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IQG
IQG
IQG - IQuad - Unaudited abridged interim results for the period ended 31
August 2009
IQuad Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 2004/025177/06
Share code: IQG
ISIN: ZAE000101622
("IQuad" or "the Company" or "the Group")
Unaudited abridged interim results for the period ended 31 August 2009
General comments and prospects
Income from our core businesses during the six months under review has been
under pressure due largely to uncontrollable macro factors, but we have
managed to offset this reduction in earnings to some extent by accruing new
clients and gaining market share. As in previous years, due to seasonal
factors, we expect performance in the second half to exceed that of the six
months under review.
While we believe that the economic environment is stabilising, we do not
anticipate a significant recovery of the general market over the next six
months.
Organic growth prospects
Over the past six months market share across all key areas of our business has
increased. We will continue to focus on client retention and the development
of existing and new strategic alliances to gain further market share. Our
cross-selling initiatives are also bearing fruit and we expect this trend to
continue.
Acquisitive growth prospects
No material acquisitions were made in the past six months as we have focused
on consolidating market dominance in our niche business areas. We remain
mindful of considering only acquisitions that will add meaningfully to our
earnings per share. Our focus on this growth area will increase in the coming
months as we believe current market conditions are favourable to adding value
through acquisitions.
We have specific goals to expand our exposure in Gauteng through organic and
acquisitive growth and will be strengthening our marketing resources in this
area.
Divisional/segment report
Investment Incentives
Incentives benefited from improved claims processing by the Department of
Trade & Industry (DTI) related to the Small Medium Enterprise Development
Programme (SMEDP) in the latter part of the period. Although revenue has
increased by 10% when compared with the comparative period, the division has
not performed as expected.
There has been a slower than expected uptake of the new Enterprise Investment
Programme (EIP), largely due to depressed investor sentiment, but we are
satisfied with the 95 projects secured during the period. We expect uptake of
EIP to accelerate as investor confidence increases.
We look forward to evaluating opportunities related to the launch of two new
investment incentives, namely the Automotive Investment Scheme (AIS) and an
additional wear and tear allowance under S121 of the Income Tax Act for
Industrial Policy Projects.
As a result of the economic slowdown there has been a decline in our income
from the administration of the Motor Industry Development Programme (MIDP),
and we do not expect any significant improvement over the next six months.
Income from this programme lags the actual market by approximately six months.
However, some of the negative impact experienced has been offset by the
accrual of new clients for MIDP administration and Import Rebate Credit
Certificate (IRCC) trading.
Global trade services
The general downturn in global trade activity as well as the recent strength
in the Rand has had a negative impact on earnings as most of our fees are
based on Rand turnover.
We have however managed to counter a reduction in earnings through our
aggressive marketing efforts over the last six months, which has resulted in
building up a sizeable pipeline of new clients, particularly in terms of duty
optimisation services. We believe that the global trend to trade protectionism
will create further opportunities in this area of our business.
We are pleased to have finalised a joint-venture agreement with International
Trade Institute Southern Africa (ITRISA) in a new training venture. We intend
using our joint skills and resources to expand our network of clients and
strategic alliances, thereby further enhancing the Group`s reputation of
providing value-adding services.
Audit and verification
Our BEE Verification business became one of 22 accredited agencies in April
this year, stimulating the demand for verification certificates to the extent
that new contracts signed during the period have increased by more than 70%
year on year.
In response to the increasing demand, we will continue to invest in capacity.
We expect demand to accelerate when Government implements the Preferential
Procurement Policy, which will compel companies to become verified should they
want to do business with Government directly or indirectly. Investment in our
national infrastructure remains a priority, further enhancing our status as
the only agency with a national footprint.
Business development
The recent merger of the Umsobomvu Youth Fund (UYF) and the National Youth
Council, into the National Youth Development Agency, has resulted in funding
problems for its programmes, causing a substantial reduction in the issue of
service vouchers for budding entrepreneurs. This has resulted in a sudden and
unexpected reduction in opportunities to provide services to entrepreneurs in
terms of these programmes.
To counter this challenge, more emphasis is being placed on opportunities
related to Government`s broad-based BEE objectives of developing black
entrepreneurs and upskilling those who were previously disadvantaged. An
increasing number of corporates in South Africa are being pressured to focus
on the enterprise development and skills development elements of BBBEE
compliance, affording us the opportunity to assist them in achieving their
required BBBEE status.
