| Tue 28 Apr 2009, 7:05 | | CVN - ConvergeNet Holdings Limited and its subsidiaries - Unaudited interim |
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CVN
CVN
CVN - ConvergeNet Holdings Limited and its subsidiaries - Unaudited interim
results for the 6 months ended 28 February 2009
ConvergeNet Holdings Limited and its subsidiaries
(Registration number 1998/015580/06)
JSE code: CVN ISIN: ZAE000102067
Unaudited interim results for the 6 months ended 28 February 2009
Condensed group income statement for the 6 months ended 28 February 2009
Restated
Unaudited Unaudited Audited
6 months 6 months year
28 Feb 29 Feb 31 Aug
R`000 2009 2008 2008
Continuing operations
Revenue 551 325 423 923 918 829
Earnings before interest, tax,
depreciation and amortisation
charges (EBITDA) 52 026 59 065 116 976
Depreciation and amortisation charges (4 552) (3 372) (7 414)
Operating profit 47 474 55 693 109 562
Financial income 2 951 1 235 3 769
Share of profit of associates 1 175 - 2 636
Finance costs (986) (313) (860)
Profit before tax 50 614 56 615 115 107
Income tax expense (12 179) (16 423) (31 111)
Profit for the period from continuing
operations 38 435 40 192 83 996
Loss for the period from discontinued
operations (670) (1 456) (2 304)
Profit for the period 37 765 38 736 81 692
Attributable to:
Equity holders of the parent 23 179 17 772 42 242
Minority interests 14 586 20 964 39 450
37 765 38 736 81 692
Earnings per share
From continuing and discontinued operations
Basic earnings per ordinary share (cents) 2.84 2.66 6.16
Diluted earnings per ordinary share (cents) 2.82 2.66 6.12
Headline earnings per ordinary share (cents) 2.71 2.66 6.19
Diluted headline earnings per ordinary share
(cents) 2.69 2.66 6.15
From continuing operations
Basic earnings per ordinary share (cents) 2.87 2.84 6.42
Diluted earnings per ordinary share (cents) 2.84 2.84 6.38
Headline earnings per ordinary share (cents) 2.73 2.84 6.45
Diluted headline earnings per ordinary share
(cents) 2.71 2.84 6.41
Calculation of headline earnings
Profit attributable to equity holders
of the parent 23 179 17 772 42 242
Profit on disposal of assets (8) (4) (46)
Profit on disposal of subsidiary (2 090) - -
Loss on disposal of associate 116 - -
Goodwill adjustment and impairment - - 423
Portion attributable to minorities 868 - (185)
Headline earnings 22 065 17 768 42 434
Weighted average number of shares 815 218 619 667 857 629 685 855 777
Diluted weighted average number of
shares 821 518 619 667 857 629 690 222 444
Condensed group balance sheet as at 28 February 2009
Restated
Unaudited Unaudited Audited
as at as at as at
28 Feb 29 Feb 31 Aug
R`000 2009 2008 2008
ASSETS
Non-current assets
Property, plant and equipment 26 030 15 485 22 570
Goodwill 267 781 159 110 150 500
Intangible assets 17 030 21 580 19 337
Investments in associates 2 069 - 2 610
Deferred tax 12 244 3 002 7 114
325 154 199 177 202 131
Current assets
Inventories 51 239 18 479 19 337
Assets held for sale - 195 534
Loans to subsidiaries, associates and
other related parties 8 284 434 494
Other financial assets 19 525 13 229 12 751
Current tax receivable 1 093 126 968
Trade and other receivables 273 526 211 707 200 129
Cash and cash equivalents 85 014 67 918 88 155
438 681 312 088 322 368
TOTAL ASSETS 763 835 511 265 524 499
EQUITY AND LIABILITIES
Total equity
Equity attributable to equity holders
of parent 414 626 220 750 246 330
Minority interest 90 668 58 627 64 600
505 294 279 377 310 930
Liabilities
Non-current liabilities
Vendors for acquisition 1 512 - 1 512
Other financial liabilities 7 181 3 334 7 351
Finance lease obligation 1 968 2 325 1 264
Operating lease liability 26 14 72
Deferred tax 5 568 7 733 6 087
16 255 13 406 16 286
Current liabilities
Vendors for acquisition 17 381 - -
Liabilities in disposal groups held
for sale - 980 2 167
Loans from subsidiaries, associates and
other related parties 11 3 665 3 095
Other financial liabilities 5 566 599 3 062
