| Wed 9 Sep 2009, 8:00 | | DGC - DigiCore Holdings - Group audited results for the year ended 30 june 2009 |
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DGC - DigiCore Holdings - Group audited results for the year ended 30 june 2009
DigiCore Holdings Limited
Registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
Group Audited Results for the year ended 30 June 2009
Turnover
R576 million
Operating Profit
R113 million
Earnings per Share
36.1 cents
COMMENTARY
Considering the severe downturn in the global economy, the board is relatively
satisfied with the group`s overall performance. Following the strong
performance of the first six months, our expectations of a performance in line
with the previous financial year in the last six months of the review period
simply did not materialise as business in our United Kingdom, European and
South African markets recorded a severe slowdown. This was mainly due to
external factors such as the strengthening of the Rand, the tender process in
South Africa coming to a halt before and after the elections, and the banks`
severe tightening of credit supply for system financing, particularly in the
small and medium enterprises (SME) sector.
The executive team is, however, confident that the balanced approach we
maintained during the period between short-term profit and future growth will
pay off when the economic recession abates. All DigiCore divisions were
profitable and we did not retrench skilled and scarce staff members.
In fact, we employed 18 more R&D engineers to enhance our hardware and software
development capacity.
Although cost cutting and preserving cash were part of our focus, we rolled out
two more C-track fitment centres.
On the international front, we continued our expansion strategy, establishing
and enlarging our subsidiaries in France, Germany and Belgium to create a
bigger self-owned distribution network in Europe.
Financial results
The reduction in turnover for the year from R685 million to R576 million (16%)
contributed to a negative effect of 45% on operating profit, reducing it from
R204 million to R113 million. As illustrated in previous periods, a marginal
increase in sales has a substantial impact on operating profit and the 2009
financial year saw DigiCore experience the reverse of this: a relatively small
reduction in sales had a disproportionate effect on operating profit, given the
mostly fixed overhead structure. Our challenge thus remains to increase our
revenue streams. Our annuity income stream from the South African operations
constituted 61% of revenue for the year and we are actively pursuing the
growth of this part of our revenue stream. Despite the tough economic climate,
gross margins for the group remained stable. The operating profit margin,
excluding both foreign exchange revaluations and the profit made on disposal
of fixed assets, declined by 6.6% from 27.3% in 2008 to 20.7% in 2009.
Particularly pleasing has been the performance of C-track SA, comprising mainly
of the stolen vehicle recovery (SVR) business in South Africa where we saw sales
and net profit increase 22% and 359%, respectively.
The volatility of the Rand during the financial year resulted in an unrealised
foreign exchange profit in the first six months of R4.8 million and an
unrealised foreign exchange loss for the second six months of R9.8 million,
with a full-year unrealised loss of R5.0 million.
Earnings per share declined by 47% from 68.7 cents to 36.1 cents in 2009.
Cash and cash equivalents decreased from R108.4 million (2008) to R47.9 million
at the end of June 2009, mainly as a result of working capital requirements
rising by R35 million as we built stock for postponed orders while settling
creditors on agreed terms. Secure units rentals financed internally to the
amount of R23 million during the year (property, plant and equipment) also
consumed some cash. However, these assets generated a return of about 18% on
funds utilised.
Trade debtors reduced by 16% and, due to new control and collection methods
introduced, should continue to reduce in the short term.
Technology, new products and ventures
The increase in R&D capacity has already resulted in the release of a number of
unique products such as Stealthguard; our Mobile Resource Management
integrated with Garmin GPS navigation systems; RoadTrack and fuel tank-level
monitoring.
We are also very excited by the release of our next generation C-track software
which has already been released as a beta version to our distributors for
internal evaluation and feedback, before the commercial release in October
2009. The software includes a full enterprise-reporting module with key
performance indicator (KPI) dashboards, drill-down reporting and a full data
warehouse. C-track Online is a zero footprint web client that can be used on
locked-down desktops, ie no program is downloaded to the operator`s PC.
A state-of-the-art integrated fare collection system for mini-bus taxis, fully
compliant to requirements set by the Reserve Bank, NDOT and EMVCo for wireless
smartcard payments in these taxis is due for roll out before the end of this
calendar year. DigiCore partnered with major players in the banking and payment
industry to develop a complete end-to-end system. DigiCore developed all the
onboard equipment for supply to our operating company.
On the C-track onboard side, a touch-screen driver terminal is undergoing final
testing and an insurance-focused driver-rating module is ready to upgrade our
SVR products to rate drivers based on their average driving styles.
