| Wed 2 Sep 2009, 10:49 | | DLG - Dialogue Group Holdings - Unaudited Consolidated Financial Results for the |
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DLG
DLG
DLG - Dialogue Group Holdings - Unaudited Consolidated Financial Results for the
Six Months Ended 30 June 2009
DIALOGUE GROUP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 2005/039219/06)
Share Code: DLG & ISIN: ZAE000083820
("the company" or "the group")
UNAUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
- Enquiries
- Dialogue Group Holdings
- Chairman: Peter Watt 083 659 3646
- Financial Director: Paul Oosthuizen 083 700 5261
Comment on the results
Trading conditions remained challenging in the first half of the year as a
result of a slowdown in the global economy. During this reporting period
management has focused on rightsizing the business and cost containment, which
led to a number of retrenchments and relocation of the head office. The
financial effect of these cost saving initiatives will only reflect in the
second half year results. With a reduced cost base, the emphasis remains on
business development to achieve the group`s objective to return to profitability
in 2010.
Operational review
The group consists of five businesses: three call-centre operations (Dialogue
SA, Sibize and Interaction), a business continuity and disaster recovery
operation (ContinuitySA) and a specialist recruitment company for the call-
centre industry (CallForce).
CallForce and Dialogue SA experienced the greatest impact of the tough trading
environment. CallForce had to aggressively reduce costs due to their dependency
on the financial sector, which will result in operating cost savings of R9
million per annum.
A new managing director has been appointed at Dialogue SA following the
departure of the previous MD. The management team has been restructured and an
extensive cost reduction programme has been undertaken. This programme cost
R2.9 million and reduces operating costs by R16 million annually. In addition,
the Board has agreed to a refresh of the technology platform used in Dialogue
SA. A healthy sales pipeline exists to fill the available capacity and numerous
successes have been achieved to date. The Board is confident that Dialogue SA
will return to profitability in 2010.
The head office cost structure was examined and consequently the head office was
relocated to one of the operating subsidiaries. Once-off costs of R1.2 million
were incurred, which will reduce operating costs by R1 million per annum.
Interaction, Sibize and ContinuitySA performed satisfactorily. During the
period ContinuitySA invested into Mauritius to expand its base of operations in
the African region.
Comments on the unaudited abridged financial statements
Income statement
Revenue
Revenue of R178.5 million (2008 restated: R197.3 million) is 10% lower than
2008, as the result of the tougher economic conditions.
- In the Cape Town contact centre, revenue is 25% less than 2008, as average
seat utilisation reduced significantly. This was already being experienced
in the second half of 2008;
- In the Staffing segment, revenue reduced by 37% as headcount plunged as a
result of decreasing demand in temporary staffing by its clients; and
- In the Business continuity segment, revenue is 23% higher following growth
with clients acquired during the second half of 2008.
Gross margin
Revenue gained has been at higher margins than revenue lost, thereby improving
gross margin to 51% (2008 restated: 48%).
Operating costs
Operating costs, excluding depreciation and amortisation, of R83.9m (2008
restated: R83.8m), represent 47% of revenue (2008 restated: 42%), and include
costs in respect of the restructuring of R4.4m. The effects of the
restructuring are only expected to show benefits in the second half of 2009.
Operating costs in this period were 11% lower than the R94.3m recorded in the
second half of 2008.
Finance income and Finance expenses
The reduction in the group`s cash resources in the previous financial year has
resulted in a reduction in the net finance income during the period.
Tax
The difference between the standard tax rate and the effective tax rate is
mainly as a result of tax losses of R17.2 million (2008 restated: Rnil) for
which a deferred tax asset has not been recognised, partially offset by STC paid
on dividends distributed by a subsidiary.
Earnings
The cash generating units of acquired operations were tested for impairment at
30 June 2009, in line with guidelines of International Financial Reporting
Standards (IFRS). In the case of CallForce, a further impairment of goodwill of
R4.3 million (2008 restated: Rnil) was recognised.
The group`s share of income from Sibize was greater than expected.
Overall, the company again reported a trading loss, but management believes that
the necessary steps have been taken to reverse this trend.
Balance sheet
Capital expenditure during the period was R8.0 million compared to R30.2 million
in the corresponding period.
During the year, ContinuitySA subscribed for 25% of ContinuityMauritius and will
be the technology partner for that operation. This is reflected as the
investment in associate.
Debtors days at 53 days (Dec 2008: 47 days) remains acceptable.
The group continues to focus on working capital management and consequently
generated net cash during the period. The business continuity segment continues
to generate strong cash flow from operations.
Asset financing facilities were used for the capital expenditure noted above.
