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MMG
MMG
MMG - Micromega - Abridged Audited Group Results For The Year Ended
31 December 2008
MICROmega Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/003821/06)
Share code: MMG & ISIN: ZAE000034435
("Micromega" or "the Company")
ABRIDGED AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
- Increase In Revenue 75%
- Increase in Earnings Per Share 49%
- Increase In Net Asset Value Per Share 30%
- Increase In Net Cash from Operating Activities 73%
ABRIDGED GROUP INCOME STATEMENT
Audited Audited
year year
ended ended
31 December 31 December
2008 2007
R(`000) R(`000)
Revenue 843 772 483 174
Revenue from continuing operations 703 045 483 174
Revenue from discontinued operations 140 727 -
Cost of sales (573 043) (312 073)
Gross profit 270 729 171 101
Gross profit from continuing operations 217 706 171 101
Gross profit from discontinued operations 53 023 -
Other income 31 011 5 784
Other expenses (230 623) (122 531)
Operating profit 71 117 54 354
Net finance income 4 280 1 798
Share of profits / (losses) of associates 99 (162)
Profit before taxation 75 496 55 990
Profit before taxation from continuing operations 71 775 55 990
Profit before taxation from discontinued operations 3 721 -
Taxation expense (13 570) (14 400)
Profit for the year 61 926 41 590
Profit for the year from continuing operations 57 519 41 590
Profit for the year from discontinued operations 4 407 -
Attributable to:
Ordinary shareholders 60 241 40 401
Minority shareholders 1 685 1 189
Reconciliation of headline earnings
Net profit attributable to ordinary shareholders 60 241 40 401
Profit on disposal of property,
plant and equipment (101) (114)
Profit on disposal of listed investments - (464)
Reversal of impairment of (88) -
property, plant and equipment
Income from write off of loan accounts - (77)
Profit on sale of subsidiary - (2 559)
Impairment of intangible assets - 122
Impairment of investments - 32 500
Reversal of impairment of loan - (28 959)
Negative goodwill 2 (20 820) -
Headline earnings 39 232 40 850
Headline earnings per share (cents) 40.26 41.91
Attributable earnings per share (cents) 61.82 41.45
Fully diluted earnings per share (cents) 61.35 40.96
Weighted average number of shares (000`s) 97 438 97 464
Fully diluted weighted average number of 98 198 98 644
shares (000`s)
Total number of shares in issue (000`s) 99 145 98 145
ABRIDGED GROUP BALANCE SHEET
Audited Audited
as at as at
31 December 31 December
2008 2007
R(`000) R(`000)
ASSETS
Non-current assets
Property, plant and equipment 55 181 25 197
Intangible assets 64 468 59 762
Investments 12 264 8 099
Loans receivable 349 3 720
Deferred tax assets 12 392 7 907
Total non-current assets 144 654 104 685
Current assets
Inventories 91 059 39 278
Retirement benefits 17 971 -
Derivative asset - 186
Trade and other receivables 124 564 81 668
Current portion of loans receivable 689 168
Cash and cash equivalents 30 365 52 640
Non-current assets held for sale 30 699 -
Total current assets 295 347 173 940
TOTAL ASSETS 440 001 278 625
EQUITY AND LIABILITIES
Equity
Share capital and premium 191 649 194 120
Non-distributable reserves 5 664 4 945
Retained earnings/(accumulated loss) 50 597 (9 644)
Total equity attributable to equity holders of
the company 247 910 189 421
Minority interest 12 338 4 262
Total equity 260 248 193 683
Non-current liabilities
Borrowings 8 789 5 812
Deferred tax liabilities 7 491 1 324
Total non-current liabilities 16 280 7 136
Current liabilities
Bank overdraft 13 025 1 345
Trade and other payables 117 773 57 886
Derivative liability 282 -
Provisions 64 450
Current portion of borrowings 23 791 12 257
Taxation payable 8 538 5 868
Total current liabilities 163 473 77 806
TOTAL EQUITY AND LIABILITIES 440 001 278 625
Net asset value per share (cents) 250.00 193.00
