| Fri 16 Apr 2010, 14:24 | | IQG - IQuad Group - Preliminary condensed financial statements for the year |
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IQG
IQG
IQG - IQuad Group - Preliminary condensed financial statements for the year
ended 28 February 2010
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")
16 April 2010
Preliminary condensed financial statements for the year ended 28 February
2010
Highlights
- Dividend per share up 12%
- Headline earnings per share down 8.3%
- Net tangible assets per share up 42%
Commentary
Investment incentives
The last year has seen a marked improvement in client payouts(up 33%)from the
Department of Trade and Industry ("DTI"), largely due to a substantial
improvement in the DTI`s processing efficiencies. The Company continues to
make good progress in securing approvals for the new Enterprise Investment
Programme ("EIP"), with the first payments from the DTI expected in the last
quarter of 2010. The DTI recently reduced some of the qualifying criteria for
the EIP, which will increase the number of companies that can participate
under the EIP.
The anticipated slowdown in activity in the motor industry, coupled with a
stronger Rand, resulted in a reduction of average fees per client in terms of
administration of the Motor Industry Development Programme ("MIDP"). The
reduction in fees was to an extent offset by the securing of a number of new
clients.
With the final guidelines of the MIDP replacement programme, the new
Automotive Production and Development Programme ("APDP"), expected to be
released in the coming year, a key focus area is to become a knowledge centre
with respect to the APDP, further enhancing our status of being a leading
service provider to the Motor Industry.
Global Trade Services
The global economic downturn, coupled with a stronger Rand had a negative
impact on revenues from existing clients of the currency management and duty
optimisation business units.
Reduced revenue from currency management services was partly countered by
effective cost control, but not to the extent that a net decline in profits
could be avoided. This business unit, however, retained over 95% of its
clients during a period when many clients would be looking to cut non core-
services.
Despite the challenges of softer economic conditions, fees from duty
optimisation and general import/export consulting services increased. The
increase in revenue was largely due to the recruitment of a record number of
new clients during the period under review, which more than offset the
reduction in fees due to tough trading conditions. The increased client base,
plus the addition of new aligned product offerings related to import and
exports, positions this business unit well for the future.
Our joint venture with International Trade Institute of South Africa
("ITRISA") in Global Trade training is progressing satisfactorily, and we
expect this business unit to create new client opportunities for other global
trade business units of the Group in the years ahead.
Audit and verification
The BEE Verification business turned profitable on a monthly basis in the
latter half of the year, and this business is well positioned for growth in
the year ahead.
Formal accreditation as a BEE verification agency was achieved in April 2009,
and as at year end the business was one of only 29 officially accredited
verification agencies. This business is the only nationally represented BEE
verification business, with offices in Johannesburg, Cape Town, Durban, Port
Elizabeth and Bloemfontein.
Growth is expected to come from organic growth, acquisitions and expansion of
the accreditation scope to include all gazetted sector codes.
Business development
Both business units, Entrepreneurs Survival Solutions (Proprietary) Limited
("ESS") and IQuad Integrated Management Systems (Proprietary) Limited ("IMS")
performed below expectations.
The expected recapitalisation of the Umsobomvu Youth Fund ("UYF") which was
announced in the 2009 Budget Speech did not materialise, resulting in a
dramatic decline in revenues from business development services. As a result,
a decision was taken to disinvest in this area of business, resulting in the
sale of the Group`s stake in ESS.
General comments and prospects
Organic and acquisitive growth prospects
The Group is focussed primarily on organic growth within its business units
for the year ahead and accordingly the Group has recently employed a number
of new marketing resources across most business units, with a specific
emphasis on our biggest market opportunity being Gauteng. Mr David Edwards
was appointed as CEO of the Group at 1 March 2010 and has relocated to
Johannesburg from Port Elizabeth to mine organic growth opportunities.
We maintain our focus on strategic alliances with complementary service
companies and related industry bodies.