Trade and other payables include deferred revenue of R48.8 million (Dec 2008:
R26.3 million).
Statement of compliance and basis of preparation
The consolidated interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS), its interpretations
adopted by the International Accounting Standards Board (IASB), the presentation
and disclosure requirements of International Accounting Standards: Interim
Financial Reporting (IAS34), the requirements of the South African Companies Act
and in compliance with the Listings Requirements of the JSE Limited. The interim
financial results have not been audited. The accounting policies applied in
preparing these interim financial statements are consistent with those applied
in the audited annual financial statements for the year ended 31 December 2008.
Change in accounting policies since 30 June 2008
These accounting policies and methods of computation are consistent with those
applied in the annual report for the year ending 31 December 2008. As was
disclosed on SENS on 24 March 2009, the interim results for the six months ended
30 June 2008 reported interests in jointly controlled entities using the
proportionate consolidation method. Consequently, the comparative information
needed to be restated to reflect the equity method from 1 January 2008.
Restatement of comparative information
The group has an interest in a joint venture (Sibize International Calling (Pty)
Ltd) which is a jointly controlled entity, whereby the venturers have a
contractual arrangement that establishes joint control over the economic
activities of the entity. The group recognised its interest in the joint venture
for the period 30 June 2008 using the proportionate consolidation method. This
policy was changed and the equity method was used in the financial statements
for the year ended 31 December 2008. The results for the interim period ended
30 June 2008 were therefore restated.
As disclosed in the annual report, Dialogue Group Holdings Ltd acquired 50% of
the shares in Sibize International Calling (Pty) Ltd in 2007. The initial
recognition of a financial liability for the full settlement of the available-
for-sale investment purchased was inappropriate, as 50% of the purchase price
constituted an equity portion. This was corrected in the financial statements
for the year ended 31 December 2008, but in the interim report for the six
months ended 30 June 2008, a gain of R4 772 000 was recognised on extinguishing
this financial liability, which was inappropriate.
The result of the change in accounting policy and prior period error could be
illustrated as below:
Change in Prior
Previously accounting period
Reported Policy error Restated
Unaudited Unaudited Unaudited Unaudited
Six Six Six Six
months months months months
ended ended ended ended
R`000 30 June 2008 30 June 2008 30 June 2008 30 June 2008
Revenue 232 000 (34 697) - 197 303
Cost of sales (126 845) 24 368 - (102 477)
Gross profit 105 155 (10 329) - 94 826
Operating expenses
excluding depreciation,
amortisation and
impairment (89 460) 5 658 - (83 802)
Depreciation and
amortisation (12 881) (23) - (12 904)
Other income 5 859 - (4 772) 1 087
Operating (loss) /
profit for the period 8 673 (4 694) (4 772) (793)
Finance income 4 770 (143) - 4 627
Finance expenses (4 311) 1 599 - (2 712)
Share of profit from
joint venture - 2 331 - 2 331
Profit before tax 9 132 (907) (4 772) 3 453
Income tax expense 967 907 668 2 542
Profit for the period 10 099 - (4 104) 5 995
Attributable to
- Non-controlling
interests 3 528 - - 3 528
- Equity holders
of the group 6 571 - (4 104) 2 467
Profit for the period 10 099 - (4 104) 5 995
Other
The nature and extent of contingent liabilities, as well as the nature and
extent of related party balances remain the same as disclosed in the annual
report for the year ended 31 December 2008.
At 30 June, the balances were as follows:
R`000 2009 2008
Loan from CB Roberts to CallForce Direct (Pty) Ltd (269) (322)
Loan to Sibize International Calling (Pty) Ltd 3 106 2 886
Amounts due from Sibize International Calling (Pty) Ltd 2 981 -
Amounts due to Tlhalefang Placements CC 1 148 -
Prospects and outlook
The economic environment remains challenging but the fact that the group
generated cash in the period is encouraging, despite losses incurred in Dialogue
SA and the investment in restructuring certain subsidiaries.
The Board is satisfied with the steps taken to return Dialogue SA to
profitability and that the necessary cash resources exist to achieve this.
Corporate governance
The group is committed to the principles embodied in the Code of Corporate
Practice and Conduct in the King Report 2002 ("the Code"). It complies with the
significant requirements incorporated in the Code and in the Listings
Requirements of the JSE Limited.
Post balance sheet events
No significant events have occurred in the period between the reporting date and
the date of this report.
The board
Mrs AO Cloete resigned as executive Group HR Director from the Board with effect
from 30 April 2009.
Dividend
No dividend was declared (2008: nil).
