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BCX
BCX
BCX - Business Connexion - Reviewed condensed group financial results for the
six months ended 28 February 2010
BUSINESS CONNEXION GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1988/005282/06)
(Share code: BCX ISIN: ZAE000054631)
("Business Connexion" or "the company" or "the group")
REVIEWED CONDENSED GROUP FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY
2010
Key features:
- Revitalisation programme success reflected in expense reduction
- Operating profit margin improved to 6,1%
- Diluted headline earnings per share up strongly
Condensed consolidated statement of financial position
Reviewed Unaudited Audited
28 February 30 November 31 August
R million 2010 2008 2009
ASSETS
Non-current assets
Property, plant and equipment 338,2 356,7 361,2
Goodwill 145,6 154,1 145,6
Intangible assets 107,4 96,1 90,2
Investments in associates 9,3 3,0 14,9
Other investments 204,9 205,4 205,7
Deferred tax assets 25,0 43,4 45,6
830,4 858,7 863,2
Current assets
Inventories 121,9 157,8 189,6
Trade receivables 727,1 877,5 686,3
Other receivables 141,8 116,1 166,7
Prepayments 90,8 93,5 87,3
Taxation prepaid 29,5 11,5
Cash and cash equivalents 266,9 313,1 333,4
1 378,0 1 558,0 1 474,8
TOTAL ASSETS 2 208,4 2 416,7 2 338,0
EQUITY AND LIABILITIES
Shareholders` equity 1 346,9 1 260,7 1 316,3
Non-controlling interests 118,2 108,7 102,1
Total equity 1 465,1 1 369,4 1 418,4
Non-current liabilities
Interest bearing long-term 25,9 16,4 26,4
liabilities
Interest free long-term 68,5
liabilities
Post-retirement benefit 12,0 11,9 11,5
obligations and long-term
provisions
Deferred tax liabilities 3,2 1,3 3,5
41,1 98,1 41,4
Current liabilities
Short-term liabilities 48,8 22,0 76,7
Trade payables 214,4 413,1 231,2
Other payables 432,9 504,7 564,8
Provisions 2,6 0,8 5,5
Taxation payable 3,5 8,6
702,2 949,2 878,2
TOTAL EQUITY AND LIABILITIES 2 208,4 2 416,7 2 338,0
Condensed consolidated statement of comprehensive income
Reviewed Unaudited Audited
6 months 6 months 15 months
ended ended ended
28 February 30 November 31 August
2010 2008 2009
R million Restated
Revenue 2 009,7 2 210,0 5 496,1
Cost of sales 1 418,4 1 640,8 4 036,7
Gross profit 591,3 569,2 1 459,4
Operating expenses 469,3 499,3 1 326,8
Operating profit 122,0 69,9 132,6
Investment income 14,3 30,7 59,9
Profit before finance costs 136,3 100,6 192,5
Finance costs 0,9 3,6 7,5
Profit before taxation 135,4 97,0 185,0
Taxation 45,2 52,3 80,3
Profit for the period 90,2 44,7 104,7
Profit attributable to:
Equity holders 74,3 39,3 106,9
Non-controlling interests 15,9 5,4 (2,2)
90,2 44,7 104,7
Other comprehensive income:
Translation of foreign operations 1,0 (3,5) (14,3)
Total comprehensive income for the 91,2 41,2 90,4
period
Total comprehensive income
attributable to:
Equity holders 75,1 36,5 91,5
Non-controlling interests 16,1 4,7 (1,1)
91,2 41,2 90,4
Basic earnings per share (cents) 28,5 15,3 41,6
Diluted earnings per share (cents) 27,8 15,1 41,0
Calculation of headline earnings
(R million)
Profit attributable to equity 74,3 39,3 106,9
holders
Impairment/(reversal of 0,1 (4,0)
impairment) of loans and
investments
Impairment of goodwill 8,6
Profit on sale of property, plant (1,6) (21,3) (21,1)
and equipment
Fair value adjustment of (1,9)
investment property
Tax effect of headline earnings 0,2 2,9 5,2
adjustments
Non-controlling interests in 0,3 3,6 2,7
headline earnings adjustments
Headline earnings 73,2 24,6 96,4
Weighted average number of shares 260 360 257 071 257 300
in issue (000`s)
Diluted weighted average number of 267 778 260 839 261 082
shares in issue (000s)
Headline earnings per share 28,1 9,6 37,5
(cents)
Diluted headline earnings per 27,3 9,4 36,9
share (cents)
Condensed consolidated statement of cash flows
Reviewed Unaudited Audited
6 months 6 months 15 months
ended ended ended
28 February 30 November 31 August
R million 2010 2008 2009