No material acquisitions were made during the past year, and although
acquisitive growth is not the core growth focus, IQuad will consider
opportunities that are fairly priced and aligned to existing Group services.
Cash flow and sustainability
The Group`s net cash position increased by R14.5 million during the year.
The Group`s ability to generate cash remained strong. Cash generated from
operations, before working capital changes amounts to R9 million.
Working capital increased by R1.6 million, where the increase in incentive
receivables of R4 million was largely off-set by a decrease in work in
progress and an increase in trade and other payables. Incentive receivables
are tradeable assets consumed in the Group`s normal business activities.
Increased focus on the collection of trade receivables was achieved through
the establishment of a debtors` collection committee consisting of executive
management.
The proceeds from the sale of the Group`s investment in Afropulse 366
(Proprietary) Limited and the sale and exercise of guarantees of ESS had a
healthy impact of R14.1 million on the Group`s net cash position.
Dividends of R6.7 million were paid to shareholders during the year.
Consolidated statement of financial position
Reviewed Audited
28 Feb 10 28 Feb 09
R000 R000
Assets
Non-current assets 120 393 133 688
Investment property 13 091 -
Property, plant and equipment 12 694 31 230
Goodwill 87 006 95 746
Intangible assets 2 930 2 842
Investments in associates - 426
Available-for-sale financial asset - 401
Loan receivable 1 000 -
Deferred tax assets 3 672 3 043
Current assets 35 523 31 316
Work in progress 1 997 4 083
Current tax assets 496 30
Trade and other receivables 25 150 21 901
Loan receivable 584 113
Amounts owing by associates and joint 117 85
ventures
Cash and cash equivalents 7 179 5 104
Non-current assets held for sale 16 328 10 000
Total assets 172 244 175 004
Equity and liabilities
Equity and reserves 137 967 136 108
Share capital and reserves 135 954 130 984
Non-controlling interest 2 013 5 124
Non-current liabilities 21 102 12 464
Operating lease liability 606 666
Deferred tax liabilities 406 939
Borrowings 20 090 10 859
Current liabilities 12 813 26 432
Current tax liabilities 129 2 402
Trade and other payables 11 053 10 585
Provisions 229 276
Dividend payable - 572
Borrowings 1 402 12 597
Liabilities held for sale 362 -
Total liabilities 34 277 38 896
Total equity and liabilities 172 244 175 004
Consolidated statement of comprehensive income
Reviewed Audited
28 Feb 10 28 Feb 09
R000 R000
Continuing operations
Revenue 79 970 80 051
Cost of services rendered (36 010) (36 974)
Gross profit 43 960 43 077
Other operating income 166 125
Operating expenses (26 167) (23 598)
Operating profit 17 959 19 604
Investment income 4 231 4 417
Share of (losses)/profits from
associates and joint ventures (124) 44
Finance costs (2 423) (1 421)
Profit before taxation 19 643 22 644
Taxation (6 315) (8 074)
Profit for the year from
continuing operations 13 328 14 570
Discontinued operations
Loss for the year from discontinued
operations - (4 482)
Profit for the year 13 328 10 088
Exchange differences on translating (30) 338
foreign operation
Total comprehensive income for the year 13 298 10 426
Profit for the year attributable to: 13 328 10 088
Non-controlling interests (831) 42
Equity shareholders of the company 14 159 10 046
Total comprehensive income for the year 13 298 10 426
attributable to:
Non-controlling interests (831) 182
Equity shareholders of the company 14 129 10 244
Basic and diluted earnings per ordinary
share (cents)
Continuing operations 50.6 51.7
Discontinued operations - (15.8)
Total basic earnings per share 50.6 35.9
Weighted average number of shares in issue 27 979 27 979
(`000)
Consolidated statement of changes in equity
Equity Non- Total equity
shareholders controlling
interests
R000 R000 R000
Balance at 1 March 2008 - 126 410 3 887 130 297
audited
Total comprehensive income for 10 244 182 10 426
the year
Treasury shares utilised in 3 036 - 3 036
business combinations
Dividends (8 706) (2 366) (11 072)
Non-controlling interests on - 3 421 3 421
business combinations
