| Thu 19 Nov 2009, 7:05 | | SPS - Spescom - Reviewed consolidated results for the year ended 30 September |
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SPS
SPS
SPS - Spescom - Reviewed consolidated results for the year ended 30 September
2009
Spescom Limited
(Registration number 1987/001083/06)
Share code: SPS
ISIN: ZAE000017919
REVIEWED CONSOLIDATED RESULTS
for the year ended30 September 2009
SALIENT FEATURES
Spescom maintained turnover of R358,6 million with 51% increase in services
revenue
10,5% increase in earnings before tax
24,5% increase in headline earnings per share to 12,7 cents
26,8% increase in net asset value per share to 108,8 cents
Long standing management team with stable skills pool
Growth drivers in place
REVIEWED CONSOLIDATED INCOME STATEMENT
Reviewed Audited
year ended year ended
30 September 30 September
2009 2008
R`000 R`000
Total revenue 362 667 362 932
Continuing operations
Turnover 358 564 358 196
Cost of sales (183 611) (189 132)
Gross profit 174 953 169 064
Operating expenses after other (158 593) (152 837)
income
Earnings before interest and 16 360 16 227
taxation
Investment income 3 652 2 763
Finance charges (4 050) (4 543)
Operating profit before taxation 15 962 14 447
Taxation (7 225) (7 080)
Profit for the year attributable to 8 737 7 367
equity holders of the parent
Reconciliation of headline earnings
Net earnings attributable to 8 737 7 367
ordinary shareholders
Headline earnings adjustments 406 40
- Loss on sale of property, plant 155 40
and equipment
- Impairment of asset 251 -
Headline earnings 9 143 7 407
Number of shares in issue 78 768 056 78 768 056
Number of shares on which earnings 72 230 513 72 230 513
per share is calculated
Number of shares on which diluted 72 230 513 73 205 254
earnings per share is calculated
cents cents
Ratio analysis per share per share
Earnings per share:
- basic, for the profit for the 12,1 10,2
year attributable toordinary equity
holders of the parent
- diluted, for the profit for the 12,1 10,1
year attributable to ordinary equity
holders of the parent
Headline earnings per share:
- Headline earnings per share from 12,7 10,2
continuing operations
Net asset value per share 108,8 85,8
REVIEWED CONSOLIDATED BALANCE SHEET
Reviewed Audited
as at as at
30 September 30 September
2009 2008
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 58 227 48 733
Intangible assets 23 235 16 563
Investments and loans 5 684 5 680
Deferred taxation 9 255 13 404
96 401 84 380
Current assets 130 052 129 923
Inventories 12 097 13 870
Taxation prepaid 97 136
Trade and other receivables 54 062 72 199
Cash and cash equivalents 63 796 43 718
TOTAL ASSETS 226 453 214 303
Capital and reserves
Share capital and premium 45 283 45 283
Non-distributable reserves 9 362 (35)
Distributable reserves 31 039 22 302
Ordinary shareholders` equity 85 684 67 550
Non-current liabilities 33 311 27 831
Deferred maintenance revenue 5 027 3 290
Deferred taxation 8 412 3 377
Interest bearing liabilities 19 872 21 164
Current liabilities 107 458 118 922
Current portion of interest bearing 1 356 1 631
liabilities
Bank finance 925 -
Taxation 3 462 5 332
Trade and other payables 55 037 57 126
Provisions and deferred maintenance 46 678 54 833
revenues
TOTAL EQUITY AND LIABILITIES 226 453 214 303
REVIEWED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
year ended year ended
30 September 30 September
2009 2008
R`000 R`000
OPERATING ACTIVITIES
Cash generated by operations 33 808 27 460
Working capital changes 8 763 19 708
Cash generated by operating 42 571 47 168
activities
Net finance costs paid (398) (1 780)
Taxation paid (3 439) (5 516)
Net cash flow from operating 38 734 39 872
activities
INVESTING ACTIVITIES
Investment to maintain operations (16 551) (21 906)
Proceeds from sale of investment - 12 457
Repayment of loans (4) -
(16 555) (9 449)
FINANCING ACTIVITIES
Bank financing and facilities (644) (9 075)
(644) (9 075)
Net change in cash and cash 21 535 21 348
equivalents
Effects of foreign exchange (1 457) 485
Cash and cash equivalents:
- At beginning of year 43 718 21 885
- At end of year 63 796 43 718
REVIEWED SEGMENTAL ANALYSIS
Reviewed Audited
30 September 30 September
2009 2008
R`000 R`000
Sector turnover
Enterprise and broadcast application 209 762 272 500
and integration solutions
Telecommunications solutions 53 984 22 725
Services and other 94 818 62 971
358 564 358 196
Operating profit
Enterprise and broadcast application 7 744 12 440
and integration solutions
Telecommunications solutions 651 119
Services and other 7 965 3 668
16 360 16 227
Geographic turnover
South Africa 303 354 332 483
Rest of Africa 45 112 16 772
Europe and Middle East 8 568 8 046
USA 1 530 895
358 564 358 196
Proprietary Technology
Own IP 151 969 104 140
3rd Party IP 206 595 254 056
358 564 358 196
REVIEWED STATEMENT OF CHANGES IN EQUITY
ATTRIBUTABLE TO EQUITY HOLDERS OF THE
PARENT
Distributable Share Share
reserves capital premium
R`000 R`000 R`000
Balance as at 30 14 935 684 44 599
September 2007
Revaluation of land and
buildings net of
depreciation
Share based payments
reserve
Foreign currency
translation profit
arising on consolidation
Net profit for the year 7 367
Balance as at 30 22 302 684 44 599
September 2008
