| Tue 21 Sep 2010, 17:00 | | DGC - DigiCore Holdings Limited - Group Audited Results for the year ended 30 |
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DGC
DGC
DGC - DigiCore Holdings Limited - Group Audited Results for the year ended 30
June 2010
DigiCore Holdings Limited
Registration number 1998/012601/06
JSE code: DGC ISIN: ZAE000016945
("DigiCore" or "the company" or "the group")
Group Audited Results for the year ended 30 June 2010
Helping the
GLOBE GO GREEN
R531 million
TURNOVER
R48 million
PROFIT AFTER TAX
6 cents
TOTAL DIVIDEND
PER SHARE
COMMENTARY
Introduction
DigiCore`s business is to supply superior mobile asset tracking, information
and management solutions for vehicle owners around the world. We design,
manufacture, sell and support our C-track devices and software globally, not
only for superb commercial fleet management but also to enable us to recover
stolen vehicles and improve the safety of lone workers, children and elderly
people by knowing their exact location when they press the panic button on our
C-track ICE personal tracking device.
The financial year to 30 June 2010 will long be remembered for both the Soccer
World Cup and its business challenges.
Whilst the financial performance in general terms was disappointing,
highlights included the superb performance of the Stolen Vehicle Recovery
(SVR) business, where profit before tax increased by 25% year-on-year as well
as the increase in percentage and Rand terms of the group`s annuity income.
A particular challenge was maintaining the balance between short-term profits
and retaining valuable people. We opted to maintain our skills base, which we
believe was the right decision as there are now indications of growth that
will require all our current skills.
We have continued to invest in research and development, flagship fitment
centres locally and the acquisition of Minorplanet UK and all its intellectual
property. These investments will stand us in good stead for the coming years.
We have sold 15% more units than the previous year, but at lower margins on an
extended-payment and thus profit basis. However, higher sales offer benefits
in the form of annuity income in coming years.
Financial review
As reported previously, the impact of the global recession was evident on the
group from 1 January 2009. Despite this, our financial performance has been
stable, with a marginal improvement in the last six months of the review
period. This is illustrated below:
Six Six Six
months months months
to Jun Growth to Dec Growth to Jun
R`000 2010 % 2009 % 2009
Sales 281 339 13 249 195 (14) 288 361
Operating profit 35 766 2 34 923 2 34 276
Profit after tax 24 717 8 22 808 17 19 481
EBITDA 54 090 4 51 774 9 47 353
Cash from
operations 79 528 262 21 951 (38) 35 521
For the full year, the decline in sales of 8% had a profound negative impact
of 29% on operating profit as a result of operating leverage. Modest growth in
overheads and margin compression increased the year-on-year decline in
operating profit to 38%.
During the year the distribution businesses in South Africa produced mixed
results. Fleet management initiated the new rental scheme for fleet management
units referred to earlier which will reduce sales initially but provide an
annuity revenue stream over the following three years with a more profitable
deal over the full rental period. The SVR business, in contrast, is going from
strength to strength, with revenue increasing by an impressive 59% and the
installed base by 35%.
Distribution internationally continues to suffer from the effects of the
recession and saw profitability decline from R31 million in the prior year to
marginally above breakeven in the current year. During the last six months of
the review period trading conditions improved somewhat and saw the loss
incurred during the first six months of the year turned into a modest profit
for the year.
Income from equity-accounted investments includes the group`s share of the
results of Trakker Pakistan.
Annuity revenue now constitutes 55% of total revenue compared to 43% in the
prior year. In rand terms, this revenue grew to R288 million from R249 million
in 2009.
Earnings per share at 22.0 cents declined in line with attributable profit by
39%.
Cash generated from operating activities was R101.5 million, a 149%
improvement on R40.7 million in the prior year. Cash balances at year-end are
lower than the prior year mainly due to the investment in MPS2010 Limited (now
C-track UK Limited) as well as an outflow in financing activities.
South Africa operations
C-track SA
Our SVR business established the brand well during the year. We are
continually making inroads into areas occupied by "uncompetitive" rivals. This
growth has put some strain on our cash flow due to internal funding
requirements. From an R&D perspective, a small, powerful and cost-effective
unit was developed last year. This positions DigiCore well for continued
growth next year.