Net tangible asset value per share (cents) 185.02 132.10
ABRIDGED GROUP CASH FLOW STATEMENT
Audited Audited
year year
ended ended
31 December 31 December
2008 2007
R(`000) R(`000)
Cash generated by operations 64 768 56 696
Movement in working capital (8 172) (17 748)
Net finance income 4 280 1 705
Dividends received - 6
Taxation paid (13 644) (13 396)
Net cash generated from operating activities 47 232 27 263
Net cash utilised in investing activities (42 540) (33 739)
Treasury shares (repurchased)/ sold (6 113) 2 550
Deferred vendor loans (repaid)/ raised (3 435) 1 825
Loans repaid (29 099) (2 265)
Net cash (utilised in)/ generated from
financing activities (38 647) 2 110
Net decrease in cash and cash
equivalents (33 955) (4 366)
Represented as follows:
Cash and cash equivalents at beginning of the year 51 295 55 661
Cash and cash equivalents at end of the year 17 340 51 295
Net decrease in cash and cash
equivalents (33 955) (4 366)
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Share- Revalu- Foreign Deal (Accum-
capital premium based ation currency diffe- ulated
payment reserve transla- rences loss) /
reserve tion reserve retain-
reserve ed ear-
nings
R(`000) R(`000) R(`000) R(`000) R(`000) R(`000) R(`000)
Balance at 1 963 187 168 806 1 793 - - (49 045)
January 2007
Foreign currency 2
Translation diff-
erences
Revaluation of 697
property, plant
and equipment net
of deferred tax
Creation of non- 1 000 (1 000)
distributable re-
serve for deal
differences
Issue of share 12 3 391
capital
Share issue (9)
costs
Treasury shares 7 2 543
sold
Share-based
Payments 45 647
Recognised direc- 19 5 970 647 697 2 1 000 (1 000)
tly in equity
Profit for 40 401
the year
Balance at 31 982 193 138 1 453 2 490 2 1 000 (9 644)
December 2007
Balance at 1 982 193 138 1 453 2 490 2 1 000 (9 644)
January 2008
Foreign currency (23)
translation
differences
Deferred tax effect (102)
on revaluation of
property, plant
and equipment
Business
combinations
Issue of share 16 3 543
capital
Share issue (12)
costs
Treasury shares (27) (6 086)
purchased
Share-based 95 844
payments
Recognised direc- (11) (2 460) 844 (102) (23) - -
tly in equity
Profit for 60 241
the year
Balance at 31 971 190 678 2 297 2 388 (21) 1 000 50 597
December 2008
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY CONTINUED
Total Minori- Total
Attrib- ty int- Equity
utable erest
to ord-
nary
share-
holders
R(`000) R(`000) R(`000)
Balance at 1 141 685 3 073 144 758
January 2007
Foreign currency 2 2
Translation diff-
erences
Revaluation of 697 697
property, plant
and equipment net
of deferred tax
Creation of non- - -
distributable re-
serve for deal
differences
Issue of share 3 403 3 403
capital
Share issue (9) (9)
costs
Treasury shares 2 550 2 550
sold
Share-based 692 692
payments
Recognised direc- 7 335 7 335
tly in equity
Profit for 40 401 1 189 41 590
the year
Balance at 31 189 421 4 262 193 683
December 2007
Balance at 1 189 421 4 262 193 683
January 2008
Foreign currency (23) (23)
translation diff-
erences
Deferred tax (102) (102)
effect on
revaluation of
property, plant
and equipment
Business 6 391 6 391
combinations
Issue of share 3 559 3 559
capital
Share issue (12) (12)
costs
Treasury shares (6 113) (6 113)
purchase
Share-based 939 939
payments
Recognised direc- (1 752) 6 391 4 639
tly in equity
Profit for 60 241 1 685 61 926
the year
Balance at 31 247 910 12 338 260 248
December 2008
NOTES TO THE ABRIDGED GROUP FINANCIAL INFORMATION
1. Basis of preparation
The condensed consolidated financial results for the year ended 31 December 2008
have been prepared in compliance with the JSE Listing Requirements,
International Financial Reporting Standards (IFRS) as published by the
International Accounting Standards Board and the Companies Act of South Africa,
1973, as amended.