By order of the board
P.A. Watt P.S. Oosthuizen
Non-executive chairman Financial director
2 September 2009
Directorate and administration
P.A. Watt*^ (Chairman), P.S. Oosthuizen, R.K. Mangena*, A. Khumalo*, G. Mkhari*,
A.C. Farthing*^#, S.J.H. Rodger*#, J.J. Drew*#
*Non-executive ^Independent #British
Registered office: 6th floor, Dialogue House, Rua Vasco da Gama, Foreshore, Cape
Town (PO Box 8355, Rogge Bay, 8012)
Company Secretary: T. Kretzmann, 6th floor, Dialogue House, Rua Vasco da Gama,
Foreshore, Cape Town (PO Box 8355, Rogge Bay, 8012)
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, Ground
floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Designated Advisor: PSG Capital (Pty) Limited, Johannesburg branch, Building 8,
Woodmead Estate, 1 Woodmead Drive, Woodmead, 2191 (PO Box 987, Parklands, 2121)
Dialogue Group Holdings Limited
(incorporated in the Republic of South Africa)
(Registration number 2005/039219/06)
JSE code: DLG ISIN: ZAE000083820
Consolidated statement of comprehensive income
Restated
Unaudited Unaudited
Six Six
months months
ended ended
R`000 30 June 2009 30 June 2008
Revenue 178 535 197 303
Cost of sales (88 054) (102 477)
Gross profit 90 481 94 826
Operating expenses excluding depreciation,
amortisation and impairment (83 922) (83 802)
Depreciation and amortization (15 527) (12 904)
Impairment of goodwill (4 254) -
Other income 225 1 087
Operating loss for the period (12 997) (793)
Finance income 1 537 4 627
Finance expenses (1 883) (2 712)
Share of loss from associate (269) -
Share of profit from joint venture 2 763 2 331
(Loss) / profit before tax (10 849) 3 453
Income tax expense (3 142) 2 542
(Loss) / profit for the period (13 991) 5 995
Attributable to
- Non-controlling interests 1 862 3 528
- Equity holders of the group (15 853) 2 467
(Loss) / profit for the period (13 991) 5 995
Other comprehensive loss
- Currency translation difference in respect of
foreign controlled entities (561) -
Other comprehensive loss for the year, net of tax (561) -
Total comprehensive (loss) / income for the period (14 552) 5 995
Attributable to
- Non-controlling interests 1 587 3 528
- Equity holders of the group (16 139) 2 467
(14 552) 5 995
(Loss) / earnings per share (cents)
- Weighted in issue (5.3) 1.0
- Fully diluted (5.3) 0.8
Consolidated statement of financial position
Unaudited Audited
As at As at
30 June 31 December
R`000 2009 2008
Assets
Non current assets 165 378 168 070
Property, plant and equipment 68 258 75 367
Intangible assets 43 888 48 294
Deferred tax asset 12 019 11 213
Investment in joint venture 32 461 29 771
Investment in associate 5 327 -
Other non-current receivables 3 425 3 425
Current assets 107 474 93 165
Loan to related parties 3 106 2 886
Taxation 3 223 986
Inventories 1 329 1 358
Trade and other receivables 55 029 45 786
Cash and cash equivalents 44 787 42 149
Total assets 272 852 261 235
Equity and liabilities
Capital and reserves 142 512 158 678
Share capital 1 251 1 251
Share premium 167 778 167 778
Share option reserve 1 247 1 023
Foreign exchange translation reserve (286) -
Accumulated loss (45 769) (29 915)
Attributable to equity holders of the group 124 221 140 137
Non-controlling interests 18 291 18 541
Non current liabilities 12 784 9 198
Long term liabilities 12 784 9 198
Current liabilities 117 556 93 359
Short term liabilities 7 350 9 881
Provisions 3 929 6 072
Trade and other payables 98 109 69 855
Taxation 1 396 1 744
Bank overdraft 6 772 5 807
Total equity and liabilities 272 852 261 235
Net asset value per share (cents) 41.5 46.9
Net tangible asset value per share (cents) 26.9 30.7
Consolidated cash flow statement
Restated
Unaudited Unaudited
Six Six
months months
ended ended
R`000 30 June 2009 30 June 2008
Cash flow from operating activities 14 968 26 007
Cash flows from investing activities (14 351) (83 916)
Cash flows from financing activities 1 056 116 794
Net increase in cash and cash equivalents 1 673 58 885
Cash and cash equivalents at beginning of period 36 342 18 502
Cash and cash equivalents at end of period 38 015 77 387
Consolidated statement of changes in equity
Restated
Unaudited Unaudited
Six Six
months months
ended ended
R`000 30 June 2009 30 June 2008
Opening Equity 158 678 99 668
Issue of shares (note 2) - 113 302