Fleet Management SA
This division made good inroads into the mining, passenger and service
industries this year with potentially good sales after initial installations.
While the new sales model also affected this division`s revenue, it will
deliver benefits in terms of future annuity streams in years to come. We have
implemented CO2 and fuel reports to assist customers in managing their
emissions downwards.
International operations
Europe and UK had a slow financial year but sold 14% more units, allowing
medium-term profitability to grow on the back of a small cash payment upfront
and a higher monthly service fee.
Our European tender division is gaining experience with some small wins, while
the UK business signed the Thames Water and Royal Mail contracts for two more
years.
The takeover of MPS2010 Limited gave DigiCore the people and skills to really
excel in the small and medium enterprise (SME) and Heavy Commercial Vehicle
markets in the same way as South Africa is doing.
Some exciting developments were finalised for the Middle East which will
underpin excellent performance in the oil transport market.
Some breakthroughs were made in Australia and expansion of these distributors
is imminent. With the appointment of Omar Hatmi (ex Trakker Pakistan) as
director based in Malaysia, this market is expected to produce good future
profits.
Acquisition
Our acquisition strategy continues to unfold, with the successful conclusion
of the Minorplanet UK transaction towards the end of the period. Post-year-
end, this was followed up with the acquisitions of Minorplanet`s associated
businesses in Holland, Belgium, Germany and a 25.1% investment in the
Australia and New Zealand operations. These are being integrated with C-track
operations and add nearly 60 000 systems to our customer base, in addition to
human resource and intellectual property benefits.
Future
DigiCore International is well positioned to capitalise on the gradual
improvement in global economic conditions in the year ahead and the expected
growth in telematics applications.
We anticipate an improved international performance for the 2011 financial
year and expect to grow organically, as well as exploring further acquisitions
in selected markets.
In our South African operations, we continue to take advantage of the small
growth in vehicle sales and bigger volume movement in the transport sector
linked to consumer spend.
With new products now in production, we should be able to grow our SVR
business as well as light commercial and service vehicles with the same
hardware platform, only adding more software features.
Supported by consistent growth in demand for our products in the last three
quarters, barring component shortages, we have a positive outlook for the year
ahead and expect improved financial performance in 2011.
For and on behalf of the board
NA Gasa NH Vlok
Chairman Chief Executive Officer
21 September 2010
CORPORATE PROFILE
DigiCore is a JSE-listed group specialising in the research, design,
development, manufacture, sales and support of technologically advanced mobile
asset tracking, management and information solutions for vehicle owners
locally and abroad.
DigiCore, working in partnership with its customers, develops solutions that
deliver measurable business and operational benefits by providing total
visibility and control of mobile assets and mobile workforces; supplying
superior vehicle-tracking solutions ranging from a basic track-and-trace
product to complete integrated enterprise-level solutions for large fleet
owners such as the Royal Mail (UK), the South African Police Service,
eThekwini Metro, BHP Billiton (global) and many others.
DigiCore seeks to achieve outstanding long-term profitability for its
shareholders, while maintaining a high standard of ethics and developing and
rewarding its people accordingly.
BOARD OF DIRECTORS
The following changes to the board took place over the last year:
- Mr Bruce Richards resigned as executive director with effect from 26
November 2009.
- Mr Barney Esterhuyzen assumed the role of director of international
business. Shareholders are advised that this constitutes a change, according
to rule 3.59(c) of the JSE Listings Requirements, to executive director from
non-executive director.
- Mrs Lindiwe Msengana-Ndlela was appointed an independent non-executive
director with effect from 5 August 2010.
DIVIDEND ANNOUNCEMENT
In line with company policy, the board has declared a final dividend of 3
cents per share (2009: 4 cents per share). This is after paying an interim
dividend of 3 cents per share (2008: 6 cents per share) in March 2010. This
brings the total dividend declared and paid for the year to 6 cents per share
(2009: 10 cents per share).
