| Fri 25 Feb 2011, 9:38 | | SBG - Simeka Business Group Limited - Unaudited condensed consolidated interim |
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SBG
SBG
SBG - Simeka Business Group Limited - Unaudited condensed consolidated interim
financial statements for the six months ended 30 November 2010
Simeka Business Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: SBG ISIN: ZAE000074878
("Simeka" or "the company" or "the group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED 30 NOVEMBER 2010
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Highlights
Revenue R411,1 million
Headline earnings R23,2 million
Cash reserves R96,0 million
NAV per share 44.98 cents
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
six months six months year ended
to 30 Nov to 30 Nov 31 May
2010 2009 2010
R`000 R`000 R`000
Revenue 411 087 373 699 697 005
Turnover 408 462 372 307 693 830
Cost of sales (228 180) (218 798) (402 286)
Gross profit 180 282 153 509 291 544
EBITDA 60 070 50 325 76 855
Depreciation (7 364) (6 881) (13 002)
Amortisation of intangible
assets (404) (2 091) (4 685)
Impairment of goodwill and
intangible assets - (178 625) (271 059)
Impairment of investments - - (306)
Net finance costs (6 497) (11 666) (21 313)
Income from associate 27 160 214
Profit/(loss) before taxation 45 832 (148 778) (233 296)
Income tax expense (15 767) (10 141) (4 518)
Profit/(loss for the period 30 065 (158 919) (237 814)
Other comprehensive income for (1 275)
the period, net of tax 294 118
Total comprehensive income/ 28 790
(loss)for the period (158 625) (237 696)
Profit/(loss)attributable to:
Owners of the parent 22 854 (159 558) (242 914)
Non-controlling interest 7 211 639 5 100
30 065 (158 919) (237 814)
Total comprehensive income
attributable to:
Owners of the parent 22 854 (159 264) (242 796)
Non-controlling interest 7 211 639 5 100
30 065 (158 625) (237 696)
Earnings/(loss)per share
(cents) 4.25 (32.45) (44.70)
Diluted earnings/(loss)per
share (cents) 4.25 (28.92) (44.70)
Notes to the statement of
comprehensive income
Headline earnings for the
period attributable to ordinary
shareholders 23 161 22 091 27 350
Headline earnings per share 4.31 4.49 5.03
Diluted headline earnings per
share 4.31 4.00 5.03
Number of shares (`000)
Weighted average number of
shares 537 497 491 629 543 414
Diluted weighted average number
of shares in issue and to be
issued 537 497 551 629 543 414
Reconciliation of headline
earnings calculation:
Earnings for the period
attributable to ordinary
shareholders 22 854 (159 558) (242 914)
Loss on disposal of
subsidiaries and associates - 1 611 10 004
Goodwill impairment - 178 625 230 295
Intangible assets impairment - - 29 350
Profit/ (loss) on disposal of
property, plant and equipment 307 (10) 60
Impairment of loans - 1 423 -
Impairment of investments - - 556
Headline earnings for the
period attributable to ordinary
shareholders 23 161 22 091 27 351
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
six months six months year ended
at 30 Nov at 30 Nov 31 May
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 259 950 358 485 263 177
Property, plant and equipment 33 790 37 868 37 846
Goodwill 180 709 228 788 180 709
Intangible assets 4 115 48 302 4 519
Other financial assets 3 968 3 519 3 613
Investment in associate company 4 554 10 777 3 789
Deferred taxation 32 814 29 231 32 701
Current assets 301 261 275 433 211 111
Inventories 31 622 7 777 9 624
Trade and other receivables 166 145 163 937 100 124
Financial assets 2 160 1 824 871
Taxation receivable 5 182 4 590 5 182
Operating lease assets 113 113 113
Cash resources 96 039 97 192 95 197
Total assets 561 211 633 918 474 288
EQUITY AND LIABILITIES
Capital and reserves 240 833 301 782 219 056
Share capital 300 742 252 370 300 742
Reserves (6 952) (5 699) (5 875)
Retained earnings (52 957) 7 545 (75 811)
Amounts due to vendors - 47 566 -
Non-controlling interest 8 330 8 334 6 629
Total equity 249 163 310 116 225 685
Non-current liabilities 79 624 155 410 94 273
Other financial liabilities
(interest-bearing debt) 73 907 138 079 88 221
Finance lease obligation 2 130 1 629 2 465
Deferred taxation 3 587 15 702 3 587
Current liabilities 232 424 168 392 154 330
Other financial liabilities
(interest-bearing debt) 41 250 14 153 47 456
Finance lease obligations 7 421 - 5 091
Trade and other payables 158 927 143 145 81 481
Provisions 2 930 - 2 930
Operating lease liability 914 310 1 038
Current tax payable 20 982 10 784 14 936
Bank overdraft - - 1 398
Total equity and liabilities 561 211 633 918 474 288
Total shares in issue (`000) 679 159 602 016 602 016
Total shares in issue after
treasury shares (`000) 535 411 549 885 544 637
Net asset value per share
(cents) 44.98 54.88 40.22
Net tangible asset value per
share (cents) 10.46 4.49 6.21
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year ended
to 30 Nov to 30 Nov 31 May
2010 2009 2010
R`000 R`000 R`000
Net cash flows from operating
activities 32 389 19 609 48 113
Net cash flows from investing
activities (6 114) (5 809) (23 688)
Net cash flows from financing
activities (24 035) (8 694) (22 712)
Net increase in cash and cash