Collectively, this technology, product partnerships and new ventures position
DigiCore at the forefront of the industry and will ensure we provide a C-track
product range that caters for the general public, right up to sophisticated
enterprise solutions for the likes of SAPS, Royal Mail (UK), Ethekwini Metro,
GMT, etc.
Local operations
The fleet management business suffered most when Government spending virtually
came to a halt in the second half of the year and credit facilities for
commercial business were difficult to access. However, the situation is
improving and tender opportunities are increasing again. We have completed some
core enterprise-level software development in June that will give us more
flexibility with our dashboard type of reporting and integration with
third-party software used by our customers. This will allow us to compete with
any world-class competitor.
The SVR division recorded some growth in the second half as a result of good
relationship building, competitive pricing and quality value-added services.
We have continued the roll out of our C-track `Lifestyle` fitment centres in
strategic locations, resulting in greater visibility and ease of access for our
growing customer base. These centres, supplemented by our 30 third-party
authorised installers nationwide, are well positioned to support our new
marketing campaigns. We have added complementary product types to these C-track
centres such as Lumar window security film, Parrot hands-free kits, Garmin
navigation as well as the full Nashua Cellular franchise.
International operations
Despite a significantly worse global economic climate than expected at the
beginning of the financial year, DigiCore International has continued its
strategy of investing in its subsidiary operations to drive organic growth.
Firstly, we have successfully concluded the purchase of the final 50%
shareholding in DigiCore Deutschland, which now becomes a wholly owned
subsidiary. The German market is poised for excellent growth from a very low
installed base of GPS fleet management technology. Secondly, we opened our
Belgium office which made a profit after its first year of operations and,
finally, the opening in January of DigiCore France in Paris, to focus on this
key European market and its strong growth potential.
These strategic decisions were based on the experience that new DigiCore
International operations and management teams take 12 to 18 months to be
optimised and will therefore position us well when markets start to improve in
2010. The set-up costs of these operations in Europe resulted in operating
expenses for our international operations increasing by 58% year on year.
Reflecting the importance of the strategies adopted in geographical, market and
product diversification, we recorded pleasing unit export results in Malaysia
which grew by 39%, Australia up by 32% and Indonesia which grew by 300%.
Although many SMEs are looking inward to manage market challenges, many larger
organisations, utilities and corporates are actively looking for solutions from
DigiCore to support operational cost reductions and productivity improvements.
Trakker Middle East in the UAE has had a tough year. However, the proven
ability of our C-track product range to reduce costs and generate business
efficiencies as well as eliminate wasted journeys and reduce environmental
impact, has ensured C-track remained an attractive service for all our fleet
customers in times of economic uncertainty. Our distributor in Pakistan
continued to have a very difficult year, but fortunately the customer base of
over 90 000 systems on long-term stolen vehicle recovery insurance-driven
contracts enabled the business and nationwide operations to continue.
Outlook
The 2009 and 2010 calendar years are expected to be difficult years for
businesses worldwide. DigiCore operates globally and intends to continue
growing its international presence, supported by the introduction of a new
product set that should be available globally this year.
The executive team is confident that, with our portfolio of new world-class
products and software packages now available, we will be well positioned to
accelerate sales as soon as global markets improve. This is particularly the
case for our SVR division which has already made such inroads in an established
market.
In conclusion we believe the company remains strongly positioned to resume its
growth phase in the global market, given our solid product range and excellent
distribution network.
