| Tue 23 Mar 2010, 8:55 | | RGT - Abridged Prospectus Relating to the Listing of RGT Smart |
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RGT
RGT - Abridged Prospectus Relating to the Listing of RGT Smart
RGT SMART MARKET INTELLIGENCE LIMITED
Incorporated in the Republic of South Africa)
(Registration number: 2008/014367/06)
Share Code: RGT & ISIN: ZAE000143715
("RGT SMART" or "the company")
ABRIDGED PROSPECTUS RELATING TO THE LISTING OF RGT SMART
The prospectus to which this announcement relates has been prepared in terms
of the Listings Requirements ("the Listings Requirements") of the JSE Limited
("the JSE"), relating to an offer for subscription of RGT SMART ordinary
shares by way of:
- an offer to the general public by the Company for subscription of up to
57 000 000 ordinary shares in the issued share capital of the Company at
an issue price of 10 cents per ordinary share; and
- the subsequent listing of the ordinary shares of RGT SMART on the
Alternative Exchange (AltX) of the JSE.
In terms of the offer, selected and public investors will be offered the
opportunity to subscribe for ordinary shares.
In the event of an over-subscription in terms of the offer, the directors will
adjust the allocation of applicants on an equitable basis in accordance with
the JSE Listings Requirements. The shares offered in terms of this prospectus
will rank pari passu with the existing ordinary shares in RGT SMART.
At the date of closing of the offer and assuming that the offer is fully
subscribed, RGT SMART`s share capital will comprise 500 000 000 authorised
ordinary shares and 437 800 000 issued ordinary shares of R0.01 each with
share capital value of R4 378 million and share premium of R39 130 million.
There will be no convertible or redeemable shares issued. There is a minimum
subscription of 38 080 000 shares which needs to be raised by the issue of
shares in terms of this prospectus in order to achieve the 10% spread of
shareholders as stipulated in the AltX Listings Requirements and hence this
offer has not been underwritten. The Company does not have any treasury
shares in issue.
Subject to achieving a minimum share capital and reserves of R2 million as
defined in the JSE Listings Requirements as well as achieving the required
spread of public shareholders in terms of the JSE Listings Requirements, which
stipulates that the public must hold a minimum of 10% of each class of equity
securities and the number of public shareholders shall be at least 100, being
obtained pursuant to the offer, the JSE has granted RGT SMART a listing in
respect of up to 437 800 000 ordinary shares on the AltX under the abbreviated
name "RGT SMART", share code "RGT" and ISIN ZAE0000143715. It is anticipated
that the listing of the shares on AltX will become effective from the
commencement of business on Wednesday, 14 April 2010.
Applications for ordinary shares in RGT SMART must be for a minimum of 10 000
ordinary shares at 10 cents per share, amounting to R1 000, and in multiples
of 100 ordinary shares thereafter. Fractions of shares in RGT SMART will not
be issued.
The shares in RGT SMART will only be trading in electronic form and, as such,
all investors who elect to receive their ordinary shares in RGT SMART in
certificated form, will have to dematerialise their certificated shares should
they wish to trade therein.
An English copy of this prospectus, accompanied by the documents referred to
under "Registration of Prospectus", was registered by the Registrar of
Companies on 12 March 2010 in terms of section 155(1) of the Companies Act,
1973 (Act 61 of 1973), as amended.
Background, incorporation and nature of business
RGT SMART was incorporated as a public company in the Republic of South Africa
on 11 June 2008 in order to act as the holding company for the RGT SMART Group
ahead of the Group`s intended listing. RGT SMART was established by the
founders and there has been neither change in control nor a change in trading
objects since the incorporation of the Company.
RGT SMART is an investment holding company engaged in market intelligence and
data analysis in all aspects and related activities and operates in South
Africa. RGT SMART currently has two wholly-owned subsidiaries namely; KA
SMART, currently representing approximately 30% of the business based on both
turnover and profitability, which focuses on the Group`s management
consultancy portion of the business and which was incorporated on 26 June
2001, and RGT, currently representing approximately 70% of the business, which
focuses on the Group`s statistical information for the automotive industry and
which was incorporated on 30 December 1969. Other than the acquisition of RGT
and KA SMART in June 2008, there has been neither change in control nor a
change in trading objects since the incorporation of RGT or KA SMART in the
past five years. The vendors of RGT and KA SMART have become the controlling
shareholders in RGT SMART.
RGT SMART has no government protection and investment encouragement law
affecting the business or its subsidiaries.