equivalents 2 240 5 106 1 713
Cash and cash equivalents at
beginning of period 93 799 92 086 92 086
Cash and cash equivalents at
end of period 96 039 97 192 93 799
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
six months six months year ended
to 30 Nov to 30 Nov 31 May
2010 2009 2010
R`000 R`000 R`000
Capital and reserves - opening
balance 225 685 482 216 482 216
Shares issued 198 - -
Treasury shares - - 915
Payment of vendor liabilities - (6 134) -
Acquisition of subsidiaries and
businesses - - (6 243)
Disposal of subsidiaries - - (712)
Foreign currency translation
reserve - 294 -
Total comprehensive
income/(loss) for the period 28 790 (158 919) (237 696)
Dividend paid to non-
controlling interest (5 510) (7 341) (12 795)
Capital and reserves - closing
balance 249 163 310 116 225 685
Commentary
Basis of preparation
The unaudited condensed consolidated interim financial statements have been
prepared in compliance with the Companies Act of South Africa 1973,
International Financial Reporting Standards (IFRS), AC 500 Standards,
International Accounting Standards (IAS) 34 Interim Financial Reporting and its
interpretations adopted by the International Accounting Standards Board (IASB),
and with the JSE Limited Listings Requirements.
The unaudited condensed consolidated interim financial statements have been
prepared under the historical cost convention, save for certain financial
instruments.
The same accounting policies, presentation and methods of computation are
followed in these unaudited condensed consolidated interim financial statements
as were applied in the preparation of the group`s audited annual financial
statements for the previous year ended 31 May 2010.
Introduction
The directors of Simeka present the unaudited condensed consolidated interim
results for the six months ended 30 November 2010 ("the period"), reflecting a
solid performance.
The unaudited condensed consolidated interim financial statements for the period
were authorised for issue by the directors on 25 February 2011.
Group profile
Simeka is a leading black-empowered provider of Professional Services,
Outsourcing and ICT Solutions.
Operational overview
South African operations performed well, capitalising on the slowly recovering
domestic economy, with a strong pipeline in place for the future. The
conclusion of the BEE transaction (refer SENS dated 17 September 2010)
successfully stabilised risk factors with existing and new customers.
Outside South Africa Simeka established a subsidiary and concluded a joint
venture in India in an effort to counter international pricing pressure. This
will result in increased capacity to capitalise on lucrative and sustainable
business opportunities throughout Africa as well as serve as a disaster recovery
site. During the period, established operations in Nigeria experienced a
slowdown in new orders in line with expectation owing to legislative changes
driven by the roll-out of RICA.
Share repurchase programme
The company repurchased 2 498 471 shares through a subsidiary company during the
period at a total cost of R336 836 and intends to continue to repurchase shares
in the current year. All share repurchase programmes are subject to group
liquidity and solvency tests.
Black Economic Empowerment
Simeka is black-owned and managed with the majority of Simeka`s board being
black. Following the successful implementation of the BEE transaction (refer
SENS dated 17 September 2010), the company has significantly improved its BEE
rating to Level 2. This BEE platform offers the group a material competitive
advantage and is a key contributor to ongoing growth.
Notwithstanding the strong BEE profile, Simeka remains committed to continually
enhancing its credentials in respect of all aspects of BEE scorecarding.
Financial results
Revenue increased 10% to R411,1 million from R373,7 million in the comparative
period, with 90% being generated from South African operations and the remainder
from the rest of Africa. EBITDA of R60,0 million (2009: R50,3 million) was
reported for the period. Net margins improved from 5,9% to 7,3% as a result of
new contract wins with better margins as well as the conclusion of the once-off
retrenchment costs incurred in the prior period.
Financing costs reduced to R9,1 million from R13,1 million, largely from a
decrease in the prime lending rate during the period and repayments now
servicing more borrowings capital than interest.
The company has a strengthened statement of financial position following the
impairment of goodwill and intangible assets absorbed in the prior year. Cash on
hand of R96,0 million is reflective of effective working capital management
despite a substantial increase in inventory to R31,6 million resulting from new
orders. During the period the company invested R6,7 million in capital
expenditure to enable growth and sustainability.
The group`s net debt position has improved from R48,0 million as at 31 May 2010
to R28,7 million.
Segmental reporting
The Business Support Services (People and Process) division contributed 72,5% of
group turnover with Technology contributing the balance of 27,5%.