For and on behalf of the board
NA Gasa NH Vlok
Chairman Chief Executive Officer
9 September 2009
Abridged group balance sheet
at 30 June 2009 30 June 30 June
2009 2008
R`000 Notes (Audited) (Audited)
Assets
Non-current assets 281 811 222 199
Property, plant and equipment 2 103 789 50 053
Goodwill 168 552 156 901
Intangible assets - 16
Investments in associates 2 328 3 506
Deferred tax 7 142 11 723
Current assets 345 085 401 935
Inventories 104 011 89 974
Other financial assets 105 -
Current tax receivable 12 299 5 496
Trade and other receivables 171 264 198 059
Cash and cash equivalents 57 406 108 406
Total assets 626 896 624 134
Equity and liabilities
Equity 491 876 464 756
Equity attributable to equity holders of
parent 480 790 455 124
Share capital 3 63 863 44 635
Reserves 3 28 118 59 043
Retained income 388 809 351 446
Minority interest 11 086 9 632
Liabilities
Non-current liabilities 44 289 27 321
Interest bearing financial liabilities 2 40 978 20 286
Finance lease obligation 2 799 6 523
Deferred tax 512 512
Current liabilities 90 731 132 057
Current portion of interest bearing
financial liabilities 2 10 787 5 072
Current tax payable 13 693 19 374
Finance lease obligation 3 904 1 926
Trade and other payables 41 046 85 625
Provisions 11 801 20 060
Bank overdraft 9 500 -
Total liabilities 135 020 159 378
Total equity and liabilities 626 896 624 134
Net asset value per share (cents) 223.3 212.8
Net tangible asset value per share (cents) 145.0 139.4
Abridged group income statement
for the year ended 30 June 2009 30 June 30 June
2009 2008
R`000 Notes (Audited) (Audited)
Revenue 576 234 684 790
Cost of sales and operating expenses (463 113) (480 688)
Operating profit 113 121 204 102
Investment revenue 2 198 3 016
(Loss)/income from equity
accounted investments (497) 128
Finance costs (3 682) (4 123)
Profit before taxation 111 140 203 123
Taxation 4 (34 946) (56 875)
Profit for the year 76 194 146 248
Attributable to:
Equity holders of the parent 74 741 140 480
Minority interest 1 453 5 768
Number of ordinary shares in issue (`000) 215 264 213 865
Weighted average number of ordinary
shares in issue (`000) 207 057 204 527
Fully diluted number of ordinary shares
in issue (`000) 217 669 218 676
Earnings ratios (cents)
Earnings per share 5 36.1 68.7
Headline earnings per share 5 35.9 64.7
Diluted earnings per share 5 35.7 64.2
Diluted headline earnings per share 5 35.5 60.5
Dividends (cents)
Interim dividend per share 6.0 6.0
Final dividend per share 4.0 13.0
Total dividend per share 10.0 19.0
Reconciliation of headline earnings
Attributable to shareholders 74 741 140 480
Adjusted for:
Profit on sale of property, plant and
equipment (475) (8 210)
Headline earnings 74 266 132 270
Abridged group cash flow statement
for the year ended 30 June 2009 30 June 30 June
2009 2008
R`000 (Audited) (Audited)
Cash flows from operating activities 40 700 116 061
Cash generated from operations 85 033 182 976
Interest income 2 198 2 782
Dividends received - 234
Finance costs (3 682) (4 123)
Tax paid (42 849) (65 808)
Net cash from investing activities (79 829) (24 361)
Net cash from financing activities (21 371) (42 537)
Total cash movement for the year (60 500) 49 163
Cash at the beginning of the year 108 406 59 243
Total cash at end of the year 47 906 108 406
Statement of changes in equity
at 30 June 2009
Share Retained
R`000 capital Reserves income
Balance at 1 July 2007 13 368 2 533 241 460
Equity instrument to be issued - 38 241 -
Currency translation differences - 13 780 -
Profit for the year - - 140 480
Issue of shares 80 606 - -
Purchase of treasury shares (49 976) - -
Employee share option scheme:
Proceeds of shares issued 637 (637) -
Share options issued - 5 126 -
Dividends paid - - (30 494)
Business combinations - - -
Balance at 1 July 2008 44 635 59 043 351 446
Currency translation differences - (6 808) -
Profit for the year - - 74 741
Issue of shares 19 121 (19 121) -
Employee share option scheme:
Proceeds of shares issued 879 (880) -
Purchase of treasury shares (772) - -
Share options cancelled - (4 116) 4 116
Dividends paid - - (41 494)
Balance at 30 June 2009 63 863 28 118 388 809
Total
attributable to
equity holders Minority Total
R`000 of the group interest equity
Balance at 1 July 2007 257 361 6 164 263 525
Equity instrument to be issued 38 241 - 38 241
Currency translation differences 13 780 - 13 780
Profit for the year 140 480 5 768 146 248
Issue of shares 80 606 - 80 606
Purchase of treasury shares (49 976) - (49 976)
Employee share option scheme:
Proceeds of shares issued - - -
Share options issued 5 126 - 5 126
Dividends paid (30 494) - (30 494)
Business combinations - (2 300) (2 300)
Balance at 1 July 2008 455 124 9 632 464 756
Currency translation differences (6 808) - (6 808)
Profit for the year 74 741 1 453 76 194
Issue of shares - - -
Employee share option scheme:
Proceeds of shares issued (1) 1 -
Purchase of treasury shares (772) - (772)
Share options cancelled - - -
Dividends paid (41 494) - (41 494)
Balance at 30 June 2009 480 790 11 086 491 876
Segmental information
for the year ended 30 June 2009 30 June 30 June
2009 2008
R`000 (Audited) (Audited)
Primary segment
Revenue
SA distribution 369 674 431 498
Foreign distribution 171 315 197 321
Product development and manufacturing 174 851 294 120
Group services 25 264 15 254
741 104 938 193
Elimination (164 870) (253 403)
576 234 684 790
Operating profit
SA distribution 55 572 43 307
Foreign distribution 30 539 50 624
Product development and manufacturing 19 466 99 663
Group services 7 544 10 508
Segment result 113 121 204 102
Investment revenue 2 198 3 016
Finance costs (3 682) (4 123)
Income from equity accounted investments (497) 128
Profit before taxation 111 140 203 123
Notes to the abridged financial statements
1. Basis of preparation and accounting policies
The consolidated annual financial statements set out in this report have been
prepared in accordance and comply with the statements of International
Financial Reporting Standards and are presented in terms of disclosure
requirements set out in IAS34-Interim Financial Reporting, the 1973 Companies
Act (as amended) and the JSE Limited Listing Requirements. The annual
financial statements are based on appropriate accounting policies,
consistently applied with those in the prior year, which are supported by
reasonable and prudent judgements and estimates.
