| Fri 16 Feb 2001, 0:00 | | Comparex Holdings Limited - Interim Report |
|
Comparex Holdings Limited
(Registration number 1994/002506/06)
(Incorporated in the Republic of South Africa)
Internet address: http://www.comparexgroup.com
Interim Report
* Turnaround in PQ Africa
* Repositioning in Europe under way
* Cash resources of R3,7 billion
The unaudited group results of Comparex Holdings Limited for the six months
ended 30 November 2000 are set out below:
Group income statement (R millions)
Year
Six months ended % ended
30 November Change 31 May
Continuing to Audited
Statutory business continuing Statutory Continuing
2000 1999* 1999 business 2000 business
Revenue 2 668,1 4 264,2 2 920,1 (8,6) 7 274,0 5 182,4
Cost of sales 1 662,6 2 761,1 1 803,6 (7,8) 4 861,5 3 326,4
Margin 1 005,5 1 503,1 1 116,5 (9,9) 2 412,5 1 856,0
Expenses 689,5 1 032,7 686,4 0,5 1 911,8 1 291,3
- Administrative
expenses 721,6 1 031,5 684,7 5,4 1 937,2 1 316,7
- Foreign exchange
(gains)/losses (32,1) 1,2 1,7 (25,4) (25,4)
Earnings before
interest, tax and
depreciation 316,0 470,4 430,1 (26,5) 500,7 564,7
Depreciation 166,0 237,8 209,2 (20,7) 310,3 303,4
Trading profit 150,0 232,6 220,9 (32,1) 190,4 261,3
Exceptional profits/
(losses) 284,8 (3,3) 13 514,7
Share of associated
companies' results 0,1
Earnings before
interest and tax 434,8 229,3 220,9 96,8 13 705,1 261,3
Net investment
income 138,8 20,3 34,0 308,2 37,3 36,5
Earnings before
taxation 573,7 249,6 254,9 125,1 13 742,4 297,8
Taxation 27,2 42,6 44,2 (109,8) 89,3
Earnings after
taxation 546,5 207,0 210,7 159,4 13 852,2 208,5
Minorities 28,4 30,5 21,6 (26,8)
Amount attributable
to shareholders 518,1 176,5 189,1 174,0 13 879,0 208,5
Headline adjusting
items:
Profit on sale of
Comparex
Networks Europe 13 704,5
Revaluation of
investments 66,4
Profit on sale of
investments 302,2 14,7 66,1
Tax effects and
losses on restructure
of international
operations 12,4 (191,4)
Losses arising on
closure of
PQ Africa operations (18,0) (64,5)
Attributable to
outside shareholders 27,1
Headline profits 137,1 179,8 189,1 (27,5) 337,2 208,5
Earnings per share
(cents) 156,5 53,3 4 191,1
Headline earnings
per share (cents) 41,4 52,2 101,8
Fully diluted
earnings per share
(cents) 134,6 49,7 3 465,6
Fully diluted
headline earnings
per share (cents) 39,7 48,7 50,4 (21,2) 89,3 57,2
Weighted number of
shares in issue
(000's) 331 153 331 153 331 153 331 153 331 153
Fully diluted
weighted number
of shares in issue
(000's) 408 956 404 558 404 558 1,1 400 873 400 873
Dividends per share
(cents) 2 950,0
*PQ Africa (Proprietary) Limited has been included at 100% in the comparative
figures.