These consolidated financial results are in compliance with the International
Accounting Standard (IAS) 34 Interim Financial Reporting.
The accounting policies applied in the presentation of the Financial Results are
consistent with those for the year ended 31 December 2007 except for the early
adoption of the revisions to IFRS 3 and the amendments to IAS 27 during the
current year.
These condensed consolidated financial results have been prepared in accordance
with the historic cost convention, except for certain financial instruments
which are stated at fair value.
All information presented in rand has been rounded to the nearest thousand.
2. Negative goodwill
Negative goodwill arose as a result of the acquisition of two subsidiaries
namely Kolbenco (Proprietary) Limited and Ocneblok Properties (Proprietary)
Limited. The negative goodwill has been recognised in the income statement as
per IFRS 3 - Business combinations. The negative goodwill has been removed from
the calculation of headline earnings as per IAS 33 - Earnings per share.
3. Acquisition of businesses
During the current year the Group acquired the entire issued share capital of
Kolbenco (Proprietary) Limited, Essential Power Services (Proprietary) Limited,
NOSA Namibia (Proprietary) Limited and Redback Vehicle Parts and Accessories
(Proprietary) Limited. It further acquired 50% of the issued share capital of
Ocneblok Properties (Proprietary) Limited and Empowerisk (Proprietary) Limited.
Fair value of assets acquired
Total assets acquired 118 365
Total liabilities acquired (87 908)
Net assets acquired 30 457
Goodwill 4 923
Negative goodwill (20 820)
Purchase consideration 14 560
Add overdraft acquired 8 187
Less settlement not in cash (4 605)
Net cash outflow on acquisition 18 142
If the operating results of these businesses had been consolidated for the
entire year then revenue would have increased by R13 636 000 with a decrease in
profit after taxation of R700 000.
4. Commentary on results
MICROmega Holdings Limited is an investment holding company that has over the
past five years diversified its investment portfolio into four sectors namely;
automotive, financial, information technology and support services. This
diversification program has served the group well and whilst this year has come
with its challenges we are pleased to report that over the past five years the
group has enjoyed the following compounded growth:
Five year compounded growth in revenue: 77%
Five year compounded growth in earnings per share: 38%
Five year compounded growth in net asset value per share: 29%
Five year compounded growth in cash generated from operating activities:
73%
As an investment holding company earnings growth is derived through the
structuring and execution of corporate transactions and the return achieved from
these investments. We are extremely satisfied to report an increase in earnings
growth from these activities of 49% for the year.
Whilst we did not achieve an increase in our headline earnings, this came as no
surprise, as it was primarily attributed to the establishment of four new
businesses in our information technology sector, and a slow-down in profits from
two of our automotive businesses.
In summary we are pleased to have created shareholder value and this is well
demonstrated in the 30% growth in net asset value to R2.50 a share.
During the period under review, the appointment of a financial director was
secured effective 1 January 2009. Due to changing circumstances this appointment
was revised and Mr. D. Carlisle was appointed during the month of March this
year.
Automotive
The businesses within this sector are:
- Automobile Radio Dealers Association;
- BTM Manufacturing;
- Deltec Power Distributors;
- Essential Power Services;
- Kolbenco;
- Lubrication Equipment; and
- Redback Vehicle Parts and Accessories
The revenue of the automotive sector increased by 97% when compared to the prior
year. This was due to acquisitions that were made in the early part of the year
together with acquisitions in 2007 that are now included in the results for the
entire year. This sector contributed 22% to total headline earnings. We remain
well diversified in this sector and whilst there has been a dramatic decrease in
new vehicle sales we have been partly shielded from the direct impact of this as
a significant portion of our sales efforts are directed at the aftermarket which
has been less affected than the original equipment market.