Balance at 1 March 2009 - 130 984 5 124 136 108
audited
Total comprehensive income for 14 129 (831) 13 298
the year
Adjustments to contingent (3 036) - (3 036)
purchase considerations
Dividends (6 123) (500) (6 623)
Disposal of shares in - (1 777) (1 777)
subsidiaries
Other changes in non-controlling - (3) (3)
interests
Balance at 28 February 2010 - 135 954 2 013 137 967
reviewed
Consolidated statement of cash flows
Reviewed Audited
28 Feb 10 28 Feb 09
R000 R000
Cash flows from operating activities 7 444 6 404
Cash generated from operations 18 610 13 688
Investment income 2 057 2 711
Finance costs (2 632) (1 521)
Taxation paid (10 591) (8 474)
Cash flows from investing activities 2 962 (10 785)
Acquisition of property, plant and equipment (7 778) (3 793)
Proceeds on disposal of property, plant and 250 119
equipment
Proceeds on disposal of non-current asset held 10 000 -
for sale
Acquisition of intangible assets (1 429) (1 941)
Proceeds on disposal of intangible assets - 163
Proceeds on disposal of associate - 200
Contingent considerations received 2 765 -
Proceeds on disposal of subsidiaries 2 344 -
Investment in subsidiaries (3 161) (5 277)
Investment in associates (29) (256)
Cash flows from financing activities 4 058 (19 319)
Amounts advanced to associate (330) (11 913)
Amounts received from associate - 5
Non-controlling interests` loans advanced 1 064 601
Loans receivable advanced (406) -
Loans payable advanced 10 425 2 488
Dividends paid (6 695) (10 500)
Increase / (decrease) in cash and cash 14 464 (23 700)
equivalents
Cash and cash equivalents at beginning of the (7 285) 16 415
year
Cash and cash equivalents at end of the year 7 179 (7 285)
Selected explanatory notes
Basis of preparation and accounting policies
The preliminary condensed financial statements have been prepared in
compliance with IAS 34: Interim Financial Reporting and the JSE Limited
Listings Requirements.
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.
Independent review
The Company`s auditors, PricewaterhouseCoopers Inc., have reviewed the
preliminary condensed consolidated financial statements for the year ended 28
February 2010. Their unqualified report is available for inspection at the
registered office of the Company.
Acquisition and disposals of subsidiaries
On 1 December 2009 the Group increased its shareholding in National Money
Transfer (Proprietary) Limited ("NMT") from 17% to 83%. The increase was
achieved through the acquisition of 49% equity for R1 960 and a further 17%
through a share swap to the value of R680.
In addition, the Group acquired loan accounts for R1 798 040, and has
advanced loans during the year of R1 361 498 (2009: R400 000), which have
subsequently been capitalised to the cost of the investment.
The subsidiary was acquired with the intention to re-sell and accordingly has
met the criteria to be consolidated on the basis of recording the fair value
of the assets and liabilities of the held for sale disposal group as a single
investment.
Refer to the note on non-current assets held for sale for further information
regarding the disclosure of this transaction.
On 1 December 2009, the Group disposed of a 44.8% interest (previously 94.9%)
in IQuad Technologies (Proprietary) Limited through a share swap in the NMT
transaction.
A loss of R4 417 was made on the disposal.
On 1 March 2008 IQuad entered into an agreement to acquire 60% in ESS.
Pursuant to the subscription and sale agreement, the ESS vendors warranted
the consolidated audited normalised profits after tax of ESS for the
financial years ending 28 February 2009 to 28 February 2011. The
aforementioned profit warranties had not been achieved and therefore IQuad
has elected to exercise its rights in terms of the subscription and sale
agreement whereby:
- cash in the amount of R2 660 000 previously held in escrow was released to
IQuad on 28 February 2010; and
- subject to shareholder approval, the IQuad shares transferred to the
vendors will be re-acquired by IQuad, for no consideration, in terms of a
specific repurchase. Shareholder approval will be sought to authorise the
specific repurchase, however, this approval has not yet been obtained.
