| Tue 28 Jul 2009, 11:04 | | SBG - Simeka - Condensed Reviewed Consolidated Annual Financial Results For The |
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SBG
SBG
SBG - Simeka - Condensed Reviewed Consolidated Annual Financial Results For The
Year Ended 31 May 2009
Simeka Business Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
Share code: SBG ISIN code: ZAE000074878
("Simeka/the company")
CONDENSED REVIEWED CONSOLIDATED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31
MAY 2009
HIGHLIGHTS
- Revenue up 29%
- Cash flow from operations up 30%
- Cash on hand up to R92 million
- EBITDA up 29%
- Net tangible asset value per share up 127%
CONDENSED CONSOLIDATED INCOME STATEMENT
Reviewed Audited
Year ended Year ended
31 May 31 May
2009 2008
R`000 R`000
Revenue 752 070 584 801
Cost of sales (397 930) (346 630)
Gross profit 354 140 238 171
Earnings before interest, impairment,
taxation, depreciation
and amortisation ("EBITDA") 119 014 92 383
Depreciation (7 727) (8 240)
Amortisation (4 183) (1 780)
Impairment of goodwill (3 675) (17 446)
Net finance costs (20 909) (5 696)
Income from associate company 3 499 548
Discontinued operations - 17 688
Profit before tax 86 019 77 457
Taxation (29 755) (19 419)
Profit for the year 56 264 58 038
Minority interest (8 782) (3 486)
Earnings attributable 47 482 54 552
Profit/loss on disposal of subsidiary and 30 (4 638)
associate
Impairment of goodwill 3 675 16 308
Loss on sale of treasury shares (excluding 6 452 -
share options)
Loss on sale of property, plant and 145 -
equipment
Headline earnings after tax 57 784 66 202
Number of shares (`000)
- Weighted average number of shares 520 031 403 241
- Diluted weighted average number of shares 547 069 427 405
- Normalised weighted average number of 475 424 403 241
shares
- Normalised diluted weighted average number 502 463 427 405
of shares
Earnings per share (cents)
- Earnings per share 9,1 13,5
- Diluted earnings per share 8,7 12,8
Headline earnings per share (cents)
- Headline earnings per share 11,1 16,4
- Diluted headline earnings per share 10,6 15,5
Normalised headline earnings per share
(cents)*
- Normalised earnings per share 12,2 16,4
- Diluted normalised earnings per share 11,5 15,5
*This arose from the SUHL clawback of 52,6 million shares (weighted 45,3
million) which were not allowed for IFRS purposes and will not be in issue next
year.
CONDENSED CONSOLIDATED BALANCE SHEET
Reviewed Audited
As at As at
31 May 31 May
2009 2008
R`000 R`000
ASSETS
Non-current assets 529 204 407 933
Property, plant and equipment 36 934 24 839
Goodwill 408 723 320 069
Intangible assets 50 247 46 635
Other financial assets 4 948 -
Investment 346 306
Investment in associate company 10 384 5 476
Deferred taxation 17 622 10 608
Current assets 248 300 202 828
Inventory 7 008 11 974
Trade and other receivables 142 145 118 380
Financial assets 2 186 -
Taxation receivable 4 792 -
Operating lease assets 83 91
Cash resources 92 086 72 383
Total assets 777 504 610 761
EQUITY AND LIABILITIES
Capital and reserves 467 180 344 290
Share capital 256 954 189 818
Foreign currency translation reserves (5 993) 1 051
Accumulated profit 167 103 119 621
Amounts due to vendors in shares 49 116 33 800
Minority interest 15 036 (635)
Total equity 482 216 343 655
Non-current liabilities 128 204 109 717
Financial liabilities 111 531 92 331
Finance lease obligations 1 323 940
Deferred taxation 15 350 16 446
Current liabilities 167 086 157 389
Vendor liabilities 5 385 46 241
Other financial liabilities 31 448 13 418
Finance lease obligations 2 522 1 172
Operating lease liabilities 1 951 1 048
Trade and other payables 124 526 85 917
Taxation payable 1 250 8 235
Bank overdraft - 1 358
Total equity and liabilities 777 504 610 761
Net asset value per share (cents) 85,6 83,3
Net tangible asset value per share (cents) 1,5 (5,4)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
Year ended Year ended
31 May 31 May
2009 2008
R`000 R`000
Net cash flows from operating activities 82 976 63 922
Net cash flows from investing activities (12 152) (17 610)
Net cash flows from financing activities (49 763) (13 982)
Net increase in cash and cash equivalents 21 061 32 330