Current tax payable 31 551 30 566 27 661
Finance lease obligation 634 497 1 044
Provisions 2 983 2 072 8 228
Trade and other payables 175 911 180 081 151 925
Bank overdraft 8 249 22 101
242 286 218 482 197 283
Total liabilities 258 541 231 888 213 569
TOTAL EQUITY AND LIABILITIES 763 835 511 265 524 499
Net asset value per share (cents) 47.9 31.7 33.6
Net tangible asset value per share (cents) 15.0 5.8 10.4
Total number of shares 865 631 298 695 971 039 733 293 261
Condensed group cash flow statement for the 6 months ended 28 February 2009
Restated
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 29 Feb 31 Aug
R`000 2009 2008 2008
Operating activities
Cash from operating activities 14 876 35 375 76 419
Finance income 2 951 1 235 3 800
Finance costs (986) (390) (1 018)
Tax paid 25 562) (10 758) (35 301)
Net cash (used in)/from operating
activities (8 721) 25 462 43 900
Net cash from/(used in) investing
activities 4 489 (9 485) (9 372)
Net cash used in financing activities (7 057) (2 619) (1 012)
Net (decrease)/increase in cash and cash
equivalents (11 289) 13 358 33 516
Cash at the beginning of the year 88 054 54 538 54 538
Total cash at end of the year 76 765 67 896 88 054
Condensed group statement of changes in equity for the 6 months ended 28
February 2009
R`000 Total
attributable
Share Trans- to equity
capital Re- Revalua- actions holders
and Treasury tained tion with of the Minority Total
premium shares earnings reserve minorities parent interest equity
Balance at 31 August 2007 - Restated
129 088 - (12 574) - - 116 514 37 916 154 430
Profit for the period
- - 17 772 - - 17 772 20 964 38 736
Expenses recognised directly in equity
(199) - - - - (199) - (199)
Dividends to minorities
- - - - - - (650) (650)
Transactions with minorities
13 287 - - - - 13 287 - 13 287
Acquisition of businesses
73 376 - - - - 73 376 2 467 75 843
Balance at 29 February 2008 - Restated
215 552 - 5 198 - - 220 750 60 697 281 447
Profit for the period
- - 24 470 - - 24 470 18 486 42 956
Issue of shares for cash
2 060 - - - - 2 060 - 2 060
Issue of treasury shares in terms of forfeitable share plan
- 2 795 - - - 2 795 - 2 795
Expenses recognised directly in equity
(303) - - - - (303) - (303)
Dividends to minorities
- - - - - - (4 094) (4 094)
Transactions with minorities
24 000 - - - (27 573) (3 573) (10 763)(14 336)
Revaluation reserve
- - - 131 - 131 274 405
Balance at 31 August 2008
241 309 2 795 29 668 131 (27 573) 246 330 64 600 310 930
Profit for the period
- - 23 179 - - 23 179 14 586 37 765
Issue of treasury shares in terms of forfeitable share plan
- 2 581 - - - 2 581 - 2 581
Expenses recognised directly in equity
(389) - - - - (389) - (389)
Dividends to minorities
- - - - - - (4 100) (4 100)
Transactions with minorities
- - - - - - 328 328
Acquisition of businesses
142 925 - - - - 142 925 15 254 158 179
Balance at 28 February 2009
383 845 5 376 52 847 131 (27 573) 414 626 90 668 505 294
Condensed group segmental analysis for the 6 months ended 28 February 2009
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 29 Feb 31 Aug
R`000 2009 2008 2008
Revenue
Support services 58 281 59 160 99 485
Hardware and software products 140 396 105 628 296 430
Infrastructure technologies 317 683 248 258 482 390
Telecoms 26 552 8 087 34 008
Corporate and other 8 413 2 790 6 516
551 325 423 923 918 829
Operating profit
Support services 9 794 12 892 23 868
Hardware and software products 2 033 8 470 32 361
Infrastructure technologies 26 165 38 902 47 111
Telecoms 11 674 3 177 11 501
Corporate and other (2 192) (7 748) (5 279)
47 474 55 693 109 562
Commentary
1. Basis of presentation
These condensed consolidated financial results for the six months ended 28
February 2009 are prepared in accordance with International Financial
Reporting Standards (IFRS), IAS34, Interim Financial Reporting, the Listings
Requirements of the JSE Limited, and the South African Companies Act, 1973 as
amended.