- this adjustment to the purchase consideration resulted in a reduction to
goodwill of R5 251 000, which is included in the goodwill reconciliation
below.
On 1 December 2009, the Group disposed of its entire shareholding in ESS. The
selling price was R3 000 000 and the Group made a profit of R334 574 on the
transaction.
A reconciliation of the Group`s goodwill is provided below:
Reviewed Audited
28 Feb 10 28 Feb 09
R000 R000
Balance at beginning of year 95 746 88 892
Additions through business combinations - 9 837
Foreign exchange differences - (34)
Impairments (233) (2 949)
Adjustments to purchase price considerations (6 692) -
Disposals of shares in subsidiaries (1 815) -
Closing balance at end of year 87 006 95 746
Non-current assets held for sale and
liabilities of disposal groups
Reviewed Audited
28 Feb 10 28 Feb 09
R000 R000
Non-current assets held for sale
Investment in subsidiary 4 035 -
Investment in associate - 10 000
Investment property 12 293 -
16 328 10 000
Liabilities of disposal group (NMT)
Available-for-sale liabilities (362) -
The Group acquired NMT with the intention to re-sell and as a result the
investment and its related liabilities have been disclosed as held for sale.
Refer to the note on acquisitions and disposals of subsidiaries above for
further information regarding this transaction.
At year end, the Company was involved in negotiations to dispose of a portion
of the Port Elizabeth property which has been disclosed as held for sale. The
sale was concluded subsequent to year end as set out below.
Other significant matters
Following completion of construction of the Group`s office in Port Elizabeth,
a section of the building has been allocated for purposes of rental earnings
and capital appreciation. Accordingly, R13 million has been reclassified from
property, plant and equipment to investment property in the consolidated
statement of financial position.
Non-current borrowings have increased due to the additional draw down on the
mortgage bond over this property with a corresponding decrease in current
borrowings.
Contingent asset
Future revenue approximating R13 million(2009: R27 million), to be earned
from incentive applications submitted to regulatory authorities but still
awaiting approval for payment as at the statement of financial position date,
has not been recognised as income in these financial statements in accordance
with the Group`s accounting policy on revenue recognition.
Subsequent events
As set out in the commentary above, the Group disposed of a portion of the
Port Elizabeth property for R 14 million. A detailed SENS announcement,
incorporating pro forma financial effects on the Group, will be disclosed to
shareholders in due course. No other material events have been identified
subsequent to the statement of financial position date of the Group up to the
date of this report.
Dividends
The directors of IQuad are pleased to announce that they declared a dividend
of 20 cents per share on 15 April 2010 and wish to ensure that shareholders
receive payment thereof as expeditiously as possible in terms of the JSE
Limited Listings Requirements.
The salient dates for the payment of this dividend are set out below:
Last day to trade cum-dividend Friday, 7 May 2010
Trading ex-dividend commences Monday, 10 May 2010
Record date Friday, 14 May 2010
Payment date Monday, 17 May 2010
Share certificates may not be dematerialised or rematerialised between
Monday, 10 May 2010 and Friday, 14 May 2010, both days included.