Group balance sheet (R millions)
30 November 31 May
2000 1999 2000
ASSETS
Non-current assets
Properties, fixtures, equipment and vehicles 162,3 233,7 177,1
Rental assets 125,9 201,1 184,3
Capitalised leased properties 190,1 191,7 190,9
Investments 133,3 493,9 243,1
Other long-term assets - interest free 380,0 382,1 382,4
Deferred tax asset 147,5 37,1 147,8
1 139,1 1 539,6 1 325,6
Current assets
Inventories 222,5 929,0 271,8
Trade accounts receivable 1 113,9 1 623,5 877,6
Other short-term assets 290,7 682,2 200,5
Bank balances and financial instruments 3 721,3 735,9 3 197,8
5 348,4 3 970,6 4 547,7
TOTAL ASSETS 6 487,5 5 510,2 5 873,3
EQUITY AND LIABILITIES
Ordinary shareholders' funds 3 700,0 2 031,2 3 158,2
Outside shareholders' interests 121,8 140,7 93,4
3 821,8 2 171,9 3 251,6
Non-current interest bearing debt 245,1 254,1 242,5
Non-current interest free debt 380,0 381,4 380,2
Pension obligations 141,0 111,9 130,4
Deferred tax liability 15,8
766,1 763,2 753,1
Current liabilities
Bank overdrafts and short-term borrowings 34,1 12,8 26,6
Other short-term liabilities 1 865,5 2 562,3 1 842,0
1 899,6 2 575,1 1 868,6
TOTAL EQUITY AND LIABILITIES 6 487,5 5 510,2 5 873,3
Group cash flow statement (R millions)
Six months ended Year ended
30 November 31 May
2000 1999 2000
Cash from trading operations
Trading profit 150,0 232,6 190,4
Items not affecting flow of funds 107,5 236,5 161,4
Properties, fixtures, equipment and
vehicles replaced (11,5) (58,8) (45,4)
(Increase)/Decrease in rental assets (32,9) 123,6 (93,6)
Working capital changes (260,9) (888,4) 338,0
Cash (utilised in)/generated from
operations (47,8) (354,5) 550,8
Exceptional items net of items not
affecting flow of funds 84,4 (3,3) (59,8)
Net finance and investment income 72,6 20,3 37,4
Taxation refunded/(paid) 9,4 134,7 (94,9)
Dividends paid (92,1) (92,1)
Net cash generated from/(utilised in)
operations 118,6 (294,9) 341,4
Cash from investing activities
Properties, fixtures, equipment and
vehicles expansion (36,5) (70,2)
Acquisition/Disposal of subsidiaries (250,8)(751,2)
Proceeds on disposal of investments 1 317,3 615,0
Proceeds on sale of fixed and rental
assets 18,7 1,9
Net cash proceeds/(invested) 1 299,5 (250,8) 204,5)
Cash from financing activities
Net movement in long-term loans 13,0 15,5 5,5
13,0 15,5 5,5
Net movement 1 431,1 (530,2) 142,4
Opening position 1 395,7 1 253,3 1 253,3
Closing cash position 2 826,8 723,1 1 395,7
Financial assets 871,2 1 775,5
Closing position 3 698,0 723,1 3 171,2
Group segmental analysis (R millions)
Six months ended
30 November Year
Continuing ended Continuing
Statutory business 31 May business
2000 1999* 1999 business 2000
REVENUE
AFRICA (principally South
Africa) 1 337,7 1 318,1 1 318,1 2 305,0 2 305,0
EUROPE 1 256,5 2 853,9 1 551,2 4 816,1 2789,5
OTHER 73,9 92,2 50,8 152,9 87,9
2 668,1 4 264,2 2 920,1 7 274,0 5 182,4
TRADING PROFIT
AFRICA (principally South
Africa) 86,3 90,3 87,0 15,8 33,9
EUROPE 45,0 167,1 158,7 216,8 246,3
OTHER (3,5) (3,5) (3,5) (28,4) (5,1)
CENTRAL FUNCTIONS 22,1 (21,3) (21,3) (13,8) (13,8)
150,0 232,6 220,9 190,4 261,3
REVENUE
Continuing business 2 668,1 2 920,1 2 920 5 165,8 5 165,8
Acquisitions 16,6 16,6
Discontinued business 1 344,1 2 091,6
2 668,1 4 264,2 2 920,1 7 274,0 5 182,4
TRADING PROFIT
Continuing business 150,0 220,9 220,9 277,7 277,8
Acquisitions (16,5) (16,5)
Discontinued business 11,7 (70,8)
150,0 232,6 220,9 190,4 261,3
Business groupings revenue
Servers 466,9 534,3 534,3 819,7 790,3
Storage 895,4 810,0 810,0 1 329,0 1 187,9
Networks 240,8 1 315,6 274,5 1 989,0 782,4
Services 938,6 1 534,4 1 231,4 2 894,5 2 193,7
Application Software Providers
and proprietary software 126,4 69,9 69,9 241,8 228,1
2 668,1 4 264,2 2 920,1 7 274,0 5 182,4
Other GROUP salient information (R millions)
Six months ended Year ended
30 November 31 May
2000 1999 2000
Movement in provisions
Opening balance 326,7 640,9 640,9
Increase due to consolidation of PQ
Africa 24,8 24,8
Relating to disposal of operations (32,9)
Utilised (88,3) (95,8) (262,0)
Charged to income statement 27,5 51,1
Reclassified (95,2)
Closing balance 265,9 569,9 326,7
Balance sheet ratios
Number of shares in issue (000's) 331 153 331 153 331 153
Fully diluted number of shares (000's) 408 956 404 558 400 873
Net asset value per share (cents) 1 154,1 655,9 981,9
Fully diluted net asset value per
share (cents) 934,5 536,9 811,1
Debt-equity ratio (%) 7,3 12,3 8,3
Commitments
- Capital 8,9 2,3 2,6
- Unutilised forward exchange contracts 31,8 16,6 11,9
- Lease commitments 201,8 339,3 226,1
Accounting policies
These consolidated condensed interim financial statements are prepared in
accordance with Generally Accepted Accounting Practice. The accounting policies
used in the preparation of the interim financial statements are consistent with
those used in the annual financial statements for the year ended 31 May 2000,
except that the revised Statement AC105 in respect of leases has been adopted.