KA SMART
Established in 2001, KA SMART is primarily a specialist market research
company, providing high value market intelligence, market research and
consulting services. While the company operates across all industries,
management`s experience base and track record has tended to focus the business
on the South African motor industry.
Typical KA SMART projects involve market evaluations for new and existing
products, across all industries but with a strong focus on the motor industry,
providing advanced analysis and interpretation to assist clients in making
critical strategic decisions. This is in direct alignment to global trends.
KA SMART is also involved in customer satisfaction and service quality systems
(SQS) for a number of clients. After a development and testing phase in 2005,
KA SMART launched an SQS program for the Motor Body Repairer (MBR) industry
that has been spectacularly successful. The system involves the integration of
SMS, Email, Internet and Call-Centre technology and has grown to a subscriber
base of over 600 subscribers.
The program is now a compulsory component of MBR approvals for Audi, Citroen,
Cadillac, Chevrolet, Chrysler, Dodge, Honda, Hummer, Jaguar, Jeep, Land Rover,
Lexus, Mercedes Benz, Mitsubishi, Nissan, Opel, Renault, SAAB, Subaru, TATA,
Toyota, Volkswagen and Volvo. Growth and development is ongoing.
KA SMART has developed exclusive technology and is contracted primarily
through referrals and repeat business. Long-standing relationships with major
players in the motor industry result in a flow of enquiries and contracts and
ensure ongoing business for the company. In the motor industry, the expertise,
experience and reputation of directors Messrs PB de Vantier and AW Calcutt
further ensure business opportunities.
KA SMART`s exclusive technology is presently not available elsewhere and a
number of clients are contractually committed to use KA SMART services on an
ongoing basis.
Income Streams
The company is focusing sales and business activity in a number of key revenue
generating areas:
MBR SQS
DSI & CSI Projects
Ad Hoc Research Projects
New Product/Vehicle Clinics
Multi-Client Reports/Projects
SQS Lite
Other SQS
Motor Dealer SQS
Fast Fit Industry SQS
These are expanded on below:
MBR SQS: KA SMART developed a unique product - the Service Quality System
(SQS). This system provides clients with a systematised process for customer
care and service level improvement. Technology based using a custom developed
software platform; the program is inexpensive and highly effective. The
business model is considered innovative.
The effectiveness of the program enabled KA SMART to secure contracts with
most major brands that have made the program a compulsory component for all
their "Approved" motor body repairers.
The contracts with these manufacturers are of indefinite duration with 12
month termination clauses. The contracts with their respective motor body
repairers individually require three month`s notice of termination if, for
example the individual motor body repairer were to lose his manufacturer
approval/s.
Many of the MBRs have multiple approvals and therefore even if an individual
MBR lost one or more of the approvals held they would still be committed to
the program. This provides stability for the program to endure - the loss of
one - or even more of the manufacturer contracts would, because of the
overlap, have little or no material impact on the program`s revenue. There are
currently over 600 MBRs contracted to the program.
The MBR SQS program`s growth potential is still significant - there are key
opportunities for further growth:
Growth in number of individual MBRs - there are as many as 4 000 motor body
repairers in South Africa, but realistically only 1 000 are sufficiently
sophisticated to be considered for manufacturer approval status - this then
sets the upper limit for the potential for the MBR SQS product/service.
Growth in number of SQS specifying Manufacturers/Other Brands - there are over
35 different manufacturer brands in South Africa and several insurance
companies who all have Quality Assurance Programs for "Approved" MBRs growth -
securing these contracts does not necessarily add many more individual MBRs
but can significantly increase the revenue without adding any additional
overhead or expense.
International Expansion - similar "Approval" programs exist in major
international markets in Europe, USA and Australasia - none of whom have a
program similar to the KA SMART SQS. KA SMART believes that there is potential
for the program to be exported to some international markets.
Motor Dealer SQS: The SQS product is ideal for use by Motor Dealers. There are
at least 1 500 franchised motor dealers in South Africa - separate programs
would be needed for New Car Sales, Used Car Sales and Vehicle Service thus
trebling the potential to 4 500 SQS contracts. Average contract size is at
least R1 500 per month making the potential for this product over R100 million
per annum.
A business model similar to that employed to secure the MBR SQS program will
be employed. The program has been endorsed by the National Automobile Dealers
Association (NADA) and initial discussions and pilot programs with major
manufacturers and dealer groups have commenced.
