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MMG
MMG
MMG - MICROmega Holdings Limited - Provisional audited consolidated financial
statements for the year ended 31 December 2010
MICROmega Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/003821/06)
Share code MMG ISIN ZAE000034435
("Micromega" or "the company" or "the group")
PROVISIONAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 2010
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year year
ended ended
Note 31 December 31 December
2010 2009
R(`000) R(`000)
Revenue 682 314 747 307
Revenue from continuing operations 681 925 721 900
Revenue from discontinued operations 389 25 407
Cost of sales (451 437) (517 175)
Gross profit 230 877 230 132
Gross profit from continuing operations 239 496 227 428
Gross (loss)/profit from discontinued operations (8 619) 2 704
Other income 7 037 9 109
Distribution expenses (6 068) (5 578)
Administration expenses (217 052) (196 616)
Results from operations 14 794 37 047
Results from continuing operations 24 102 43 947
Results from discontinued operations (9 308) 6 900
Finance income 8 468 9 479
Finance cost (10 794) (16 995)
Net finance cost (2 326) (7 516)
Share of loss of equity accounted associates (724) (768)
Profit before taxation 11 744 28 763
Profit before taxation from continuing operations 22 510 36 346
Loss before taxation from discontinued
operations (10 766) (7 673)
Taxation expense (3 936) (11 084)
Profit for the year 7 808 17 679
Profit from continuing operations 15 547 23 768
Loss from discontinued operations (7 739) (6 089)
Other comprehensive income:
Foreign currency translation differences 12 42
Revaluation of property 16 099 2 230
Realisation of revaluation reserve (49) -
Income tax on other comprehensive income (4 507) (634)
Other comprehensive income for the year 11 555 1 638
Total comprehensive income for the year 19 363 19 317
Profit attributable to:
Owners of the company 5 673 16 362
Non-controlling interests 2 135 1 317
Profit for the year 7 808 17 679
Total comprehensive income attributable to:
Owners of the company 11 432 18 000
Non-controlling interests 7 931 1 317
Total comprehensive income for the year 19 363 19 317
Reconciliation of headline earnings:
Profit attributable to ordinary shareholders 5 673 16 362
Profit on disposal of property,
plant and equipment (25) (1 786)
Impairment of property, plant and equipment 2 2 520 -
Profit on disposal of other investments - (1 995)
Impairment of goodwill and intangible assets 7 758 7 540
Headline earnings 15 926 20 121
Earnings per share
Headline earnings per share (cents) 16.46 20.75
Basic earnings per share (cents) 5.86 16.88
Diluted earnings per share (cents) 5.83 16.77
Continuing operations
Basic earnings per share (cents) 13.85 23.16
Diluted earnings per share (cents) 13.78 23.01
Weighted average number of shares (000`s) 96 783 96 958
Diluted weighted average number of shares (000`s) 97 266 97 561
Total number of shares in issue (000`s) 96 462 96 966
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
as at as at
31 December 31 December
2010 2009
R(`000) R(`000)
ASSETS
Non-current assets 262 828 168 880
Property, plant and equipment 141 332 58 871
Intangible assets 62 902 61 434
Investments in associates 2 476 3 747
Other investments 6 695 6 698
Loans receivable 24 677 21 891
Deferred tax assets 24 746 16 239
Current assets 242 036 251 906
Inventories 51 631 45 200
Retirement benefit surplus 26 844 18 877
Trade and other receivables 113 330 123 976
Current portion of loans receivable 3 539 5 497
Cash and cash equivalents 20 963 29 936
Income tax receivable 1 043 -
Non-current assets classified as held for sale 24 686 28 420
TOTAL ASSETS 504 864 420 786
EQUITY AND LIABILITIES
EQUITY
Share capital and share premium 190 797 191 440
Non-distributable reserves 14 410 8 196
Retained earnings 78 280 66 959
Total equity attributable to owners of
the company 283 487 266 595
Non-controlling interests 16 189 13 455
Total equity 299 676 280 050
LIABILITIES
Non-current liabilities 69 877 27 530
Borrowings 56 576 19 467
Deferred tax liabilities 13 301 8 063