Sustainability
Market share
Due to the slower market conditions we intensified our marketing efforts and
we have succeeded in retaining existing clients and acquiring new clients
across all business segments. We will continue with this strategy to grow
market share.
Cash flow
The Group`s ability to generate cash has continued to be strong. Cash
generated from operations, before working capital changes amounts to R7.16
million. The increase in working capital relates mainly (R4.5 million) to an
increase in Incentive receivables. Incentive receivables are tradable assets
consumed in the Group`s normal business activities.
Our cash position could be further enhanced should we succeed in selling a
part or the whole of our interest in IQuad Property Investment (Pty) Limited.
Our BEE partners in this venture have not to date been able to fund their
portion of the capital investment. They are, however, likely to be in a
position to contribute a portion of their commitment in the near future.
Human resources
We have over the past six months managed to redeploy resources from areas with
excess capacity, thereby retaining our skilled and experienced employees which
will stand us in good stead when the market recovers.
Condensed statement of financial position
Notes Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
R000 R000 R000
Assets
Non-current assets 141 368 114 110 133 688
Property, plant and equipment 37 668 2 313 31 230
Goodwill 95 746 95 711 95 746
Intangible assets 3 429 277 2 842
Investments in associates 391 13 522 426
Available-for-sale financial 401 401 401
assets
Deferred tax assets 3 733 1 886 3 043
Current assets 34 247 43 878 31 316
Work in progress 3 565 3 848 4 083
Current tax assets - - 30
Amount owing by associates 131 17 866 85
Trade and other receivables 1 26 597 19 625 21 901
Loan receivable 1 404 - 113
Cash and cash equivalents 2 550 2 539 5 104
Non-current asset held for sale 2 - - 10 000
Total assets 175 615 157 988 175 004
Equity and liabilities
Equity and reserves 136 296 132 142 136 108
Issued ordinary capital 103 867 103 810 103 867
Foreign currency translation 30 (168) 30
reserve
Accumulated profits 27 832 25 663 27 087
Attributable to equity 131 729 129 305 130 984
shareholders of the Company
Minority interest 4 567 2 837 5 124
Non-current liabilities 20 083 - 12 464
Operating lease liabilities 476 - 666
Deferred tax liabilities 702 - 939
Borrowings 18 905 - 10 859
Current liabilities 19 236 25 846 26 432
Current tax liabilities 2 691 2 874 2 402
Trade and other payables 8 195 13 261 10 585
Provisions 373 498 276
Borrowings 7 977 9 213 12 597
Dividend payable - - 572
Total equity and liabilities 175 615 157 988 175 004
Condensed statement of comprehensive income
Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
R000 R000 R000
Continuing operations
Revenue 35 142 35 366 80 051
Cost of services rendered (16 266) (16 205) (36 974)
Gross profit 18 876 19 161 43 077
Other operating income 476 596 125
Administrative expenses (12 831) (10 789) (23 598)
Operating profit 6 521 8 968 19 604
Investment income 1 243 2 221 4 417
Share of profits/(losses) of
associates (36) (147) 44
Finance costs (1 171) (369) (1 421)
Profit before taxation 6 557 10 673 22 644
Taxation (2 425) (4 271) (8 074)
Profit for the period from
continuing operations 4 132 6 402 14 570
Discontinued operations
Loss for the period from
discontinued operations (12) (1 095) (4 482)
Profit for the period 4 120 5 307 10 088
Other comprehensive income:
Exchange differences on translation - - 338
of foreign operation
Income tax thereon - - -
Total comprehensive income for the 4 120 5 307 10 426
period, net of tax
Profit attributable to:
Minority interest (557) (226) 42
Owners of the parent 4 677 5 533 10 046
4 120 5 307 10 088
Total comprehensive income
attributable to:
Minority interest (557) (226) 182
Owners of the parent 4 677 5 533 10 244
4 120 5 307 10 426
Basic and diluted earnings per
ordinary share (cents)
Continuing operations 16,7 23,6 51,7
Discontinued operations - (3,9) (15,8)
Total basic earnings per share 16,7 19,7 35,9
Condensed consolidated statement of changes in equity
Owners of Minority Total
the interests equity
parent
R000 R000 R000
Balance at 1 March 2008 - audited 126 410 3 887 130 297
Treasury shares utilised in business 2 979 - 2 979
combinations
Total comprehensive income for the 5 533 (226) 5 307
period
Dividends (5 617) (1 794) (7 411)
Increase in minority interest on - 970 970
business combinations
Balance at 31 August 2008 - unaudited 129 305 2 837 132 142
Total comprehensive income for the 4 711 408 5 119
period