Fast Fit Industry SQS: A version of the SQS program suitable for use in the
Fast-Fit (Exhausts/Batteries/Tyres) industry has been developed. There are 2
500 franchised Fast-Fit businesses in South Africa. At R2 500 per month for a
program with expanded CRM functionality the program is very cost effective and
has a revenue potential of up to R75 million per annum. Again, the established
business model will be applied.
SQS Lite: A lower cost version of the SQS program has been developed for
smaller companies or those who do not need the full service version of the SQS
program.
The South African Motor Body Repairers Association (SAMBRA) has made SQS Lite
a compulsory requirement of their national MBR grading program from March
2008. There are potentially 500 SAMBRA graded members who are not yet part of
the main SQS program therefore the potential annual income from this contract
is over R2 000 000.
Subscriptions are already in force and the base of customers enrolled in the
SQS Lite program is growing.
New Product/Vehicle Clinics: KA SMART has developed a reputation as an expert
in the area of New Vehicle Product Clinics. Typical contracts are valued at
R200 000 to R600 000 although many run well over R1 000 000. The work is ad
hoc in nature, however with over 35 vehicle brands constantly developing and
launching new products, a steady flow of enquiries for these projects is
experienced.
Ad Hoc Research Projects: A number of projects fall into this category.
Although ad hoc in nature many projects are repeated each year. Typical
examples are:
Volkswagen MBR Accreditation - an annually renewed contract to conduct initial
evaluations prior to the accreditation of a new VWSA approved motor body
repairer.
WesBank Dealer Satisfaction Index - a contract to measure, every six months,
the satisfaction levels of motor dealerships with the various banks and
finance houses across South Africa.
Automotive Pricing Monitor - a monthly project providing tracking and
interpretation of price movements in the passenger car segment.
National Automobile Dealer Association DSI - an annual contract with NADA to
measure the satisfaction levels of motor dealerships with their respective
manufacturer, importer or franchisor.
SAVRALA Manufacturer of the Year - an annual contract to produce Manufacturer
of The Year results for the South African Vehicle Rental and Leasing
Association.
Multi-Client Reports: Multi-client reports are produced speculatively and then
sold to a range of clients. The KA SMART National Labour Rate Report is one
example which is eagerly anticipated. 2009 will see this report in its fifth
year of production.
RGT
In the 1970s, the National Association of Automobile Manufacturers of South
Africa (NAAMSA) began producing and disseminating automotive statistics.
Information was supplied by motor manufacturers, and the data programmed into
reports, which were distributed back to the motor manufacturers.
The above system was maintained at a computer bureau, until Martin Kruger
(Managing Director of RGT) offered a superior on-line enquiry version. It is
important to note that the system has developed from punch cards for data
capture, processing via sequential magnetic tape-driven data devices on a
mainframe computer to today`s fast and online reports.
The manufacturers are contracted directly with RGT. These agreements have
been adhered to for over 20 years. RGT was the first ever on-line computer
bureau in the Cape province. The RGT/NAAMSA Online system was hailed as a
world-beater in 1986. This ability to think ahead has been a hallmark of the
RGT`s success over the long term.
Of particular importance is that RGT acts "in association with NAAMSA". This
is reinforced by a legal contract between RGT and NAAMSA as is detailed in
paragraph 11.1.6 of this prospectus. The motor manufacturers own the raw
data. The power of the RGT/NAAMSA association is that the reworked, merged,
enhanced, updated, refreshed data which emerges in the databases now belongs
to RGT/NAAMSA under the custody and primary ownership of the Kruger Primary
Trust. This data is much sought after, worldwide and an attempt a couple of
years ago by a large international statistics company to aggressively enter
the South Africa market was successfully fended off.
In today`s times the systems start with the receipt of electronic data, video
screen auditing, and dissemination of data via both paper as well as the
widespread inter-connectivity of internet. The systems are significantly
enhanced, with the addition of new vehicle prices and specifications, creating
multi-faceted enquiry paths. RGT has an enviable reputation for its ethical
manner of doing business. With the co-operative agreements, audited data may
not be generally provided to third parties.
The Essence of RGT
Sole source of and supplier of new vehicles sales data to the SA motor
industry, in association with NAAMSA, for the past 26 years.
Owns a dynamic and steadily growing database of new vehicle models sold by
manufacturer, dealer and town and licensing district in SA by month from 1980
onwards.
NAAMSA approved supplier of new vehicle specification and pricing data.