Earnings, dividend and net asset value per share
Reviewed Audited
28 Feb 10 28 Feb 09
Cents Cents
Headline earnings per share
Headline earnings per share from 46.2 56.4
continuing operations
Headline earnings per share from - (6.0)
discontinuing operations
46.2 50.4
Dividend per share
Interim 8.0 11.0
Final 20.0 14.0
28.0 25.0
Headline earnings are reconciled to earnings per the statement of
comprehensive income as follows:
Reviewed Audited
R000 R000
28 Feb 10 28 Feb 09
Profit attributable to equity 14 159 10 046
shareholders of the Company
Goodwill impairments 233 2 949
Goodwill impairment of associate - 986
Impairment of other intangible assets - 460
Loss on disposal of property, plant 27 31
and equipment
Fair value adjustment on (95) -
remeasurement of disposal group held
for sale
Revaluation of property, plant and - (181)
equipment
Impairment of investment in 274 -
associates
Profit on disposal of investments (1 670) (186)
Headline earnings for the year 12 928 14 105
Unaudited Unaudited
28 Feb 10 28 Feb 09
Net asset value per ordinary share Cents Cents
Net asset value per share 485.9 468.2
Net tangible asset value per share 164.5 115.8
Number of shares in issue (`000) 27 979 27 979
Discontinued operations
During the year the Group acquired a subsidiary with the intention to re-
sell: the investment and its related liabilities have been disclosed as held
for sale.
Discontinued operations related to the previous financial year have ceased
operating or were disposed of shortly after year end.
Reviewed Audited
28 Feb 10 28 Feb 09
R000 R000
Analysis of the results of
discontinued operations
Revenue - 1 279
Impairment of carrying value of - (1 486)
associate
Equity-accounted losses of associate - (1 244)
Investment income - 222
Finance costs - (100)
Other operating expenses - (3 204)
Net loss before taxation - (4 533)
Taxation - 51
Loss for the year from discontinued - (4 482)
operations
Segment report
The Group has four reportable segments within which the Group`s strategic
business units ("SBUs")operate.
The SBUs offer different services and are managed separately as they require
different technology and marketing strategies.
Investment incentives
Includes consulting services aimed at enabling clients to obtain the maximum
benefits and refunds from Government and the Department of Trade and Industry
("DTI") incentive programmes.
Global trade services
Offers import and export business solutions, including customs consulting,
rebate administration, interest rate and forex risk management.
Business development
Provides strategic direction, consulting services and management tools to
optimise business systems and processes.
Verification services
Verifies BEE compliance, conducts quality assurance, VAT and customs audits
Operating Investment Global Business Verifi- Total
segments incentives trade develop- cation
services ment services
2010 - reviewed R000 R000 R000 R000 R000
Results
Revenue - 360 - 993 182 1 535
internal
Revenue - 39 892 26 695 8 580 4 234 79 401
external
Segment 16 077 8 722 (1 736) (1 587) 21 476
profit/(loss)
before tax
Operating Investment Global Business Verifi- Total
segments incentives trade develop- cation
services ment services
2009 - audited R000 R000 R000 R000 R000
Results
Revenue - 179 - 1 056 - 1 235
internal
Revenue - 32 621 31 095 12 325 5 277 81 318
external
Segment 14 444 12 076 (3 496) (10) 23 014
profit/(loss)
before tax
Reviewed Audited
28 Feb 10 28 Feb 09
Segmental reconciliations R000 R000
Profit reconciliation
Total profit before tax for reportable segments 21 476 23 014
Unallocated profits 7 639 17 720
Elimination of intersegment profits (9 472) (22 623)
Discontinued operations disclosed separately - 4 533
Group profit before tax per statement of 19 643 22 644
comprehensive income
Transactions with individual clients did not amount to 10% or more of the
Group`s total revenue.
For and on behalf of the board.
Dave Edwards Frans Botha
(Chief Executive Officer) (Financial Director)
15 April 2010
Port Elizabeth
Registered Office: 56 Mangold Street, Newton Park, Port Elizabeth, 6045
Directors: TB Hayter (Chairman); A da Costa#*; FW Swart#; DM Edwards (CEO); S
Totaram#; FJ Botha (FD); ZL Combi#; M Shaik Amod#*
# Non-executive
* Independent
Transfer Secretaries: Computershare Investor Services (Pty) Limited
Auditors: PricewaterhouseCoopers Inc.
Designated Adviser: PSG Capital (Pty) Limited
Date: 16/04/2010 14:24:01 Produced by the JSE SENS Department.
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