This policy change has been effected by a restatement of prior year numbers as
follows:
Six months ended Year ended
30 November 31 May
R millions 1999 2000
Movement in provisions
Balance sheet
Increase in fixed assets 191,7 190,9
Increase in long-term interest
bearing debt (210,8) (213,5)
Effect on retained income (19,1) (22,6)
Income statement
Increase in operating expenses (0,8) (1,6)
Decrease in operating lease costs 12,6 25,2
Increase in finance charges (15,2) (30,5)
Net effect in income statement (3,4) (6,9)
Effect on opening retained income (15,7) (15,7)
(19,1) (22,6)
The effect of the adoption of deferred tax assets in the previous year has been
included in November 1999 numbers and was effectively a R3,4 million decrease
in the taxation charge and a R33,7 million adjustment to opening retained
income. The deferred tax asset raised was R37,1 million.
Costs that occur unevenly during the financial year are anticipated or deferred
in the interim report as it would be appropriate to do at the financial
year-end. The income tax expense is recognised based on the best estimate of
the annual income tax rate expected for the full year. These interim financial
statements should be read in conjunction with the annual financial statements
at 31 May 2000.
These interim financial statements were not audited, nor were the comparatives
for the six months to 30 November 1999. The comparative figures for 31 May
2000, other than the effects of the prior year adjustment, were subject to
audit.
Group statement of changes in equity (R millions)
Non- Foreign
Share Share distributable exchange Distributable
capital premium reserves reserve reserves Total
Opening balance 3,3 861,3 215,0 (12,2) 2 090,8 3 158,2
Foreign subsidiaries'
exchange adjustment 23,8 23,8
Attributable profit 518,1 518,1
Closing balance 3,3 861,3 215,0 11,6 2 608,9 3 700,1
STRATEGIC
The process of repositioning the Group as an integrator of eBusiness solutions,
based upon best-of-breed hardware and software, continued in the period under
review. Good progress is being made with the process, which is largely complete
in Africa. In Europe considerable work remains to be done, particularly in
settling into the new partner relationships with EMC and Sun.
The core business of the Group is that of an integrator. For historic reasons,
the Group has a number of investments in proprietary software companies and
Application Service Providers. It is no longer considered necessary for the
Group to own 100% or control such companies and therefore mechanisms to add
value by combining such businesses or introducing partners are being pursued.
In accordance with this strategy, QEDI is to be merged, subject to Competition
Board approval, with the medical switching business of USKO, and GE Capital
has been introduced as a partner in Mosaic Software. The Group also subscribed
for a 49% shareholding in Intenda (Pty) Limited, which acquired the ProQure
proprietary software suite developed by the Group, with the balance of the
shareholding held by the management team and Brait Technology and Innovation
Fund. The Smart Shed, an electronic procurement exchange in the household goods
industry was formed in partnership with leading industry players, with the
Group subscribing for a 30% shareholding.
The Group continues to identify companies that do not, nor have the ability to,
contribute meaningfully to profits and will dispose of them over time. Such
companies disposed of during the period, include Q Data Networks Cabling and
Motodata. The Group also disposed of two proprietary technology divisions of
Nanoteq, namely TimPlus and SecMod.
The above transactions, although not significant to the current results of the
Group, are expected to materially improve focus within the core integration
business of the Group and enhance shareholder value in the future.
A further 20 million of the Group's remaining 36,6 million Dimension Data
shares were disposed of prior to 30 November.
Subject to shareholder approval, Comparex has agreed to an early release from
escrow of the National Information Technology Acquisition Consortium's (Nitac)
shares in Dimension Data Holdings plc. In terms of this agreement, Nitac has
irrevocably undertaken to exchange their shares in PQ Africa for shares in
Comparex by no later than 31 October 2002. Comparex has at the same time also
obtained the right to cause an immediate exercise of this exchange option. The
fully diluted number of shares reflected in the Group's results takes account
of the 64 million Comparex shares to be issued upon the exercise of this option
OPERATIONAL
The disposal of the Group's European network integration businesses and the
repositioning of the Group which followed this during February 2000, renders a
direct comparison between the statutory income statements for the six-month
periods ended 30 November 1999 and 30 November 2000 of little value. To make a
meaningful assessment of the Group's performance, a separate consolidated
income statement for the six-month period ended 30 November 1999 of the
Group's continuing operations has been presented and commented on below.