Majority of internet sites offering access to South African new vehicle
specifications and pricing data obtain this data from RGT.
Since inception, and in close association with the motor manufacturers and
importers in SA, has developed a suite of analytical systems which are used on
a daily basis by manufacturers and importers, (who reports data in detail to
NAAMSA), and their dealer organisations throughout SA.
Systems have relevance and application opportunities in other industrial
sectors and in international markets.
Company revenue based primarily on regular monthly annuity income from "blue
chip" customers.
RGT currently has no competitors and is protected by significant barriers to
entry for any prospective competitor.
Is trusted and respected by the South African motor industry.
Has developed large and sophisticated systems in daily use outside of the
motor industry and has a highly respected call centre.
Summary of RGT`s main product range:
AUTOSTATS Detailed new vehicle volume statistics, including dealership sales
performance analysis.
AUTOPARC Regional vehicle population volumes.
AUTOMSA Vehicle pricing and specification analysis, including vehicle model
planning.
AUTOLAUNCH New vehicle product report.
AUTOPROMOTION Manufacturer and dealership vehicle promotional information.
AUTOSPECS New vehicle specification comparison.
AUTOWIZARD One-stop comprehensive vehicle information tool.
AUTOECONOMICS Motor industry and related economic information.
AUTOFORECAST New vehicle regional market forecast report.
AUTOEXPORT Regional new vehicle volumes exported from South Africa.
AUTOCSI Statistical Index of customer satisfaction when buying or servicing a
vehicle.
AUTODPE Dealership performance evaluation system, including new vehicle sales
forecasting.
AUTODSA Dealership Service operational analysis, including capacity forecast
planning.
Conclusions
RGT dominates the South African market for new vehicle statistics, including
sales volumes, prices and specifications, and motor industry specific
analytical systems.
RGT has the potential to expand its motor industry offerings into the
international arena, with possible meaningful applications in selected markets
in Africa and potentially South East Asia, dependent primarily upon the supply
and availability of data.
SUMMARY OF ESTIMATE AND FORECAST FINANCIAL INFORMATION
The RGT SMART estimate and forecast for the years ending 28 February 2010 and
28 February 2011 respectively are summarised below. In addition, a forecast
for the year ending 29 February 2012 has been included. The estimate and
forecasts set out below are not based on the assumption that the public offer
of 57 000 000 new shares in terms of the prospectus is fully subscribed but is
based on the existing RGT SMART business.
28 Feb 28 Feb 29 Feb 2012
2010 2011
R`000 R`000 R`000
Revenue 25 158 31 315 35 578
Cost of sales (3 164) (4 616) (5 577)
Gross profit 21 994 26 699 30 001
Operating expenses (17 210) (16 587) (18 091)
Operating profit before 4 784 10 112 11 910
interest
Impairment of goodwill (1 990) - -
Interest received 1 112 119
Finance costs (230) (42) (57)
Profit before taxation 2 564 10 182 11 972
Taxation (1 906) (2 455) (2 831)
Secondary tax on companies (400) - -
Profit after taxation 258 7 727 9 141
Profit attributable to 258 7 727 9 141
ordinary shareholders
Fully diluted shares (`000`s) 350 000 430 434 437 800
Earnings per share (cents) 0.07 1.80 2.09
Headline earnings per share 0.64 1.80 2.09
(cents)
Assumptions:
The current market conditions in the industry in which the business operates
are not expected to change substantially.
The estimate and forecast numbers have been prepared in terms of IFRS.
Revenue for 2010 has been secured and is in terms of current agreements.
The increase in revenue in 2011 and 2012 is primarily related to organic
growth in respect of new vehicle clinics, adhoc research, autoparc consulting
and SQS Multidealers.
The 2010 profit estimate includes IFRS 2 share based payment adjustments of R2
033 563 relating to Arcay and Cliff Reed, which adjustment is not expected to
have a continuing effect on the Company.
Expenses have been forecast on a line by line basis and reflect the current
budgeted expenditure and takes into account the cost of being listed.
The present level of interest and tax rates will remain substantially
unchanged.
The cash raised on the public offer is utilised to settle interest bearing
borrowings and share issue costs.
Interest from cash generated from operations has not been taken into account
in the forecasts.
The weighted average number of shares in issue is based on the offer for
subscription being fully subscribed and a listing date of 14 April 2010.
Dividends of R4 million have been declared in 2010 to the existing RGT Smart
shareholders prior to listing and the respective STC has been taken into
account in the period.
