 30 June 2008
Revenue
SA Distribution 190 207 171 262 431 498
Foreign Distribution 79 293 99 733 197 321
Product development and
manufacturing 99 960 140 691 294 120
Group Services 4 390 1 753 15 254
373 850 41 339 938 193
Elimination (85 977) (104 193) (253 403)
287 873 309 246 684 790
Operating profit
SA Distribution 30 214 20 495 43 307
Foreign Distribution 16 466 22 584 50 624
Product development and
manufacturing 35 023 39 838 99 663
Group Services (2 858) (6 012) 10 508
Net finance costs 1 066 1 137 (1 107)
Income from equity accounted
investments - - 128
Profit before taxation 79 911 78 042 203 123
Notes to the abridged financial statements
1. Basis of preparation and accounting policies
The condensed consolidated interim financial statements set out in this report
have been prepared in accordance and comply with International Financial
Reporting Standards and are presented in terms of disclosure requirements set
out in IAS 34 - Interim Financial Reporting, the Companies Act, 1973 (as
amended) and the JSE Limited Listings Requirements.
The interim financial statements are based on appropriate accounting policies,
consistently applied with those used in the Annual financial statements for the
year ended 30 June 2008, which are supported by reasonable and prudent
judgements and estimates.
These interim financial results have not been audited or reviewed.
2. Property, plant and equipment
The significant growth in property, plant and equipment is due to the purchase
of new premises to replace the Head Office which was expropriated last year.
The total purchase price of the buildings is R34.6 million.
A bond facility of R30 million with Absa Bank is in place to part fund the
purchase of the buildings.
3. Goodwill
Goodwill during the year increased by R39.9 million through the purchase of the
49.9% shareholding in DigiCore Limited from minorities. A further R9.6 million
increase relates to the revaluation of the goodwill reported in foreign
currency held in DigiCore Europe BV.
4. Share capital, share premium and reserves
During the reporting period 1 398 843 shares were issued as part payment after
the profit warranty for the DigiCore Limited share purchase from minorities was
met for the year ended 30 June 2008.
The equity reserve was reduced by R19.1million during the reporting period as a
result of the issue of the shares for the profit warranty being met.
The balance of the 2 405 078 shares that were issued were repurchased in the
market.
5. Income tax expense
The effective tax rate of 29% (2007: 31%) includes a Secondary Tax on Companies
(STC) charge on the final and interim dividends declared and paid during the
years ended 30 June 2008 and 30 June 2007.
6. Earnings per share
The difference between the total number of shares in issue and the weighted
number of shares in issue relates to treasury shares, held by the share trust
for share options given to employees that will convert in the future and
treasury shares bought back to be re-issued subsequent to year-end as part
payment for the DigiCore Deutschland vendor liabilities, as well as, shares
issued during the reporting period in part payment for the purchase of the
balance of shareholding in DigiCore Ltd (UK) from the minorities.
Post-balance sheet events
The acquisition and issuing of the shares for the acquisition of the remaining
50% shareholding in DigiCore Deutschland from the minorities was only finalized
after the period end.
Except for the matter mentioned above, there have been no significant events
subsequent to year-end and up to the date of this report, that would require
adjustment or further disclosure.
Corporate Governance
The group endorses the Code of Corporate Practice and Conduct as set out in the
King Committee Report on Corporate Governance in South Africa (2002).
Nature of business
DigiCore is a leading provider of innovative Mobile Asset Tracking, Management
and Information Solutions for vehicle owners, globally.
We supply superior vehicle tracking solutions ranging from a basic track and
trace product used to recover stolen vehicles (although still being interactive
with the client), to complete integrated enterprise level solutions for large
fleet owners such as the Royal Mail (UK), the South African Police Service,
eThekwini Metro, BHP Billiton (global) and many others.
Board of directors
Prof Ben Marx joined the board of directors on 3 November 2008 as an
independent non-executive director.
He has also been appointed as the Chairman of the audit and risk committee.
Dividend announcement
In line with company policy, the board has declared an interim dividend of 6
cents per share (2007: 6 cents per share).
Payment will be made on Monday, 30 March 2009 to shareholders recorded in the
register on Friday, 27 March 2009. The last day to trade to qualify for the
dividend will be Friday, 20 March 2009 and the shares will be traded
ex-dividend from Monday, 23 March 2009.
Share certificates may not be dematerialised or rematerialised between Monday,
23 March 2009 and Friday, 27 March 2009.
Registered office
DigiCore Building, Regency Office Park
9 Regency Drive, Route 21 Corporate Park
Irene Ext 30, Centurion, South Africa
(PO Box 68270, Highveld Park, 0169)
Tel: +27 12 450 2222 Fax: +27 12 450 2497
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor
PSG Capital (Pty) Limited
Auditors
PKF (Pta) Incorporated
Directorate
NA Gasa* (Chairman), NH Vlok (Chief Executive Officer), SR Aberdein,
D du Rand, BC Esterhuyzen*, BS Khuzwayo*, B Marx*, SS Ntsaluba*,
BJ Richards#, MD Rousseau, FJ SchindehA1/4tte
* Non-executive # British
Company secretary
DA Nieuwoudt
Website
www.digicore.com
www.ctrack.com
Date: 03/03/2009 08:00:05 Produced by the JSE SENS Department.
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