Dividends (3 089) (572) (3 661)
Treasury shares 57 - 57
Increase in minority interest on - 2 451 2 451
business combinations
Balance 1 March 2009 - audited 130 984 5 124 136 108
Total comprehensive income for the 4 677 (557) 4 120
period
Dividends (3 932) - (3 932)
Balance 31 August 2009 - unaudited 131 729 4 567 136 296
Condensed statement of cash flows
Note Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
R000 R000 R000
Cash flows from operating activities (2 746) 4 407 6 404
Cash generated from operations 3.1 215 6 074 13 688
Investment income 1 243 2 221 2 711
Finance costs (1 171) (369) (1 521)
Taxation paid (3 033) (3 519) (8 474)
Cash flows from investing activities 2 057 (6 586) (10 785)
Acquisition of property, plant and (6 710) (1 099) (3 793)
equipment
Proceeds on disposal of property, plant - - 119
and equipment
Acquisition of intangible assets (683) - (1 941)
Proceeds on disposal of intangible - - 163
assets
Proceeds on disposal of associate - - 200
Proceeds on disposal of non-current 9 450 - -
asset held for sale
Investment in subsidiaries - (5 487) (5 277)
Investment in associate - - (256)
Cash flows from financing activities 2 577 (20 910) (19 319)
Minority shareholders` loans advanced - (521) 601
Amounts advanced to associate (46) - (11 913)
Amounts received from associate - - 5
Loans receivable advanced (741) (12 978) -
Loans payable advanced 7 868 - 2 488
Dividends paid (4 504) (7 411) (10 500)
Increase /(decrease) in cash and cash 1 888 (23 089) (23 700)
equivalents
Cash and cash equivalents at beginning (7 285) 16 415 16 415
of period
Cash and cash equivalents at end of (5 397) (6 674) (7 285)
period
Selected explanatory notes
Basis of preparation and accounting policies
This interim financial report has been compiled in accordance with
International Financial Reporting Standards (IFRS) and complies with IAS 34:
Interim Financial Reporting.
The accounting policies and critical accounting estimates and judgements
applied to these financial statements are consistent with those applied for
the year ended 28 February 2009.
Financial results
This interim financial report has not been reviewed or audited by the Group`s
auditors.
Reclassification adjustment
Where necessary, August comparative information has been adjusted to conform
to changes in presentation affected to the 28 February 2009 annual report. The
following changes were made to comparative amounts:
- Trade and other receivables amounting to R400 000 have been reclassified
as available-for-sale financial assets. This amount represents a loan to
National Money Transfer (Pty) Limited and is considered to be part of the
investment.
- Certain amounts have been reclassified out of revenue and operating
expenses to cost of services rendered in the income statement.
Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
R000 R000 R000
1. Trade and other receivables
Trade debtors, net of impairment 14 212 18 830 14 023
Incentive receivables 10 400 - 5 944
Sundry debtors 1 985 795 1 934
26 597 19 625 21 901
2. Non-current assets held for sale and discontinued operations
The Group`s investment in associate, Afropulse 366 (Pty) Limited, was sold for
its carrying amount as at 1 March 2009.
The assets, performance and cash flows associated with these discontinued
operations are summarised below.
Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
R R R
Non-current assets held for sale
Investment in associate - - 10 000
Analysis of the results of discontinued
operations
Revenue - 1 279
Impairment of carrying value of - (1 144) (1 486)
associate
Equity-accounted profits / (losses) of - (1 244)
associates
Investment income - 222
Finance costs - (100)
Administrative expenses (12) (3 204)
Net loss before tax (12) (1 144) (4 533)
Tax - 49 51
Loss for the period from discontinued (12) (1 095) (4 482)
operations
Cash flows associated with discontinued
operations
Operating cash flows - - (802)
Investing cash flows - - (1 362)
Financing cash flows - - 532
- - (1 632)
3. Notes to the statement of cash flow
3.1 Cash generated by operations
Profit before tax, including 6 545 9 529 18 111
discontinued operations
Non-cash adjustments 543 2 245 4 173
Working capital changes:
Work in progress 518 (350) (585)
Trade and other receivables (4 700) (3 726) (1 313)
Trade and other payables (2 691) (1 624) (6 698)
215 6 074 13 688
Dividends
The directors of IQuad are pleased to announce that they declared a dividend
of 8 cents per share on 7 October 2009 and wish to ensure that shareholders
receive payment thereof as expeditiously as possible in terms of the JSE
Listings requirements.