Goodwill has been impaired by R1 990 352 based on an independent valuation
performed by Moore Stephens Corporate Finance as at 28 February 2010. This
impairment has been taken into account and included in the 2010 profit
estimate.
Authorised and issued share capital
The authorised and issued share capital of RGT SMART before and after the
offer is set out below. The share capital of the Company has been calculated
before setting off the estimated expenses against share premium.
Per CIPRO
R`000
Authorised, before the offer
500 000 000 ordinary shares of R0.01 each 5 000
Issued, before the offer
380 800 000 ordinary shares of R0.01 each 3 808
Share premium 34 000
Authorised, after the offer
500 000 000 ordinary shares of R0.01 each 5 000
To be issued
57 000 000 ordinary shares of R0.01 each 570
Share Premium 5 130
Issued, after the offer
437 800 000 ordinary shares of R0.01 each 4 378
Share premium 39 130
Directors of RGT SMART
The full name, ages, addresses and occupations of the directors of RGT SMART
are set out below:
Name (Age) Business Address Occupation
Alfred IQUAD Place Chairman
Anthony Da 54 - 58 Mangold Street
Costa (45) Newton Park
Chairman Port Elizabeth
Non- 6045
Executive *
Paul Bernard 9 Third Avenue Managing Director
de Vantier Newton Park
(51) Port Elizabeth
Group 6045
Managing
Director
Clifford Suite 3 Financial
Walter Reed 21 Barton Road Director CA(SA)
(51) Cotswold
Group Port Elizabeth
Financial 6045
Director
Dr Neal 130 Church Road Executive
Stanley Walmer Director -
Bruton (53) Port Elizabeth Corporate
Executive 6070 Strategy
Director
Martin 14 Seventh Avenue Executive
Kruger (62) Summerstrand Director -
Executive Port Elizabeth Information
Director 6001 Technology
Gert 5 Eighth Avenue Executive
Johannes Summerstrand Director
Grundlingh Port Elizabeth
(57) 6001
Executive
Director
Anthony 9 Third Avenue Executive
William Newton Park Director
Calcutt (37) Port Elizabeth
Executive 6045
Director
Jacques 1 Umtata Avenue Financial Advisor
Magliolo Gallo Manor
(48) Johannesburg
Non- 2096
Executive
Director
Heinrich 5 Eighth Avenue Alternative
Coetzee (44) Summerstrand Executive
Alternate Port Elizabeth Director
Executive 6001
Director
PURPOSE OF THE OFFER AND LISTING
In terms of the offer, selected and public investors will be offered the
opportunity to subscribe for ordinary shares.
The purpose of the offer and listing is to accelerate growth of RGT SMART into
a significant player through:
- enhancing the profile and credibility of both KA SMART and RGT, both
locally and in Africa;
- raising awareness of the two subsidiaries and RGT SMART in their target
markets and more generally with strategic investors and members of the
public;
- positioning RGT SMART to attract and retain key human resources by means
of the implementation of a share incentive scheme in the foreseeable
future;
- increasing its capital base in order to take advantage of future growth
opportunities; as specified in the research report (available on request
as well as on the Company`s website); in South Africa and globally;
- providing management, staff, selected black economic empowerment
investors, financial institutions and associates the opportunity to
participate directly in the equity of RGT SMART; and
- raising the necessary funding to allow the Company to fund future
strategic acquisitions.
SALIENT DATES AND TIMES
2010
Offer opens at 09h00 on Monday, 15 March
Offer closes at 12h00 (see notes Wednesday, 07 April
below) on
Anticipated listing date on AltX at Wednesday, 14 April
commencement of trade on
*Shareholders wishing to subscribe for ordinary shares in dematerialised form
must advise their Central Securities Depository Participant ("CSDP") or broker
of their acceptance of the offer to subscribe for shares in the manner and
within the cut-off time stipulated by their CSDP or broker.
Interested investors should contact Julie Boel at Arcay Moela Sponsors on
011 480 8500 for a copy of the prospectus.
Designated Adviser Reporting Accountants
Arcay Moela Sponsors Mazars Moores Rowlands
Attorneys
Gordon, Stevens & Ranchhoojee
Date of issue: 15 March 2010
Johannesburg
23 March 2010
Designated Advisor
Arcay Moela Sponsors (Proprietary) Limited
(Registration number 2006/033725/07)
Date: 23/03/2010 08:55:51 Produced by the JSE SENS Department.
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