Current liabilities 135 311 113 206
Bank overdraft 11 844 3 930
Current portion of borrowings 31 886 21 372
Trade and other payables 82 286 86 055
Current portion of deferred vendor payments 789 871
Provisions 8 506 36
Taxation payable - 942
Total liabilities 205 188 140 736
TOTAL EQUITY AND LIABILITIES 504 864 420 786
Net asset value per share (cents) 293.88 274.94
Net tangible asset value per share (cents) 228.68 211.58
SUMMARISED GROUP STATEMENT OF CASH FLOWS
Audited Audited
year year
ended ended
31 December 31 December
2010 2009
R(`000) R(`000)
Cash generated by operating activities 38 799 50 157
Movement in working capital 446 14 771
Finance income 8 468 9 479
Finance costs (10 794) (16 995)
Taxation paid (14 817) (22 589)
Net cash inflows from operating activities 22 102 34 823
Cash flows from investing activities
Expenditure to maintain operating capacity
Property, plant and equipment acquired (68 820) (12 212)
Intangible assets acquired (101) (213)
Proceeds on disposals of property, plant and equipment 1 528 5 656
Proceeds on disposals of intangible assets - 19
Expenditure for expansion
Acquisition of subsidiaries (7 812) (1 578)
Internally generated intangible assets (9 368) (4 956)
Proceeds on disposal of investments 51 2 359
Loans receivable granted - (26 350)
Loans receivable repaid 1 757 1 012
Net cash outflows from investing activities (82 765) (36 263)
Cash flows from financing activities
Treasury shares repurchased (644) (224)
Dividends paid to non-controlling interests (780) (200)
Borrowings raised 45 537 12 857
Deferred vendor payments repaid (337) (2 327)
Net cash inflows from finance activities 43 776 10 106
(Decrease)/increase in cash and cash equivalents (16 887) 8 666
Cash and cash equivalents at the beginning of
the year 26 006 17 340
Cash and cash equivalents at the end of the year 9 119 26 006
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Revalu- Foreign Deal Share Retained
capital premium ation currency diffe- based earnings
reserve transla- rences payme-
tion reserve nt re
reserve serve
R(`000) R(`000) R(`000) R(`000) R(`000) R(`000) R(`000)
Balance at 1 971 190 678 2 388 (21) 1 000 2 297 50 597
January 2009
Total comprehen-
sive income for
the year
Profit for the - - - - - - 16 362
year
Other comprehen- - - 1 596 42 - - -
sive income
Foreign currency - - - 42 - - -
translation dif-
ferences
Revaluation - - 1 596 - - - -
of property
Total comprehen- - - 1 596 42 - - 16 362
sive income for
the year
Contributions by (1) (208) - - - 894 -
and distributions
to owners
Treasury shares (1) (223) - - - - -
purchased
Dividends paid by - - - - - - -
subsidiary company
to non-controlling
interests
Share-based - 15 - - - 894 -
payment transac-
tions
Total transac- (1) (208) - - - 894 -
tions with owners
Balance at 31 970 190 470 3 984 21 1 000 3 191 66 959
December 2009
Balance at 1 970 190 470 3 984 21 1 000 3 191 66 959
January 2010
Total comprehen-
sive income for
the year
Profit for the - - - - - - 5 673
year
Other comprehen- - - 5 376 12 - - 371
sive income
Foreign currency - - - 12 - - -
translation dif-
ferences
Revaluation - - 5 796 - - - -
of property
Realisation of - - (420) - - - 371
revaluation reserve
Total comprehen- - - 5 376 12 - - 6 044
sive income for
the year
Contributions by (5) (638) - - - 826 5 277
and distributions
to owners
Treasury shares (5) (639) - - - - -
purchased
Share-based - 1 - - - 826 -
payment transac-
tions
IFRS 3 Business - - - - - - 5 277
combinations
Dividends paid by - - - - - - -
subsidiary company
to non-controlling
interests
Total transac- (5) (638) - - - 826 5 277
tions with owners
Balance at 31 965 189 832 9 360 33 1 000 4 017 78 280
December 2010
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Total Non-con- Total
trolling Equity
interests
R(`000) R(`000) R(`000)
Balance at 1 247 910 12 338 260 248
January 2009
Total comprehen-
sive income for
the year
Profit for the 16 362 1 317 17 679
year
Other comprehen- 1 638 - 1 638
sive income
Foreign currency 42 - 42
translation dif-
ferences
Revaluation 1 596 - 1 596
of property