Revaluation of land and
buildings net of
depreciation
Share based payments
reserve
Foreign currency
translation loss arising
on consolidation
Net profit for the year 8 737
Balance as at 30 31 039 684 44 599
September 2009
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
Non-
distributable
reserves Total
R`000 R`000
Balance as at 30 (5 816) 54 402
September 2007
Revaluation of land and 4 947 4 947
buildings net of
depreciation
Share based payments 695 695
reserve
Foreign currency 139 139
translation profit
arising on consolidation
Net profit for the year 7 367
Balance as at 30 (35) 67 550
September 2008
Revaluation of land and 11 423 11 423
buildings net of
depreciation
Share based payments 47 47
reserve
Foreign currency (2 073) (2 073)
translation loss arising
on consolidation
Net profit for the year 8 737
Balance as at 30 9 362 85 684
September 2009
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
Basis of presentation
These financial statements have been compiled in accordance with IAS 34 (Interim
Financial Reporting). The presentation of these results also conforms to the
Listings Requirements of the JSE Limited and Schedule 4 of the South African
Companies Act. The accounting policies used in preparation of the results are
consistent in all material respects with the prior year.
Restatement of comparatives
The comparatives to the segmental analysis have been restated in accordance with
a change in measurement of segments during the current year.
Auditors` review
The external auditors, Ernst & Young Inc, have issued their review opinion on
the Group`s preliminary results for the year ended 30 September 2009.
Our review was conducted in accordance with the International Standard on Review
Engagements 2410, "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity", and nothing has come to our attention that
causes us to believe that the accompanying financial information does not
present fairly, in all material respects, the financial position of the Group as
at 30 September 2009, and of its financial performance and its cash flows for
the twelve-month period then ended in accordance with International Financial
Reporting Standards.
COMMENTARY
Financial review
Notwithstanding the adverse operating environment which led to lower IT
spending, Spescom Limited reported stable revenue of R362,7 million (2008:
R362,9 million) for the year ended 30 September 2009. The Group delivered on its
strategy to grow the contribution of services and annuity revenue contracts,
which showed an increase of 51% to R94,8 million (2008: R63,0 million). Spescom
Media IT and Spescom Telecommunications maintained their positive trends from
the first half of the financial year, dampening the effect of the slowdown which
impacted the flow of new projects in Spescom DataVoice and Spescom DataFusion.
Gross profit for the Group grew by 3,5% to R175,0 million (2008: R169,1 million)
supported by the increased services component. Operating profit before tax
improved by 10,5% to R16,0 million (2008: R14,4 million) despite inflationary
pressures on wage costs imposed by ongoing shortages of skilled resources and a
once off retrenchment cost of R2,2 million.
Attributable profit of R8,7 million was reported (2008: R7,4 million), while
headline earnings per share improved by 24,5% to 12,7 cents (2008: 10,2 cents).
The Group achieved a 23,1% increase in cash generated from operations of R33,8
million (2008: R27,5 million), supported by the continued improvement in
operating performance and judicious working capital management. Net finance
charges of R398 000 (2008: R1,8 million) as a result of lower gearing also
contributed to the improved profitability. Cash and cash equivalents showed an
increase of R21,5 million to R63,8 million (2008: R43,7 million), with R16,6
million being invested to maintain operations.
Net asset value per share increased by 26,8% to 108,8 cents per share (2008:
85,8 cents per share).
The gearing position of the Group improved to 25,9% (2008: 33,7%).
Operational review
Spescom`s business model centres on the delivery of business communication
solutions, by providing best of breed products as well as the associated
integration services and long-term maintenance agreements. The Group`s operating
divisions all showed a positive trend in service related revenues during the
year, by harnessing the strength of their integration skills. These are
increasingly delivering a tangible differentiator and growth driver for Spescom.
Spescom DataVoice`s local revenues remained unchanged due to the adverse economy
which impacted its customers` ability to implement new systems. However, service
revenues showed an increase of 53% as the division benefited from its heightened
focus on services. It achieved additional sales of workforce optimisation and
risk management products to a major cellular network, increasing its penetration
of the local telecommunications environment. During the year DataVoice`s
strategy to establish new routes to market through partnerships started paying
off as the division supplied products to a major international equipment
manufacturer. It maintained investments in product development, adding further
functionality to its offering during the year.