2. Accounting policies
The unaudited results for the six months ended 28 February 2009 have been
prepared in accordance with the group`s accounting policies which comply with
IFRS and are consistent with those applied in preparation of the group`s
audited annual financial statements for the year ended 31 August 2008.
3. Comparative figures
The initial accounting for business combinations in the previous financial
period have only been completed after 29 February 2008 as the independent
valuations of intangible assets relating to business combinations in the
previous period were only received subsequent to the date the previous
period`s financial statements were approved. As a result hereof certain
comparative figures have been restated.
4. Change in board of directors
Mr Dumisani Dumekhaya Tabata was appointed as a non-executive director with
effect from 30 January 2009, which appointment was pursuant to Vuwa
Investments acquiring a shareholding in ConvergeNet through the contract
Kitting vendor placement.
5. Operating results
5.1 Income statement
Revenue increased by 30% to R551 million compared to the corresponding period.
The gross profit margin decreased to 22.2% from 26% in the previous
corresponding period mainly due to an increased product component in the
business mix.
Basic earnings and headline earnings per share increased by 7% and 2%
respectively mainly as a result of acquisitions made during the prior period.
Operating profit declined by 15% largely due to delays in project income which
will now be reflected in the second half of the financial year, and to the
deterioration in trading conditions caused by the overall economic malaise.
Operating expenses were also higher than expected for the period as a result
of an increase in business development activities, which are expected to
produce results in the forthcoming period.
5.2 Balance sheet
Increase in goodwill, inventories and trade and other receivables were mainly
as a result of the Contract Kitting acquisition detailed under 6.1 below.
6. Corporate activities
6.1 Acquisition of Chrystalpine Investments 9 (Pty) Ltd
As announced on 12 December 2008, with effect from 1 January 2009, ConvergeNet
acquired a 74% interest in Chrystalpine Investments (Proprietary) Limited
whose only asset is a 100% interest in Andrews Kit (Pty) Ltd trading as
Contract Kitting ("Contract Kitting") for a maximum purchase consideration of
R160 306 267 of which R142 925 080 has been settled through the issue of 132
338 037 shares in ConvergeNet at 108 cents per share. The remainder will only
be paid if certain profit warranties for the year ended 31 August 2009 are met
but the full amount has been provided for. Contract Kitting operates as a
supplier of infrastructure technology products and services and all related
activities.
Goodwill of R114 159 153 arose on this acquisition however, the initial
accounting for this acquisition has been determined only provisionally as the
fair values of identifiable assets have not yet been valued by independent
valuers.
6.2 Acquisition of Tswelopele Technical Solutions (Pty) Ltd
On 1 December 2008, Sizwe Africa IT Group (Pty) Ltd acquired a 75% interest in
Tswelopele Technical Solutions (Proprietary) Limited for a nominal purchase
consideration. Tswelopele primarily provides access control and ticketing
systems and solutions. Goodwill of R2 269 284 arose on this acquisition.