Cash and cash equivalents at beginning of 71 025 38 695
year
Cash and cash equivalents at end of year 92 086 71 025
Condensed consolidated statement of changes in equity
Reviewed Audited
Year ended Year ended
31 May 31 May
2009 2008
R`000 R`000
Capital and reserves - opening balance 343 655 253 326
Shares issued 101 516 38 026
Treasury shares (2 521) (13 600)
Payment of vendor liabilities (33 800) (9 225)
Share repurchase (31 859) -
Acquisition of subsidiaries and businesses 49 116 33 800
Minorities interest (15 671) (2 447)
Foreign currency translation reserves (7 044) 978
Accumulated profit 47 482 42 797
Capital and reserves - closing balance 482 216 343 655
COMMENTS
INTRODUCTION
The directors of Simeka present the reviewed financial results for the year
ended 31 May 2009 ("the year"), which continued to reflect growth despite the
economic downturn.
Simeka recorded revenue of R752,1 million, marking the group`s fourth
consecutive year of more than 20% growth in revenue while strong EBITDA growth
of 29% was supported by healthy cash flows from operations of R82,0 million, up
30% from the prior year. Headline earnings amounted to R57,8 million.
Following the prior year acquisitions and the merger with SAB&T Ubuntu Holdings
Limited ("SUHL") at the start of the year (see Business Combinations below),
Simeka intensified focus on organic growth and rationalised operations for
improved operating efficiencies.
The still robust pipeline of secure contracts and the group`s diversified
services offering proved to be effective in mitigating the difficult trading
conditions.
GROUP PROFILE
Simeka is a leading black-empowered provider of outsourcing and technology
services and solutions. The group`s operations are accordingly aligned into two
key divisions:
- Business Support Services (People and Outsource Process);
- Technology
Simeka is able to offer outsourcing as well as bespoke and comprehensive
outsourcing and business solutions through combining the niche offerings of its
major brands within the divisions.
OPERATIONS
South Africa
Simeka is pleased to advise that despite the global financial crisis affecting
certain business units notably:- Matomo Technologies which suffered a reduction
in sales volumes of desktops which subsequently saw an uptick in volumes;
Cybernet Africa Logistics; and SUHL`s consulting business. Simeka has addressed
these issues and there are exciting prospects which would see these operations
performing again at their expected levels. The group as a whole continued to
perform well.
Simeka expects further to see good growth in its mobile technology applications,
with keen interest being shown from various industries.
Nigeria
Notwithstanding that the commissioning of the voucher plant was delayed due to
local regulatory requirements, the operations in Nigeria continue to be
profitable in this year and are expected to strengthen based on the voucher
plant has now been fully commissioned.
Middle East
Simeka has taken the decision to concentrate its efforts on opportunities in
SADC and Africa following the dramatic slowdown in the Middle East.
Group
Although to date the group has not suffered any cancellation of contracts,
certain operations were more severely affected than others by the poor economic
conditions during the year (see South Africa above). Simeka`s diversified
services offering proved to be a strong advantage in this respect, enabling the
group as a whole to counter the negative impact. Further, Simeka won new major
contracts including long-term projects for leading telecommunications companies
and financial institutions strengthening it`s annuity and secured revenues for
the next four to five years to again over R2 billion.
In terms of operational goals Simeka successfully delivered on undertakings at
the prior year-end. In line with its strategy to substantial investments were
made in the group`s sales capacity, which was effectively bolstered to position
Simeka for ongoing growth. The Microsoft operation was restructured for maximum
efficiency and performed well (see Business Combinations below).
SHARE REPURCHASE PROGRAMME
During the year the company repurchased 7,5 million shares on the open market
for an amount of R2,8 million.