Kolbenco (Proprietary) Limited, which is South Africa`s last piston
manufacturer, was acquired by the Group in February 2008. Piston sales have
dramatically decreased due to the drop in the number of new vehicles being
manufactured. As a result of this, the board of directors decided to close the
manufacturing operation of Kolbenco at 31 December 2008. This has not had a
negative impact on the financial performance of the Group for the year.
We still remain focused on diversification within this sector and despite the
difficult market conditions we anticipate good growth out of the existing
operations within this sector. Significant progress has been made in enhancing
our distribution capabilities which should start to deliver greater returns in
2009.
Information Technology
The businesses within this sector are:
- Intermap;
- MICROmega Revenue Management Solutions;
- MICROmega Technologies;
- SaleScience;
- Sciam Professional Solutions;
- Sebata Municipal Solutions; and
- Stable-Net
The revenue of this sector increased by 43% for 2008 when compared to the prior
year. This was primarily as a result of greater procurement by the public
sector within Southern Africa. This sector contributed 20% to total headline
earnings. All the businesses operating in the public sector market managed to
grow their existing customer bases through the supply of services and products
at both local and provincial level. We expect the growth to continue in these
areas as our service offerings continue to be on the leading edge of market
innovations and legislative changes.
Start-up businesses in this sector gained momentum during the year and whilst
they contributed losses to the Group results for 2008 we are confident of a
significant improvement in performance during 2009.
Support services
The businesses within this sector are:
- NOSA
- EmpoweRisk
- NQA Africa; and
- MECS Africa
Support services` revenue increased by a substantial 89% during 2008. The growth
in revenue was organic and was due to strong demand for the products and
services of the two main businesses within the sector, namely MECS Africa and
NOSA. The sector`s contribution to Group headline earnings amounted to 40%, up
from 30% in 2007. NOSA is the largest provider of occupational risk management
services in Africa and is well positioned to take advantage of the increased
pressure on companies to comply with legislation, particularly in the mining
sector. NOSA`s training and auditing products, which are statistically proven
to reduce a company`s injury rates, are recognized internationally and NOSA is
expecting further strong growth in earnings during 2009. MECS Africa, which
provides labour broking services, benefited from the securing of a number of new
contracts in the petrochemical and mining industries both in South Africa and
Africa. Whilst revenue is likely to come under pressure in 2009, given the
pressure on the mining industry, MECS is well positioned to support ongoing
demand for skills in the petrochemical industry both in South Africa and Angola.
Financial Services
The businesses within this sector are:
MICROmega Securities; and
MICROmega Africa Money Brokers
MICROmega Securities experienced a 17% increase in revenue and accounted for 18%
of the Group`s headline earnings. MICROmega Securities is a voice and electronic
interdealer broker in the financial markets and benefits from deal flow between
the commercial and investments banks. Accordingly, given the impact of the
global financial crisis, trade volumes have declined however these are expected
to increase towards the middle of 2009. In addition, the establishment of
MICROmega Africa Money Brokers during 2008 will improve the company`s earnings
mix and will place less reliance on the South African market going forward.
Forecast
We remain confident that we will continue to enjoy similar rates of growth both
in our balance sheet strength and operating account in 2009.
The operating investment we made in 2008 to establish our four new information
technology companies will give us a positive return in 2009, and we are
cautiously confident that we have underpinned the economic impact that the
decline in global automotive sales could have on those businesses adversely
affected in 2008.
Report of the auditors
KPMG Inc`s unmodified audit report on 31 December 2008 summarised
financial statements contained herein is available for inspection at the
company`s registered office.
By order of the Board
Directors: IG Morris (Chairman), DM Carson (Non-Executive), PV Henwood (Non-
Executive), RC Lewin (Non-Executive), JE Newbury (Non-
Executive)
Company Secretary: DJ Case
Auditors: KPMG Inc.
Transfer Secretaries: Computershare Investor Services (Pty) Ltd
Sponsor Broker: Investec Bank Limited
Attorneys: Routledge Modise
30 March 2009
Sponsor: Investec Bank Limited
Date: 30/03/2009 17:47:50 Produced by the JSE SENS Department.
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