Payment will be made on Monday, 18 October 2010 to shareholders recorded in
the register on Friday, 15 October 2010. The last day to trade to qualify for
the dividend will be Friday, 8 October 2010 and the shares will be traded ex
dividend from Monday, 11 October 2010.
Share certificates may not be dematerialised or rematerialised between Monday,
11 October 2010 and Friday, 15 October 2010.
Abridged consolidated statement of financial position at 30 June 2010
30 Jun 10 30 Jun 09
R`000 R`000
Notes (Audited) (Audited)
Assets
Non-current assets 346 086 281 811
Property, plant and equipment 120 493 103 789
Goodwill 2 172 537 168 552
Intangible assets 3 36 344 -
Investments in associates 2 493 1 062
Other financial assets 7 887 1 266
Deferred tax 6 332 7 142
Current assets 312 355 345 084
Inventories 86 533 104 011
Other financial assets 304 105
Trade and other receivables 169 990 171 263
Current taxation receivable 6 205 12 299
Cash and cash equivalents 49 323 57 406
Total assets 658 441 626 895
Equity and liabilities
Equity attributable to equity holders of parent 485 390 480 790
Share capital and premium 4 82 585 63 863
Equity reserve 4 - 19 120
Equity reserve - share-based payments 4 484 204
Foreign currency translation reserve (21 744) 8 794
Retained income 420 065 388 809
Non-controlling interest 12 356 11 086
Non-current liabilities 36 600 44 289
Interest-bearing financial liabilities 5 35 563 43 777
Deferred tax 1 037 512
Current liabilities 124 095 90 730
Current portion of interest-bearing
financial liabilities 5 12 123 14 691
Bank overdrafts 37 012 9 500
Provisions 14 919 7 330
Current taxation payable 4 525 13 693
Trade and other payables 55 516 45 516
Total equity and liabilities 658 441 626 895
Net asset value per share (cents) 223.0 223.3
Net tangible asset value per share (cents) 132.7 145.0
Abridged consolidated statement of comprehensive income
for the year ended 30 June 2010
Year Year
ended ended
Growth 30 Jun 10 30 Jun 09
% R`000 R`000
Notes (Audited) (Audited)
Revenue (8) 530 534 576 234
Cost of sales and operating expenses (459 845) (463 113)
Net operating profit for the year (38) 70 689 113 121
Investment income 1 046 2 198
Finance costs (4 771) (3 682)
Share of profit/(loss) from associates 909 (497)
Profit before taxation (39) 67 873 111 140
Income tax expense 6 (42) (20 348) (34 946)
Profit after tax (38) 47 525 76 194
Attributable to:
Non-controlling shareholders 1 270 1 453
Equity holders of the parent (38) 46 255 74 741
Other comprehensive income
Currency translation differences (30 538) (6 808)
Total comprehensive income (76) 16 987 69 386
Attributable to:
Non-controlling shareholders 1 270 1 453
Equity holders of the parent (77) 15 717 67 933
Reconciliation between basic to
headline earnings:
Attributable earnings 46 255 74 741
Profit on disposal of fixed assets (1 752) (475)
Headline earnings 44 503 74 266
Number of ordinary shares in issue (`000) 217 669 215 264
Weighted number of ordinary
shares in issue (`000) 210 018 207 057
Fully diluted number of ordinary
shares in issue (`000) 210 018 209 462
Basic earnings per share (cents) 7 (39) 22.0 36.1
Headline earnings per share (cents) 7 (41) 21.2 35.9
Fully diluted basic earnings per
share (cents) 7 (38) 22.0 35.7
Fully diluted headline earnings
per share (cents) 7 (41) 21.2 35.5
Interim dividend per share (cents) 3.0 6.0
Final dividend per share (cents) 3.0 4.0
Total dividend per share (cents) (40) 6.0 10.0
Abridged consolidated statement of cash flows
for the year ended 30 June 2010
Year Year
ended ended
30 Jun 10 30 Jun 09
R`000 R`000
(Audited) (Audited)
Cash flows from operating activities 101 479 40 700
Cash generated from operations 127 309 85 033
Net finance cost (3 725) (1 484)
Taxation paid (22 105) (42 849)
Cash flows from investing activities (105 944) (79 829)
Cash flows from financing activities (31 130) (21 371)
Decrease in cash and cash equivalents for the year (35 595) (60 500)
Cash and cash equivalents at the beginning of the year 47 906 108 406