Operating cash flows 174,8 117,6 248,1
Working capital changes (105,7) (35,7) (29,2)
Net investment income 33,0 30,3 36,9
Dividends paid (47,3) (200,7) (200,7)
Taxation paid (39,3) (87,5) (135,5)
Cash generated from/(utilised in) 15,5 (176,0) (80,4)
operating activities
Net cash flows (utilised in)/from (52,0) 5,5 (75,3)
investing activities
Net cash flows utilised in (30,0) (40,7) (35,2)
financing activities
Decrease in cash and cash (66,5) (211,2) (190,9)
equivalents
Cash and cash equivalents at 333,4 524,3 524,3
beginning of the period
Cash and cash equivalents at end 266,9 313,1 333,4
of the period
Summarised segmental analysis
Reviewed Unaudited Audited
6 months 6 months 15 months
ended ended ended
28 February 30 November 31 August
2010 2008 2009
R million Restated Restated
Segment revenue
Services Division 947,8 989,0 2 288,8
Technology Division 720,5 869,6 2 177,9
Innovation Division 188,8 207,0 608,7
International Division 152,6 144,4 420,7
2 009,7 2 210,0 5 496,1
Segment operating profit
Services Division 107,8 42,3 180,5
Technology Division 20,7 36,6 21,5
Innovation Division 28,8 34,9 114,7
International Division 1,9 (31,7) (55,1)
Corporate Office (37,2) (12,2) (129,0)
122,0 69,9 132,6
Other group salient information
Reviewed Unaudited Audited
28 February 30 November 31 August
2010 2008 2009
Number of shares in issue (000`s) 262 637 262 637 262 637
Less: shares held in share 2 007 5 343 2 370
purchase trusts as treasury shares
Less: weighting of options 270 223 2 967
exercised during the period that
would have been treasury shares
260 360 257 071 257 300
Dilutive options 7 179 3 584 1 140
Options exercised during the 239 184 2 642
period that were dilutive for a
portion of the period
267 778 260 839 261 082
Number of options in issue (000`s) 30 261 8 391 28 994
Key ratios and statistics
Net asset value per share (cents) 557,8 521,4 540,1
Tangible net asset value per share
(cents)
(excluding goodwill and fair value 501,6 461,2 483,6
of contracts)
Operating margin (%) 6,1 3,2 2,4
Return on total equity (%) - 11,0 6,2 6,5
annualised
Return on total assets (%) - 11,0 5,8 4,5
annualised
Current ratio (%) 2,0 1,6 1,7
Average debtors days 56,9 64,2 57,3
Depreciation and amortisation (R 57,8 66,1 149,9
million)
Cost of sales 37,7 46,8 99,1
Operating expenses 20,1 19,3 50,8
Contingent liabilities (R million)
Performance guarantees 68,8 83,3 70,6
Asset finance recourse deals 8,3 15,6 11,4
Other 6,1 2,3 6,1
Capital commitments (R million)
Capital 44,6 54,7 64,6
Operating leases 227,8 304,1 281,4
Basis of preparation
The condensed consolidated group financial statements are prepared in terms of
the recognition and measurement principles of International Financial Reporting
Standards (IFRS) and the presentation and disclosure requirements of IAS 34:
Interim Financial Reporting, the Listings Requirements of the JSE Limited and
the South African Companies Act, Act 61 of 1973, as amended. There were no
changes in the accounting policies (as published in the latest annual report),
except for the adoption of the revised IFRS 3: Business Combinations and the
amendment to IAS 27: Consolidated and Separate Financial Statements, which are
to be applied prospectively and had no impact in the current period. For the
six months ended 30 November 2008 and the fifteen months ended 31 August 2009
we wish to draw your attention to the condensed consolidated statement of
comprehensive income and the condensed segmental analysis which have been
restated to include exceptional gains/(losses) in operating expenses. Through
the revitalisation programme the group has simplified its business model to
optimise efficiencies and to drive shareholder value. The four operating
divisions are Services, Technology, Innovation and International together with
a Corporate Office. The group has restated its condensed segmental analysis in
line with the reporting above.