Share options issued 223 763
Total comprehensive (loss) / income for the
period attributable to equity holders (16 139) 2 467
- (Loss) / profit for the period (15 853) 2 467
- Currency translation difference in respect of
foreign controlled entities (286) -
Total comprehensive income for the period
attributable to non-controlling interests 1 587 3 528
- Profit for the period 1 862 3 528
- Currency translation difference in respect of
foreign controlled entities (275) -
Dividends paid to non-controlling interests (1 837) -
Closing Equity 142 512 219 728
Capital commitments
Unaudited Audited
As at As at
30 June 31 December
R`000 2009 2008
Authorised and contracted 9 790 2 174
Authorised and not contracted 2 163 19 891
Notes
Restated
Unaudited Unaudited
Six Six
months months
ended ended
R`000 30 June 2009 30 June 2008
1. Headline (loss) / earnings calculation
Net (loss) / profit attributable to equity
holders of the company (15 853) 2 467
Adjusted for
- Impairment of goodwill 4 254 -
- Gain on disposal of property, plant and equipment 40 -
Headline (loss) / earnings (11 559) 2 467
Number of shares (`000)
- Total 299 075 299 075
- Weighted in issue 299 075 247 092
- Fully diluted 299 075 299 075
Headline (loss) / earnings per share (cents)
- Weighted in issue (3.9) 1.0
- Fully diluted (3.9) 0.8
2. Share issues
11 January 2008 - 70 373 832 shares @ R1.61 per share - 113 302
27 February 2008 - 11 220 471 shares @ R1.27 per share - 14 250
10 April 2008 - 7 480 315 shares @ R1.27 per share - 9 500
Release of Vendor Share issue reserve - (23 750)
- 113 302
Segment result:
Restated
Unaudited Unaudited
Six Six
months months
ended ended
R`000 30 June 2009 30 June 2008
Contact Centre - Cape Town
Total external revenues 26 295 35 214
Intersegment revenues 5 710 2 337
Segment profit / (loss) before interest, income
tax and impairments (15 974) (10 215)
Finance expense - (15)
Finance income 44 200
Segment profit / (loss) before income tax (15 930) (10 029)
Contact Centre - Durban
Total external revenues 42 636 50 875
Intersegment revenues - -
Segment profit / (loss) before interest, income
tax and impairments 2 888 5 540
Finance expense (21) (0)
Finance income 194 117
Segment profit / (loss) before income tax 3 061 5 657
Business Continuity
Total external revenues 77 688 63 098
Intersegment revenues 254 -
Segment profit / (loss) before interest, income
tax and impairments 8 681 9 226
Finance expense (1 385) (1 412)
Finance income - 631
Share of loss from associate (269) -
Segment profit / (loss) before income tax 7 027 8 446
Staffing
Total external revenues 30 500 48 116
Intersegment revenues 1 407 117
Segment profit / (loss) before interest, income
tax and impairments (1 912) 718
Finance expense (631) (589)
Finance income - -
Segment profit / (loss) before income tax (2 543) 129
Head office
Total external revenues 1 416 -
Intersegment revenues - -
Segment profit / (loss) before interest, income
tax and impairments (2 426) (6 063)
Finance expense (79) (1 171)
Finance income 1 633 3 884
Share of profit from joint venture 2 763 2 331
Share of loss from associate - -
Impairment of goodwill (4 254) -
Segment profit / (loss) before income tax (2 363) (1 019)
Intersegment
Total external revenues - -
Intersegment revenues (7 371) (2 454)
Segment profit / (loss) before interest, income tax
and impairments - -
Finance expense 233 475
Finance income (334) (205)
Segment profit / (loss) before income tax (101) 270
Total
Total external revenues 178 535 197 303
Intersegment revenues - -
Segment profit / (loss) before interest, income
tax and impairments (8 743) (793)
Finance expense (1 883) (2 712)
Finance income 1 537 4 627
Share of profit from joint venture 2 763 2 331
Share of loss from associate (269) -
Impairment of goodwill (4 254) -
Segment profit / (loss) before income tax (10 849) 3 453
Segment assets:
Unaudited Audited
As at As at
30 June 31 December
R`000 2009 2008
Contact centre - Cape Town 23 044 23 977
Contact centre - Durban 13 809 15 037
Business continuity 161 327 133 630
Staffing 20 621 19 866
Head Office 165 599 127 193
Intersegment transactions (111 548) (58 468)
Total 272 852 261 235
Date: 02/09/2009 10:49:01 Produced by the JSE SENS Department.
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