Although Spescom DataFusion`s service revenues increased by 58% during the year,
this was not sufficient to offset the impact of lower discretionary spending
among its corporate clients and the division reported a 33% decline in revenue.
However, differentiated by its best of breed product range and strong
integration skills, the division continued to win new contracts. Its managed
services offering supported an increase in gross margins and is gaining further
awareness. A professional services capability was established to support
customers` increased requirement for innovation and tangible returns on
investment, which should result in increased future service revenues.
Spescom Media IT delivered a strong performance with 48% revenue growth as it
reaped the benefits of its business development activities in the SADC region.
The division expanded its footprint through the supply of turnkey integrated
broadcast solutions to the national broadcasters in Mauritius and Namibia. The
migration to digital television broadcast and the issue of new community
television licences is set to support future demand and Media IT is well
positioned to benefit with its compelling range of products and strong
integration skills.
Spescom Telecommunications doubled its revenue which supported an improvement in
margins. It continued the infrastructure roll out for Neotel and concluded a
three year maintenance agreement on the network, based on its specialised
services capability. The division`s services revenues represent 16% of total
revenue, having shown significant growth during the year. The Seacom undersea
cable, to be followed by several additional undersea cables in the medium term,
is set to unlock opportunities in the SADC telecommunications industry. Locally,
legislative changes enabling the conversion of VAN`s licences into ECNS and ECS
licences should lead to localised network roll out opportunities for Spescom
Telecommunications, such as residential and commercial estates.
Board of Directors
Mr Mutle Mogase resigned as non-executive director and chairman of Spescom with
effect from 5 June 2009, in order to focus on his chairmanship of African Bank
Limited. The Spescom board thanks Mr Mogase for his contribution to the affairs
of the company over the past six years and wishes him every success in his
future endeavours.
Dr Simo Lushaba was appointed as non-executive director and chairman of Spescom
to replace Mr Mogase with effect from 6 June 2009. Dr Lushaba holds a BSc
(Honours), an MBA as well as a Doctorate of Business Administration (DBA) and
has engaged in in-depth studies of corporate governance. Dr Lushaba has held a
number of key leadership roles in both the private and public sector and
currently focuses on the development of his investment company, Simosezwe
Investments (Pty) Limited. He serves on boards of several companies as a non-
executive director. The Spescom board welcomes Dr Lushaba and looks forward to a
long and productive association with him.
Ms Dashni Sinivasan resigned as financial director of Spescom with effect from
30 May 2009. The board expresses its appreciation for her valuable contribution
to Spescom and wishes her well in her new position. Ms Amanda Alback joined the
Group as Chief Financial Officer as of 1 August 2009 and is a member of
Spescom`s Executive Committee. Ms Alback is a Chartered Accountant (SA) and
worked at SAA and Vodacom prior to joining the Group.
The board is cognisant of the JSE Listing Requirement for the appointment of a
financial director and is committed to finalising this appointment as soon as
the audit committee has satisfied itself of the appropriateness of the expertise
and experience of the potential candidate.
Prospects
Although the global recession is showing signs of ending, the domestic economy
is only expected to recover towards the end of 2010.
However Spescom`s long-term growth drivers are in place:
The deregulation of the local telecommunications environment is spawning an
increase in the number of independent network operators.
Increased availability and lower bandwidth costs in South Africa should
increase the country`s appeal as a call centre outsourcing destination.
The digitisation of the broadcast industry creates opportunities for Media IT
while the Soccer World Cup will also deliver short-term opportunities. Further
afield in the SADC region, the Group has identified prospects in broadcasting
which it is well positioned to convert into revenue in the medium term.
The economic downturn has led to an increased focus on customer satisfaction
and retention while new legislation is resulting in tighter compliance
requirements. Spescom DataVoice`s risk mitigation and workforce optimisation
solutions are well positioned to benefit from these trends.
Looking forward, the Group will continue to evaluate opportunities to build
critical mass and leverage its competencies and skills to deliver on its growth
objectives and is still trading under cautionary on the JSE Limited. In support
of these objectives Spescom will also continue to make the required investments
to leverage its skills pool, thereby increasing its services revenues to support
sustainably higher operating margins.
During the year under review, the Group`s results continued to improve despite
the highly challenging operating environment imposed by the global slowdown.
With its long standing and experienced executive team, and its specialist skills
pool, Spescom is positioned to weather the current economic conditions.
Dividends
Given the uncertain timing of the local economic recovery, the board considered
it prudent to reinvest the cash generated from operations in the business and as
such has not declared a dividend.
By order of the board
JI Palmer
Chief Executive Officer
19 November 2009
Directors:
DS Lushaba (Chairperson)*
PH Fick
TS Makore
C Nkosi*
L Ogilvy*
JI Palmer
P Vallet*
*Non-executive
Registered office:
Spescom Park
Cnr Alexandra Avenue and Second RoadMidrand, 1685
Tel: +27 11 266 1500
Secretary:
A van der Merwe
Registrar:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Tel: +27 11 370 5000
www.spescom.com
Date: 19/11/2009 07:05:09 Produced by the JSE SENS Department.
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