Total comprehen- 18 000 1 317 19 317
sive income for
the year
Contributions by 685 (200) 485
and distributions
to owners
Treasury shares (224) - (224)
purchase
Dividends paid by - (200) (200)
subsidiary company
to non-controlling
interests
Share-based 909 - 909
payment transac-
tions
Total transac- 685 (200) 485
tions with owners
Balance at 31 266 595 13 455 280 050
December 2009
Balance at 1 266 595 13 455 280 050
January 2010
Total comprehen-
sive income for
the year
Profit for the 5 673 2 135 7 808
year
Other comprehen- 5 759 5 796 11 555
sive income
Foreign currency 12 - 12
translation dif-
ferences
Revaluation 5 796 5 796 11 592
of property
Realisation of (49) - (49)
revaluation reserve
Total comprehen- 11 432 7 931 19 363
sive income for
the year
Contributions by 5 460 (5 197) 263
and distributions
to owners
Treasury shares (644) - (644)
purchased
Share-based 827 - 827
payment transac-
tions
IFRS 3 Business 5 277 (4 417) 860
combinations
Dividends paid by - (780) (780)
subsidiary company
to non-controlling
interests
Total transac- 5 460 (5 197) 263
tions with owners
Balance at 31 283 487 16 189 299 676
December 2010
NOTES TO THE GROUP FINANCIAL INFORMATION
1. Basis of preparation
These provisional audited summarised consolidated financial statements are
prepared in accordance with the framework concepts and the recognition and
measurement criteria of International Financial Reporting Standards (IFRS), its
interpretations adopted by the International Accounting Standards Board(IASB),
the presentation and the disclosure requirements of IAS 34 Interim Financial
Reporting, the AC 500 standards as issued by the Accounting Practices Board, the
Listing Requirements of the JSE Limited and the requirements of the South
African Companies Act 61 of 1973, as amended.
These provisional audited summarised consolidated financial results are prepared
in accordance with the going concern principle under the historical cost basis
as modified by the fair value accounting of certain assets and liabilities where
required or permitted by IFRS.
All financial information presented in South African Rand has been rounded
to the nearest thousand.
The accounting policies applied in preparing these provisional audited
summarised consolidated financial statements are consistent with those presented
in the annual financial statements for the year ended 31 December 2009.
2. Impairment of property, plant and equipment
The group has impaired the non-current assets classified as held for sale
due to negotiations and calculations conducted over the course of the
year. It is expected that no further impairments will be required.
3. Segmental information
SEGMENT REVENUE
Audited Audited
year year
ended ended
31 December 31 December
2010 2009
R(`000) R(`000)
Financial Services
External sales 44 229 36 619
Support services
External sales 324 269 365 123
Information technology
External sales 107 820 164 527
Automotive components
External sales 232 621 216 290
Property investments
Internal sales 11 208 2 677
Adjustments and eliminations (37 833) (37 929)
Total revenue 682 314 747 307
SEGMENT PROFIT / (LOSS)
Audited Audited
year year
ended ended
31 December 31 December
2010 2009
R(`000) R(`000)
Financial services 6 734 5 387
Support services 10 571 6 911
Information technology 4 885 13 843
Automotive components (7 761) (11 335)
Property investments 9 139 2 913
Adjustments and eliminations (17 895) (1 357)
Profit attributable to owners 5 673 16 362
of the company
SEGMENT ASSETS
Audited Audited
as at as at
31 December 31 December
2010 2009
R(`000) R(`000)
Financial services 321 701 243 511
Support services 102 868 75 644
Information technology 132 361 139 232
Automotive components 185 827 174 560
Property investments 119 657 33 676
Adjustments and eliminations (357 550) (245 837)
Total assets 504 864 420 786
4. Commentary on results
MICROmega has operating investments in five sectors; the automotive sector, the
financial services sector, the support services sector, the information
technology sector and the property investment sector, introduced in 2010.