Cash and cash equivalents at the end of the year 12 311 47 906
Abridged consolidated statement of changes in equity
for the year ended 30 June 2010
Year Year
ended ended
30 Jun 10 30 Jun 09
R`000 R`000
(Audited) (Audited)
Share capital and premium
Share capital and premium at the beginning of the year 63 863 44 635
Movement in treasury shares - (772)
Arising on shares issued for the share trust (1 194) 879
Arising on shares issued for the purchase of DigiCore
Limited 19 916 19 121
Share capital and premium at the end of the year 82 585 63 863
Distributable reserves
Foreign currency translation reserve
Balance at the beginning of the year 8 794 15 602
Arising during the year (30 538) (6 808)
Balance at the end of the year (21 744) 8 794
Equity-settled share-based payment reserve
Balance at the beginning of the year 204 5 200
Employee share option scheme 1 194 (880)
Fair value options issued 3 086 -
Share options cancelled - (4 116)
Balance at the end of the year 4 484 204
Equity instrument to be issued
Balance at the beginning of the year 19 120 38 241
Shares to be issued in respect of DigiCore Limited
transaction (19 120) (19 121)
Balance at the end of the year - 19 120
Distributable reserves at the end of the year (17 260) 28 118
Retained income
Retained income at the beginning of the year 388 809 351 446
Movement in attributable earnings during the year 46 255 74 741
Share options cancelled - 4 116
Dividends paid during the year (14 999) (41 494)
Retained income at the end of the year 420 065 388 809
Non-controlling interest
Balance at the beginning of the year 11 086 9 632
Movement through business combinations - 1
Share of recognised income and expenses 1 270 1 453
Non-controlling interest at the end of the year 12 356 11 086
Segment report
for the year ended 30 June 2010
Product
SA Foreign development and
R`000 Distribution Distribution manufacturing
Revenue 415 748 123 138 154 602
External revenue 380 208 112 071 25 457
Internal revenue 35 540 11 067 129 145
Other operating income 15 814 - 20 028
Operating income 431 562 123 138 174 630
Operating expenses (342 737) (122 992) (167 359)
External operating expenses (172 052) (111 925) (166 359)
Internal operating expenses (170 685) (11 067) (1 000)
Profit/(Loss) exchange differences - - (5 984)
Profit/(Loss) disposal of assets - - -
Depreciation and amortisation (29 541) - (2 406)
Operating income 59 284 146 (1 119)
Operating profit 59 284 146 (1 119)
Investment revenue 13 086 84 81
Finance costs (12 946) - (478)
Income from equity-accounted
investments - - -
Profit before tax 59 424 230 (1 516)
Taxation
Profit after taxation
Group
R`000 services Eliminated Consolidated
Revenue 26 237 (189 191) 530 534
External revenue 12 798 - 530 534
Internal revenue 13 439 (189 191) -
Other operating income 7 877 - 43 719
Operating income 34 114 (189 191) 574 253
Operating expenses (24 913) 189 191 (468 810)
External operating expenses (18 474) - (468 810)
Internal operating expenses (6 439) 189 191 -
Profit/(Loss) exchange differences 3 273 - (2 711)
Profit/(Loss) disposal of assets 1 752 - 1 752
Depreciation and amortisation (1 848) - (33 795)
Operating income 12 378 - 70 689
Operating profit 12 378 - 70 689
Investment revenue 238 (12 443) 1 046
Finance costs (3 790) 12 443 (4 771)
Income from equity-accounted
investments - - 909
Profit before tax 8 826 - 67 873
Taxation (20 348)
Profit after taxation 47 525
for the year ended 30 June 2009
Product
SA Foreign development and
R`000 Distribution Distribution manufacturing
Revenue 369 674 171 315 174 851
External revenue 341 760 166 870 53 594
Internal revenue 27 914 4 445 121 257
Operating income 369 674 171 315 174 851
Operating expenses (293 023) (139 485) (146 534)
External operating expenses (164 412) (110 771) (143 534)
Internal operating expenses (128 611) (28 714) (3 000)
Profit/(Loss) exchange differences (4) - (7 528)
Profit/(Loss) disposal of assets 642 - (167)
Depreciation and amortisation (21 717) (1 291) (1 156)
Operating income 55 572 30 539 19 466