With the share price at current levels, management has strong faith in the value
offered by Simeka shares and will continue to repurchase shares on the open
market during the year ahead. Announcements in this regard will be released in
due course in accordance with JSE rules and regulations.
BLACK ECONOMIC EMPOWERMENT ("BEE")
Simeka`s BEE platform remains an excellent differentiator, with the group
reporting firm BEE credentials at both equity and operational levels. The
company is majority black-owned, managed, and to a large extent staffed. At
least 90% of Simeka`s board of directors is black, of which 30% comprises black
females.
FINANCIAL RESULTS
Turnover increased by 29% to R752,1 million (from R584,8 million in the prior
year) of which 76% was organic and the balance of 24% was acquisitive.
Simeka invested a significant amount (R13,8 million) in infrastructure of which
R3,8 million was for the upgrade of systems and processes and R10 million for
expansion of its geographic footprint and acquiring new equipment on the back of
new major contracts secured. Stricter lending criteria as a result of the global
credit crunch forced Simeka to fund a large proportion of this capital
expenditure through cash reserves.
R2,8 million was spent on buying back shares (see Share Repurchase Programme
above) and an aggregate amount of R130,5 million was discharged in terms of
vendor obligations (see Vendor Obligations below.)
Included in these results are once-off/non-recurring costs in excess of R20
million, which include loss on treasury shares amongst others.
DIVIDEND
At the prior year-end the board of directors disclosed its intention to declare
a dividend for the year, however, given the subsequent economic downturn and the
decision of the board to reduce gearing and preserve the balance sheet
accordingly, a dividend has not been declared for the year.
In line with group policy the declaration of a dividend will continue to be
considered annually, taking into account trading conditions, gearing, reserves
and free cash flow.
BASIS OF PREPARATION
The condensed consolidated annual financial statements have been prepared in
accordance with International Financial Reporting Standards. The accounting
policies of the group comply with IAS 34 and the 1973 Companies Act, as amended
and are based on appropriate accounting policies, consistently applied with
those in the prior year, which are supported by reasonable and prudent judgments
and estimates.
AUDIT OPINION
The condensed consolidated annual financial results have been reviewed by the
company`s auditors, PKF (Pta) Inc. Their unqualified audit report is available
for inspection at the company`s registered office.
SEGMENTAL REPORTING
The Business Support Services (People and Outsource Process) division
contributed 60% of group revenue, while the Technology division contributed the
balance of 40%, consistent with the prior year contribution.
BUSINESS COMBINATIONS
SUHL
On 1 June 2008, Simeka acquired 100% of the shares in SUHL and its underlying
subsidiaries. The cost of acquisition amounted to R123 000 000 which is payable
in shares as follows:
Number of Shares Total
shares
`000 R`000 R`000
As of transaction date 1 June 2008 90 000 73 800 73 800
As of 31 May 2009 60 000 49 200 49 200
150 000 123 000 123 000
The shares are to be issued at an issue price of R0,82.
The second payment of the shares is subject to a profit warranty having been
achieved by 31 May 2009.
Goodwill of R89 374 313 arose due to expected synergy between the assets of
Simeka and SUHL. Revenue contribution of 23% was includeed in the group`s
results, while EBITDA margins of approximately 18% was realised by SUHL.
Through the use of independent valuers, Simeka valued the identifiable
intangible assets of SUHL. This resulted in R6 063 000 worth of customer-related
intangible assets that can be separately identifiable. No other intangible
assets were identified of which the purchase price less the fair value of the
net assets identified has resulted in goodwill.
Mint Net (Proprietary) Limited
On 10 December 2008 Simeka acquired the remaining 48% of the issued shares in
Mint Net from the vendors for a total consideration of R2 589 475. Goodwill of
R2 128 050 arose owing to expected synergy between the assets of Simeka and Mint
Net.
Adcheck (Proprietary) Limited
On 31 May 2009, Simeka acquired an additional share of Adcheck. This resulted in
Adcheck becoming a subsidiary of the group (previously it was an associate). The
cost of acquisition amounted to R20 000 001 which is payable in cash, shares and
the disposal of 100% holding of Mint Net as follows:
Number of Shares Cash Total
shares
`000 R`000 R`000 R`000
Cash 10500 10 500
Shares 9 000 4 500 4 500
Previously investment in associate 5 000 5 000 5 000
Sale on Mint Net 1 1
14 000 9 500 10 501 20 001
Through the use of independent valuers, Simeka had undergone to value the
identifiable intangible assets of Adcheck. No separately identifiable intangible
assets have been found. Goodwill of R12 368 307 arose from this transaction.