The period under review was a year in which we consolidated our existing
operations while preparing to re-focus our activities back to our more preferred
"intellectual property" driven businesses. A conscious decision was taken not to
grow by acquisition as revenue generation in our current sectors remained
volatile and sustainability was under question. Fortunately, trading conditions
in the second half of the year trended upwards towards the levels enjoyed prior
to the global economic down turn in 2008. We are not yet convinced that this is
sustainable.
The results for the group were significantly impacted by the underperformance of
our automotive sector, in particular our Kolbenco and BTM Manufacturing
operations. We experienced trading losses of R16,3 million in this sector. In
addition to this we have impaired the value of our investment in this sector by
a further R9,1 million resulting in a combined loss of R25,4 million for the
year. The impact of this sector on the group`s overall performance for the
trading periods of 2008, 2009 and 2010 has reinforced our previous decision that
we do not view this sector as having sufficient medium to long term prospects
albeit we are enjoying a growth in new car sales in 2011. Shareholders should
not experience any further negative impact on the operating earnings of the
group given the impairments and discontinuation of activities within this
sector.
Future growth prospects are discernible in our information technology and
support services operations. In these two sectors we are pleased to report that
market conditions remain kind and our challenge is to secure the requisite
skills to meet our client`s expectations and demands. The decision has been
taken to expand the services provided by NOSA beyond the African continent. In
January 2011 we started to actively support demand for our services from China.
The order book for 2011 boasts clients such as China Light and Power and a
further twenty blue chip corporates in mainland China. This favourable entry
into China bodes well for operating profits for 2011. We anticipate that by the
close of this year we will have taken the NOSA services to Latin America where
we are experiencing demand from South African based mining operations in that
region. Our information technology sector is continuously requiring investment
in product development and we have invested substantially in that area during
2010. This investment is expected to assist in growing earnings in 2011 and
beyond.
The financial services sector is dominated by our inter-dealer broking
operation. It performed to expectation. Liquidity and market volatility are the
key revenue drivers in this business. Market activity was low in 2010 however we
are seeing signs of recovery in 2011 that we believe will continue.
The opening of our property investment sector has been motivated by the increase
in the number of property rentals that the group`s growth has necessitated. A
conversion of operating spend to capital investment at the current property
prices underpins sustainable asset growth on our statement of financial
position.
Whilst we view our overall delivery of earnings to our shareholders in 2010 as
being far from acceptable we are confident that 2011 will be a year of more
normal trading and we are further confident that our statement of financial
position and operating activities are now structured to deliver meaningful
growth to shareholders.
Any reference to future financial performance included in this announcement, has
not been reviewed or reported on by the company`s auditors.
Report of the auditors
KPMG Inc., MICROmega`s independent auditors have audited the consolidated annual
financial statements of the group from which the summarised consolidated
financial results have been derived and have expressed an unmodified opinion on
the consolidated annual financial statements. The summarised consolidated
financial results comprise the summarised consolidated statement of financial
position at 31 December 2010, summarised consolidated statement of comprehensive
income, summarised consolidated statement of changes in equity and summarised
consolidated statement of cash flows for the year then ended and selected
explanatory notes. The audit report is available for inspection at MICROmega`s
registered offices.
By order of the Board
31 March 2011
Directors: D C King (Chairman - appointed 17 January 2011); IG Morris (Chief
Executive Officer); DSE Carlisle (Managing Director); DJ Case (Financial
Director); PV Henwood (Lead Independent Non-Executive); RC Lewin (Non-Executive)
Company Secretary: T de Mendonca
Auditors: KPMG Inc.
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Sponsor: Java Capital
Attorneys: Eversheds
Date: 31/03/2011 17:15:02 Produced by the JSE SENS Department.
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