Business Support Technology
Services
Nov 10 Nov 09 Nov 10 Nov 09
R`000 R`000 R`000 R`000
Total segment
turnover 296 942 222 594 159 014 210 227
Net profit/
(loss)from ordinary 31 090 18 515 12 353 20 731
activities
Consolidated total 267 783 384 990 75 408 195 639
assets
Consolidated total 213 272 184 587 40 066 128 260
liabilities
Corporate and Totals
Eliminations
Nov 10 Nov 09 Nov 10 Nov 09
R`000 R`000 R`000 R`000
Total segment (47 494) (60 514) 408 462 372 307
turnover
Net profit/
(loss)from ordinary (13 378) (198 165) 30 065 (158 919)
activities
Consolidated total 218 020 53 289 561 211 633 918
assets
Consolidated total 58 710 10 955 312 048 323 802
liabilities
Related parties
During the period certain subsidiaries, in the ordinary course of business,
entered into various loans and transactions with related parties under terms and
conditions that are no less favourable than those arranged at arm`s length with
third parties.
Transactions between the company and its subsidiaries, which are related parties
of the company, have been eliminated and consolidated.
BEE transactions
Shareholders approved two BEE schemes, one for the benefit of key executives and
the other for the benefit of management and staff, at the general meeting held
on 11 October 2010 and as proposed in the circular to shareholders dated 16
September 2010. The take-up of shares in the group has increased direct black
shareholding to enable Simeka to retain existing public and private sector
contracts, secure upcoming contract renewals as well as bring new business on
stream, while at the same time aligning management`s interests with
shareholders.
The above IFRS 2 transactions have been calculated in terms of the group`s
accounting policy, resulting in an expense amounting to R198 473.
Post balance sheet events
Disposal of certain intellectual property of Mint Management Technology (Pty)
Ltd ("Mint")
On 10 December 2010 Mint, a 50,01% subsidiary of Simeka, entered into an
assignment agreement with Moputso Investments 66 (Pty) Ltd ("Moputso") in terms
of which Mint disposed of certain intellectual property, relating only to its
property valuation business, for a 35% equity in Moputso. The consideration of
R10 million was discharged by Moputso allotting and issuing 700 ordinary shares
in Moputso to Mint equating to a 35% equity stake in Moputso. The financial
effects are in the process of being finalised and will be published on
completion if required.
Mint`s stake in the combined entity will help boost combined operational
efficiencies as well as drive a combined data and technology strategy to current
and future customers.
Change of auditors
As announced on 8 February 2011, the company has appointed PKF (Pta) Inc. as its
auditors with effect from 8 February 2011. Mazars was not re-appointed by
shareholders at the annual general meeting held on 18 January 2011.
Board of directors
On 8 February 2011 Professor Benjamin Marx was appointed as an independent non-
executive director and chairman of the audit committee in place of Mr Peter
Gordon, who was not re-appointed by shareholders at the annual general meeting
held on 18 January 2011.
Mrs Kobote Molefe, a non-executive director of the company, retired at the
annual general meeting held on 18 January 2011.
Change of name
Shareholders are advised that at the general meeting held on 18 January 2011 the
special resolution was approved to change the name of the company to Morvest
Business Group Limited with effect from 7 March 2011.
Outlook
Despite signs of a slowly recovering economy, the climate is expected to remain
challenging over the next 12 to 18 months. Notwithstanding this outlook,
Simeka`s solid business model with strong fundamentals is expected to enable the
group to maintain its current performance. The initiative to simplify and
streamline the group`s structure for optimal efficiency, as well as healthy cash
reserves in hand, will support stability. In the current year Simeka will
continue focusing on nurturing existing customer relationships and contracts,
reducing debt and further enhancing the group`s BEE status.
Renewal of cautionary announcement
Further to the cautionary announcement dated 12 January 2011, shareholders are
advised that discussions are still in progress, which if successfully concluded,
may have a material effect on the price of the company`s securities.
Accordingly, shareholders are advised to continue exercising caution when
dealing in the company`s securities until further announcement.
Appreciation
We thank all directors, managers and staff for their tenacity and drive which
contributed to the group`s performance in a tough economic environment.
We further extend our appreciation to all our shareholders, business associates
and loyal customers for their unwavering support in these difficult times.
By order of the board
Mohammed Varachia Suren Singh
CEO CFO
25 February 2011
Directors:
Dr PS Molefe (Chairman)*, M Varachia (CEO), S Singh (CFO), M Papiyana (Group HR
Director), N Singh, Prof. B Marx *, NY Mhinga*
*Non-executive Independent
Registered office:
10 Kikuyu Road, Sunninghill, 2191
(PO Box 4307, Halfway House, Midrand, 1685)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg
(PO Box 61051, Marshalltown, 2107)
Company secretary:
Noelene Beryl January, 10 Kikuyu Road, Sunninghill
(PO Box 4307, Halfway House, Midrand, 1685)
Designated advisor:
Sasfin Capital (a division of Sasfin Bank Limited)
Auditors:
PKF (Pta) Inc. (appointed 8 February 2011)
Date: 25/02/2011 09:38:00 Produced by the JSE SENS Department.
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