The salient dates for the payment of this dividend are set out below:
Last day to trade cum-dividend Friday, 23 October 2009
Trading ex-dividend commences Monday, 26 October 2009
Record date Friday, 30 October 2009
Payment date Monday, 2 November 2009
Share certificates may not be dematerialised or rematerialised between Monday,
26 October 2009 and Friday, 30 October 2009, both days included.
Headline earnings, dividend and net asset per
share
Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
Cents Cents Cents
Headline and diluted earnings per
share
Headline earnings per share from 16.8 23.7 56.4
continuing operations
Headline earnings per share from - (3.3) (6.0)
discontinuing operations
Total headline earnings per share 16.8 20.4 50.4
Dividend per share
Interim 8.0 11.0 11.0
Final - - 14.0
Total dividend per share 8.0 11.0 25.0
Number of ordinary shares (weighted 27 979 28 085 27 979
and issued)(R`000)
R R R
Headline earnings reconciliation
Continuing operations 4 689 6 628 14 478
Discontinued operations (12) (1 095) (4 432)
Basic earnings attributable to 4 677 5 533 10 046
ordinary shareholders
Loss/(profit) on disposal of property, 29 (10) 31
plant and equipment
Impairment of goodwill - 163 3 935
Impairment of investments - 181 -
Profit on disposal of investments - (129) (186)
Impairment of intangible assets - - 460
Share of associate revaluation of - - (181)
investment property
Continuing operations 4 718 6 653 15 788
Discontinued operations (12) (915) (1 683)
Headline earnings 4 706 5 738 14 105
Net asset value per ordinary share
Total assets (cents) 470.8 460.4 468.2
Tangible assets (cents) 116.7 118.6 115.8
Segment report
The Group has four reportable segments:
Investment incentives
Includes consulting services aimed at enabling clients to obtain the maximum
benefits and refunds from Government and Department of Trade and Industry
(DTI) incentive programmes.
Global trade services
Offer import and export business solutions, process automation, customs
consulting, rebate administration, interest rate and foreign currency risk
management.
Business development
Provides management systems implementation, SME development and business
process automation.
Verification services
Conduct quality assurance, VAT and customs audits, verify BEE compliance and
provide critical certification to qualifying companies.
Operating segments Segment Segment Segment Segment
revenue - revenue - profit assets
internal external before
taxation
R000 R000 R000 R000
For the period ended 31 August
2009 - unaudited
Investment incentives 180 15 831 6 006 18 999
Global trade services - 12 225 4 754 21 630
Business development 366 5 516 (1 218) 11 509
Verification services - 1 393 (883) 1 493
546 34 965 8 659 53 631
For the period ended 31 August
2008 - unaudited
Investment incentives - 15 165 6 550 12 373
Global trade services - 14 435 4 410 13 392
Business development - 4 472 (1 315) 17 634
Verification services - 1 861 113 1 832
- 35 933 9 758 45 231
For the period ended 28
February 2009 - audited
Investment incentives 179 32 621 14 444 17 162
Global trade services - 31 095 12 076 17 134
Business development 1 056 12 325 (3 496) 8 856
Verification services - 5 277 (10) 1 926
1 235 81 318 23 014 45 078
Reconciliation of segment profit
Unaudited Unaudited Audited
31 Aug 09 31 Aug 08 28 Feb 09
R000 R000 R000
Total profit before tax for reportable 8 659 9 758 23 014
segments
Unallocated profits/(losses) 3 195 (327) 17 720
Elimination of intersegment profits (5 309) 98 (22 623)
Discontinued operations disclosed 12 1 144 4 533
separately
Group profit before tax as per 6 557 10 673 22 644
statement of comprehensive income
Transactions with individual clients did not amount to 10% or more of the
Group`s total revenue.
8 October 2009
Designated Advisor
PSG Capital (Pty) Limited
Date: 08/10/2009 14:10:01 Produced by the JSE SENS Department.
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