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 land and buildings is R34.6 million.
A bond facility with Absa Bank is in place to part fund the purchase of the
buildings of R30 million.
The group also continued to increase the number of C-track units on rental
in customers` vehicles which amount to a net book value of R34.7 million.
3. Share capital, share premium and reserves
During the year 1 398 843 shares were issued as part payment for the profit
warranty for the DigiCore Limited share purchase from minorities that was met
for the year ended 30 June 2008.
The equity reserve was reduced by R19.1 million during the year 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 to the vendors were
repurchased in the market.
4. Income tax expense
The effective tax rate of 31% (2008: 28%) includes a Secondary Tax on Companies
(STC) charge on the interim and final dividends declared and paid during the
years ended 30 June 2009 and 30 June 2008.
5. 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 staff share
trust for share options given to employees that will convert in the future and
treasury shares bought back and re-issued as part payment for the DigiCore
Deutschland vendor liability, as well as shares issued during the year as part
payment for the purchase of the balance of shareholding in DigiCore Limited
from the minorities.
Post-balance sheet events
Subsequent to year-end, it has been established that the profit warranty for
the year ended 30 June 2009 for the DigiCore Limited share purchase from
minorities (as detailed in the SENS announcement of 30 June 2008) has been met
and as a result 2 405 078 shares were issued to the vendors in August 2009.
The vendors have further over achieved their profit warranty and a further
R4.5 million cash has been paid to them in August 2009 as part of the purchase
price.
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.
Audit report
The group`s consolidated annual financial statements for the year ended 30 June
2009 have been audited by PKF (Pta) Incorporated, registered auditors and
accountants. The board has approved these annual financial statements that have
been abridged for purposes of this report. The auditors` unqualified audit
report is available for inspection at the company`s registered address.
Corporate Governance
The group subscribes to the Code of Corporate Practice and Conduct as set out
in the King Committee Report on Corporate Governance in South Africa (2002).
CORPORATE PROFILE
DigiCore Holdings is a JSE listed group that specialises in the research,
design, development, manufacture, sales and support of technologically advanced
mobile asset tracking, management and information solutions for vehicle owners
locally and abroad.
DigiCore working in partnership with its customers, develop solutions that
deliver measurable business and operational benefits by providing total
visibility and control of mobile assets and mobile work forces;
supplying superior vehicle tracking solutions ranging from a basic track and
trace product to complete integrated enterprise level solutions for large fleet
owners.
DigiCore seeks to achieve outstanding long-term profitability for their
shareholders whilst maintaining a high standard of ethics and developing and
rewarding their people accordingly.
DIVIDEND ANNOUNCEMENT
In line with company policy, the board has declared a final dividend of 4 cents
per share (2008: 13 cents per share). This is after the payment of an interim
dividend of 6 cents per share (2008: 6 cents per share) in March 2009. This
brings the total dividend declared and paid for the year to 10 cents per share
(2008: 19 cents per share).
Payment will be made on Monday, 5 October 2009 to shareholders recorded in the
register on Friday, 2 October 2009. The last day to trade to qualify for the
dividend will be Friday, 25 September 2009 and the shares will be traded ex
dividend from Monday, 28 September 2009. Share certificates may not be
dematerialised or rematerialised between Monday, 28 September 2009 and Friday,
2 October 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 Schindehutte
*Non-executive #British
Company secretary
DA Nieuwoudt
Registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
Websites
www.digicore.com
www.ctrack.co.za
Date: 09/09/2009 08:00:07 Produced by the JSE SENS Department.
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