Operating profit 55 572 30 539 19 466
Investment revenue 86 306 230
Finance costs 473 95 (2)
Income from equity-accounted
investments (497) - -
Profit before tax 55 634 30 940 19 694
Taxation
Profit after taxation
Group
R`000 services Eliminated Consolidated
Revenue 25 264 (164 870) 576 234
External revenue 14 010 - 576 234
Internal revenue 11 254 (164 870) -
Operating income 25 264 (164 870) 576 234
Operating expenses (18 951) 164 870 (433 123)
External operating expenses (14 406) - (433 123)
Internal operating expenses (4 545) 164 870 -
Profit/(Loss) exchange differences 2 578 - (4 954)
Profit/(Loss) disposal of assets - - 475
Depreciation and amortisation (1 347) - (25 511)
Operating income 7 544 - 113 121
Operating profit 7 544 - 113 121
Investment revenue 1 576 - 2 198
Finance costs (4 248) - (3 682)
Income from equity-accounted investments - - (497)
Profit before tax 4 872 - 111 140
Taxation (34 946)
Profit after taxation 76 194
Notes to the abridged group financial statements
1. Basis of preparation and accounting policies
The abridged consolidated annual financial statements set out in this report
have been prepared in accordance and comply with International Financial
Reporting Standards and are presented in terms of disclosure requirements set
out in IAS 34: Interim Financial Reporting and the Companies Act, 1973 (as
amended) and the JSE Limited Listings Requirements.
The financial statements are based on appropriate accounting policies,
consistently applied with those used in the audited annual financial
statements for the year ended 30 June 2009, which are supported by reasonable
and prudent judgements and estimates, with the following exceptions:
- IAS 1 (Revised): Presentation of Financial Statements, effective for
accounting periods commencing on or after 1 January 2009. This statement
required certain changes in disclosure as well as the introduction of the
"Statement of comprehensive income". These changes had no impact on the
financial position or results of the group; and
- IFRS 8: Operating segments, effective for accounting periods commencing on
or after 1 January 2009. This standard requires the disclosure of information
based on the "management approach" to reporting the financial performance of
operating segments. This change had no impact on the financial position or
results of the group and is merely a disclosure issue.
2. Goodwill
Net goodwill increased by R4 million for the current year after an increase of
R25.3 million attributable to the acquisition of MPS2010 Limited and a
decrease of R21.3 million from the foreign goodwill being revalued at the spot
rate on 30 June 2010.
3. Intangible assets
During the year R17.6 million worth of development costs were capitalised to
the balance sheet for development of the new C-track v6 software, as well as
the Tap-i-Fare in-taxi device hardware for the taxi fare-collection project.
The development to which these costs have been capitalised is now complete; it
will be brought into use in the next financial year and is expected to have a
useful life of five years.
4. Share capital, share premium and reserves
During the year 2 405 078 shares were issued as part payment for profit
warranties that were met for the DigiCore Limited share purchase from
minorities for the financial years ended 30 June 2008 and 2009. The equity
reserve was reduced in the current year by R19.1 million as a result of the
issue of shares for the profit warranty being met.
5. Interest-bearing financial liabilities
The interest-bearing financial liabilities decreased due to repayment of R4.8
million on the foreign euro loan as well as the payment of R4.4 million to the
vendors of DigiCore Limited and further capital repayments on the Absa bond
held over the Head Office buildings.
6. Income tax expense
The effective tax rate of 30% (2009: 31.4%) includes a secondary tax on
companies charge on the final and interim dividends declared and paid during
the years ended 30 June 2010 and 30 June 2009.