Condensed consolidated statement of changes in equity
Share Foreign Share-based
capital and currency trans- Retained payment
R million premium lation reserve earnings reserve
Balance at 31 May 322,0 (4,7) 1 092,2 12,3
2008 - audited
Changes in equity
for the six
months ended 30
November 2008
Movement in 2,6
treasury shares
and related
reserves held by
share purchase
trusts
Share-based 0,5
payments
Non-controlling
interest in
dividends
received from
subsidiaries
Total (2,8) 39,3
comprehensive
income for the
period
Dividends paid (200,7)
Balance at 30 322,0 (7,5) 933,4 12,8
November 2008 -
unaudited
Changes in equity
for the nine
months ended 31
August 2009
Movement in (1,3)
treasury shares
and related
reserves held by
share purchase
trusts
Share-based 1,9
payments
Non-controlling
interest in
dividends
received from
subsidiaries
Total (12,6) 67,6
comprehensive
income for the
period
Balance at 31 322,0 (20,1) 999,7 14,7
August 2009 -
audited
Changes in equity
for the six
months ended 28
February 2010
Movement in 0,2
treasury shares
and related
reserves held by
share purchase
trusts
Share-based 2,2
payments
Total 0,8 74,3
comprehensive
income for the
period
Dividends paid (46,9)
Balance at 28 322,0 (19,3) 1 027,3 16,9
February 2010 -
reviewed
Share- Non-
holders` controlling Total
R million equity interests equity
Balance at 31 May 1 421,8 105,0 1 526,8
2008 - audited
Changes in equity
for the six
months ended 30
November 2008
Movement in 2,6 2,6
treasury shares
and related
reserves held by
share purchase
trusts
Share-based 0,5 0,5
payments
Non-controlling (1,0) (1,0)
interest in
dividends
received from
subsidiaries
Total 36,5 4,7 41,2
comprehensive
income for the
period
Dividends paid (200,7) (200,7)
Balance at 30 1 260,7 108,7 1 369,4
November 2008 -
unaudited
Changes in equity
for the nine
months ended 31
August 2009
Movement in (1,3) (1,3)
treasury shares
and related
reserves held by
share purchase
trusts
Share-based 1,9 1,9
payments
Non-controlling (0,8) (0,8)
interest in
dividends
received from
subsidiaries
Total 55,0 (5,8) 49,2
comprehensive
income for the
period
Balance at 31 1 316,3 102,1 1 418,4
August 2009 -
audited
Changes in equity
for the six
months ended 28
February 2010
Movement in 0,2 0,2
treasury shares
and related
reserves held by
share purchase
trusts
Share-based 2,2 2,2
payments
Total 75,1 16,1 91,2
comprehensive
income for the
period
Dividends paid (46,9) (46,9)
Balance at 28 1 346,9 118,2 1 465,1
February 2010 -
reviewed
Reviewed Unaudited Audited
6 months 6 months 15 months
ended ended ended
28 February 30 November 31 August
2010 2008 2009
Normal dividend paid per 18,0 18,0 18,0
share (cents)
Special dividend paid per 60,0 60,0
share (cents)
Commentary
Overview
Evidence of the successful completion of the revitalisation programme
undertaken by the group over the past two years can be seen in the improvement
in the operating profit margin to 6,1% for the six months to 28 February 2010
("the period under review") against 3,2% for the six months to 30 November 2008
("the comparative period"). The increase in the operating profit margin is as a
result of an improvement in the gross profit margin and savings in operating
expenses. Gross profit margin increased through improving margins in the
Services Division and changes in the product mix. Operating expenses reduced as
a result of the savings from the revitalisation programme.
Change in financial year end
As previously communicated to shareholders, the group`s financial year end was
changed from 31 May to 31 August. These results reflect the performance for the
six months to 28 February 2010 compared to the six months to 30 November 2008
which is the most recent comparable interim reporting period.