6.3 Acquisition of Mmele Consulting (Pty) Ltd
On 1 September 2008, Sizwe Africa IT Group (Pty) Ltd acquired a 65% interest
in Mmele Consulting (Proprietary) Limited for a nominal purchase
consideration. The name of the company was subsequently changed to ConvergeNet
Networks (Pty) Ltd and it provides primarily network solutions.
This acquisition was a bargain purchase and a gain of R34 272 resulting from
the bargain purchase has been recognised in profit and loss.
6.4 Aggregate of the provisional fair value of assets and liabilities acquired
R`000
Property, plant and equipment 3 624
Intangible assets 852
Deferred tax assets/liabilities 733
Other financial assets 2 186
Inventories 30 498
Trade and other receivables 34 503
Trade and other payables (16 119)
Tax assets/liabilities (12 233)
Other financial liabilities (5 585)
Cash 20 705
Minority interest (15 253)
43 911
Purchase consideration 160 306
Goodwill on acquisition 116 429
Gain on bargain purchase (34)
6.5 Sale of businesses
On 1 September 2008, Sizwe Africa IT Group (Pty) Ltd sold its 27% interest in
Sizwe Asset Finance (Pty) Ltd and on 1 January 2009, it sold its 51% interest
in Columbus Technologies (Proprietary) Limited.
7. Industry and group outlook
South Africa`s economy and its consumers are continuing to adjust to the
unfavourable impact of a troubled global economy and an early end to the
depressed conditions seems unlikely. Nevertheless, the ConvergeNet board
believes the group is able to compete effectively under these circumstances.
The group enjoys a significant market share in several growing market
segments, which includes the public sector.
It is common cause that in addition to increased government infrastructure
spending, the expected impact of competition in the broadband marketplace will
drive additional growth in our target markets.
ConvergeNet has virtually no interest-bearing debt and is ungeared.
ConvergeNet remains focused on sustainable growth, improving earnings quality
and further strengthening our capability and capacity.
8. Dividend
The declaration of cash dividends will continue to be considered by the board
in conjunction with an evaluation of current and future funding requirements
as well as potential acquisitions and will be adjusted to levels considered
appropriate at the time of declaration.
ConvergeNet`s continued commitment to optimal cash utilisation will mean that
cash generated by the operations will be used to fund growth. In line with the
current dividend policy, no interim dividend has been proposed for the period
under review.
9. Post-balance sheet events
As announced on 1 April 2009, ConvergeNet acquired the remaining 26% interest
in Telesto Communications (Pty) Ltd ("Telesto") as a result of the vendors of
Telesto exercising their put option which was part of the original acquisition
of Telesto.
10. Conclusion
ConvergeNet thanks all our stakeholders. We are grateful for the continued
commitment and support of our customers, employees, suppliers and
shareholders.
For and on behalf of the board
SLL Peteni PWJ Bouwer
Chairman Chief executive officer
Pretoria
23 April 2009
Corporate information:
www.convergenet.co.za
Directors: SLL Peteni *(Chairman), PWJ Bouwer (CEO), DF Bisschoff (CFO), D
Braine, G Edwards, B Kekana, NR Macdonald*, MJ Krastanov*, T Modise*, MI
Scott*, S Swana*, DD Tabata*,H van Dyk. (*non-executive)
Company secretary and registered Office: Arcay Client Support (Pty) Ltd, Arcay
House II, Number 3 Anerley Road, Parktown 2193
Business Address: Unit 5, Tijger Valley Office Park, Silver Lakes Road, Tijger
Valley 0181
Postal address: PO Box 73174, Lynnwood Ridge 0040
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001
Sponsor: Arcay Moela Sponsors (Pty) Ltd, Arcay House II, Number 3 Anerley
Road, Parktown 2193
E-Mail: info@convergenet.co.za
Date: 28/04/2009 07:05:02 Produced by the JSE SENS Department.
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