7. Earnings per share
The difference between the total number of shares in issue and the weighted
number of shares in issue relates to treasury shares, held by the share trust
to provide share options to employees that will convert in future and shares
issued to the minorities of DigiCore Limited during the reporting period.
Business combinations
On 9 June 2010, DigiCore ultimately acquired the full shareholding in the
newly formed company MPS2010 Limited, a company registered in the United
Kingdom, for GBP3.0 million (R31.5 million) paid in cash.
MPS2010 Limited has taken over the operations and assets of Minorplanet`s UK
business and the intellectual property of Minorplanet. Further details on this
transaction can be found on the SENS releases of 18 May 2010 and 9 June 2010.
Assets acquired and liabilities assumed at the date of acquisition:
Property, plant and equipment R112 000
Intangible assets R18 716 000
Trade and other receivables R1 000
Provisions (R9 218 000)
Other financial liabilities (R3 372 000)
Total identifiable net assets R6 239 000
Goodwill R25 292 000
Total purchase price R31 531 000
The initial accounting for the acquisition of MPS2010 Limited has only been
provisionally determined at the end of the reporting period. At the date of
finalisation of these financial statements, the necessary market valuations
and other calculations had not been finalised and they have therefore only
been provisionally determined based on the directors` best estimate. The
initial accounting of the MPS2010 Limited transaction is expected to be
completed within 12 months of the acquisition date.
Post-balance sheet events
Subsequent to year-end, the following events have taken place:
- On 24 August 2010 DigiCore acquired the operations and assets in the
Minorplanet businesses in Belgium, Holland and Germany for euro165 000. The
value of the assets and liabilities acquired has not been finally determined
as the acquisition date is close to the date of this report.
- DigiCore is in the process of acquiring a 25.1% stake for AUS$50 000 in a
newly formed company in Australia that will acquire the operations of
Minorplanet in the Asia-Pacific region.
- Negotiations are currently under way with the administrators to acquire the
operations and assets of Minorplanet Ireland.
Other than disclosed above, there have been no significant events subsequent
to year-end and up to the date of this report that would require adjustment to
the annual financial statements or further disclosure.
Audit report
These condensed consolidated results have been audited by our auditors PKF
(Pta) Inc, who have performed their audit in accordance with the International
Standards on Auditing. A copy of the unqualified audit report is available for
inspection at the registered office of the company.
The board has approved these annual financial statements which have been
abridged for purposes of this report.
Any reference to future financial performance included in this announcement
has not been reviewed or reported on by the company`s auditors.
Corporate governance
The group endorses the Code of Corporate Practice and Conduct as set out in
the King Committee Report on Corporate Governance in South Africa (2002) and
complies substantially with the guidelines of the report as required by the
JSE. The audit and risk committee has been tasked with reviewing the
guidelines of King III and changes to the new Companies Act 2008, and to
implement changes in the group where applicable.
Sustainability
During the year DigiCore continued with its initiatives and drive towards
being a more sustainable company for itself and its customers. As an example
Thames Water, in the UK, by utilising the C-track system, as part of a wider
efficiency programme, has cut fuel usage by almost 10%, equating to 161 000
litres of diesel fuel. This has had significant environmental benefits with a
reduction in carbon dioxide (CO2) emissions of approximately 429 metric
tonnes.
Directorate
NA Gasa* (Chairman), NH Vlok (Chief Executive Officer), SR Aberdein,
D du Rand, BC Esterhuyzen, BS Khuzwayo*, B Marx*, LG Msengana-Ndlela*,
SS Ntsaluba*, MD Rousseau, FJ Schindehutte
*Non-executive
Company secretary
DA Nieuwoudt
Registered office
DigiCore Building, Regency Office Park
9 Regency Drive, Route 21 Corporate Park
Irene Ext 30, Centurion, South Africa
(PO Box 68270, Highveld Park, 0169)
Tel: +27 12 450 2222 Fax: +27 12 450 2497
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor
PSG Capital (Pty) Limited
Auditors
PKF (Pta) Incorporated
Websites
www.digicore.com
www.ctrack.co.za
Date: 21/09/2010 17:00:03 Produced by the JSE SENS Department.
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