Applebox Accounting
On 31 August 2008 Simeka through SUHL disposed of Applebox Accounting and
Applebox Training, in which it had previously held 55% and 51% stake
respectively. The proceeds of the disposal amounted to R50 000 in aggregate and
were received in cash. The disposal resulted in a loss of R22 610. Applebox
Accounting`s and Applebox Training`s revenue and net profit attributable to
equity holders included in the group`s results to 31 August 2008 were R389 603
and R2 245 respectively.
Virtually HR
On 31 August 2008 Simeka through SUHL disposed of 1% of its shareholding in
Virtually HR resulting in the status of the company changing from a subsidiary
to an associate of Simeka. The proceeds of the disposal amounted to R41 437 and
were received in cash. The disposal resulted in a loss on sale of R66 639.
Revenue and profit attributable to Simeka as included in the group`s results to
31 August 2008 were R5 554 436 and R192 123 respectively.
VENDOR OBLIGATIONS
The following vendor obligations were discharged during the year:
Vendor Cash Shares Total
R million R million R million
SUHL Nil 123 123
Mint Net - minorities 2,1 0,4 2,5
Adcheck Nil 5,0 5,0
Total 2,1 128,4 130,5
DIRECTORS
As previously announced Bashier Adam, former CEO of SUHL, resigned from the
board of Simeka as a non-executive director with effect from 25 June 2009.
PROSPECTS
The group continues to hold a pipeline of secured contracts of over R2 billion
for the next four to five years. In addition, new contract wins during the year
(see Operations above) have further boosted the order book. Simeka will
concentrate on continually driving this largely annuity-based revenue stream.
Organic growth will be a key focus in the year ahead and the programme of
rationalising group operations will continue.
In order to ensure Simeka`s ongoing resilience in the face of tough economic
conditions, fiscal emphasis will be on maintaining cash flows, entrenching
balance sheet strength, securing credit lines and regulating debt levels.
Public sector remains an important growth avenue for the group. A number of
large government contracts secured (through SUHL) vindicate this strategy. These
include a R400 million project for the Department of Education to be rolled out
over the next three years. The contract has the potential to be extended beyond
the initial period at an agreed value.
Regarding EMEA businesses the group intends to adopt a conservative approach
towards the Middle East pending resolution of the economic crisis in the region.
However, Simeka will intensify focus on Africa. The group aims to leverage
existing client relationships to extend its foothold in the region, following in
the footprint of client expansion.
The still healthy outsourcing sector continues to present robust opportunities
for growth. A weak economy may work to Simeka`s advantage in this respect as
corporates and government increasingly favour scalable and cost-effective
outsourcing solutions.
APPRECIATION
We thank all directors, managers and staff for their tenacity and drive which
contributed to the group`s performance for the year. We welcome to the group all
new employees and look forward to working together to continue Simeka`s success.
We also thank all our shareholders, business associates and particularly our
loyal customers for their vital support.
By order of the board
Mohammed Varachia Suren Singh
CEO CFO
28 July 2009
Directors:
Dr PS Molefe (Chairman)*, M Varachia (CEO), S Singh (CFO), M Papiyana (Group HR
Director), A Evan (CLO), N Singh (Executive Director), T Botha* (Deputy
Chairman), KBJ Molefe*, NY Mhinga*#, S Montsi*
(*Non-executive #independent)
Registered office:
Corner Naivasha and Rivonia Road, Sunninghill (PO Box 4307, Halfway House,
Midrand, 1685)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg (PO Box 61051, Marshalltown, 2107)
Company secretary:
Noelene Beryl January, Corner Naivasha and Rivonia Road), Sunninghill (PO Box
4307, Halfway House, Midrand, 1685)
Designated advisor:
Java Capital (Proprietary) Limited
A world of opportunities
www.simekabusinessgroup.co.za or www.simekabg.co.za
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