Financial and operating performance
Revenue from the group`s premier client base increased marginally although
budget curtailment in the public sector impacted both the Technology and
Innovation Divisions and resulted in revenue declining to R2 009,7 million for
the period under review from R2 210,0 million for the comparative period.
The group`s gross profit margin for the period improved from 25,8% for the
comparative period to 29,4%. This was driven primarily by the Services
Division`s focus on more profitable business, with this division remaining the
largest contributor to group revenue at 47,2% (November 2008: 44,8%).
The Services Division has focused on its services catalogue to ensure a
consistent service offering to all clients irrespective of geographic location
or industry sector. This allows for standardised costing methodologies to be
applied resulting in more profitable business being generated. The contribution
from the four large outsourcing deals awarded to the group in the previous
financial period have further bolstered the annuity revenue in the Services
Division.
The Technology Division was impacted by the financial downturn and contributed
35,9% (November 2008: 39,3%) to the group`s revenue. The decline during the
period under review reflects reduced private sector spend as clients
reprioritise information technology projects and cut budgets. Public sector
revenue also decreased with government spend being placed on hold until the new
budget cycle which commences in April 2010.
The Innovation Division enables the group to maximise its own intellectual
property and contributed 9,4% (November 2008: 9,4%) to the group`s revenue.
The International Division showed improving operating margins, but certain
geographies still require further critical mass.
Operating expenses reduced from R499,3 million in the comparable period to
R469,3 million, reflecting tight expense control and cost savings from the
revitalisation programme. Total expected annualised savings and savings
recorded to date from the revitalisation programme are reflected in the table
below:
Planned Actual
R million (Annualised) (6 months
ended 28
February
2010)
Total cost to company savings 67,1 32,8
Contract negotiation savings 12,3 9,1
Outsourcing and related savings 27,1 9,3
Total savings 106,5 51,2
The operating performance resulted in the group achieving an operating profit
of R122,0 million for the six months (November 2008: R69,9 million).
The effective taxation rate decreased from 53,9% for the comparative period to
33,4%. This was primarily as a result of the decrease in secondary taxation on
companies due to a special dividend of 60 cents per share paid during the
comparative period.
The group generated diluted earnings per share ("EPS") of 27,8 cents for the
period (November 2008: 15,1 cents). Diluted headline EPS for the period was
27,3 cents (November 2008: 9,4 cents).
Working capital management remains a key area of focus. While the timing of the
month end resulted in a negative impact on trade payables and receivables, the
focus on inventory has seen a significant decrease in this balance.
Prospects
The strong annuity income base from core clients in the Services Division and
improving market conditions, which should benefit the Technology and Innovation
Division, will position the group for enhanced profitability, along with
disciplined cost control.
Business Connexion should also benefit from the trends in companies moving away
from owned-infrastructure to outsourcing.
The group will continue to develop its intellectual property and use these
unique business solutions to enhance its annuity based revenue streams. The
prospects for the International Division remain positive as the businesses are
well positioned in most of the geographies in which they operate.
The group has also made good progress to date in improving its operating
performance and continues to strive for an operating profit margin of 8% by the
2011 financial year.
Independent review by the auditors
The condensed consolidated statement of financial position at 28 February 2010
and the related condensed consolidated statements of comprehensive income,
changes in equity and cash flows for the six months then ended were reviewed by
KPMG Inc. The individual auditor assigned to perform the review is Mr LP
Fourie. Their unmodified review report is available for inspection at the
registered office of the company.
For and on behalf of the board
AC Ruiters LB Mophatlane
Chairman Chief Executive Officer
Midrand
22 April 2010
Executive directors:
LB Mophatlane (Chief Executive Officer)
V Olver (Chief Financial Officer)
Non-executive directors:
AC Ruiters (Chairman)*, JF Buchanan*, NN Kekana, FL Sekha*, JM Poluta*
*Independent non-executive directors
Registered office:
Business Connexion Park North
789 16th Road, Randjespark, Midrand, 1685
Postal address:
Private Bag X48, Halfway House, 1685
Internet address:
http://www.bcx.co.za
Transfer office and transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
JSE Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
1 Merchant Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196
For more information please visit our investor relations website at:
www.bcx.co.za
Date: 22/04/2010 08:00:01 Produced by the JSE SENS Department.
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