In the light of the disappointing financial performance by the Group's African
operations during the 2000 financial year, it is particularly pleasing to
report that the Group's South African operations not only returned to
profitability, but also achieved their targets for the first six months of the
2001 financial year. As expected, the Group's European operations were the most
affected by the restructure during the period and reported lower profits than
in the same period last year.
Turnover of the Group's continuing operations reduced by 8,6% to R2,7 billion.
This decline is attributable to a 19% decline in the turnover of the Group's
European operations that, in turn, is attributable to the extent of the
strategic repositioning of the business. The Group's decline in Servers and
Services turnover of respectively 12,6% and 23,7% is attributed to the material
reduction in sales and maintenance of Hitachi mainframes. A combination of
network component delivery problems from suppliers and delays in the roll-out
of three significant customer contracts, contributed to a decline of 12,3% in
the turnover of the African Networking business. The 10,5% increase in the
Group's Storage turnover is evidence of the progress being made in the
strategic partnership with EMC.
The operating margin on continuing operations was affected negatively by the
reduced European throughput, but benefited from a foreign exchange gain of
R32,1 million on cash on hand, and accordingly increased to 5,6% compared to
the 5,0% achieved for the year ended 31 May 2000. Excluding the benefits of
foreign exchange gains in both periods, the Group's operating margin declined
marginally from 4,6% for the year ended 31 May 2000 to 4,4%. Of particular
significance is the increase in the operating margin of the Group's African
operations over the same period from 1,5% to 6,5%.
The disposal of approximately 20 million Dimension Data shares resulted in an
exceptional profit of R302,2 million. Losses of R17,4 million incurred on
European restructuring resulted in a net exceptional profit of R284,8 million.
Revaluation of the Group's remaining 16,6 million Dimension Data shares to the
30 November closing price of R52,50 resulted in an unrealised profit of R66
million. This amount, together with net interest received on the Group's cash
resources, resulted in net investment income increasing by 308,2% to a total of
R138,8 million.
The Group's rate of tax remains low as a result of deductions attributable to
trademarks acquired by the Group, which were written off at acquisition for
accounting purposes, but are being amortised for tax purposes. Deductions
claimed in respect of certain of these trademarks have been disallowed and are
the subject of an appeal to the Special Tax Court. As reported previously, the
directors are confident of the success of such deductions claimed, but have
decided not to raise debit deferred tax attributable to the future tax benefits
of the trademarks until this matter is resolved.
As anticipated the fully diluted headline earnings per share on continuing
operations were below that of the comparative period by 21,2%.
The Group's balance sheet remains extremely strong with net financial
short-term assets, which included 16,6 million Dimension Data shares at the 30
November closing value of R52,50 per share, of R3,7 billion.
The balance sheet has been affected by the revision of the statement on
capitalisation of leases and has resulted in approximately R210,8 million being
added to interest bearing long-term debt and R191,7 million to buildings. The
fully diluted net asset value per share of the Group of R9,35 as at 30
November 2000 increased 15,2% during the period under review.
PROSPECTS
Despite the high level of cash and near-cash resources available to the Group
it was decided not to pursue any significant acquisitions while the Group's
African operations were not performing to their full potential. As the Group's
African operations are performing in line with expectations and the process of
repositioning in Europe is under way, strategic acquisitions will be prudently
pursued in the areas of the Group's strategic focus. The prospects for
value-adding acquisitive expansion have significantly improved following the
substantial correction in the value of companies in the Group's focus area
during the period under review. The Group's geographic focus remains on Europe
and Africa.
Subsequent to the end of November 2000, 2,8 million of the Group's Dimension
Data shares were sold for a total consideration of R152 million. The Group
still has 13,8 million shares with a present market value of approximately R725
million, which will in due course be utilised to further the strategic
expansion of the Group.
In accordance with the approval obtained from shareholders, consideration will
also be given to the buy-back of Comparex shares.
Whilst the Group's African operations are expected to continue to perform in
line with expectations for the remainder of the 2001 financial year, the
strategic repositioning of the Group's European operations remains challenging.
However, the prospects for a resumption of the growth in headline earnings per
share on continuing operations for the full financial year remain good.
On behalf of the board
RJ Marnitz WA du Plessis KRM Evans
Chairman Chief Executive Officer Director:
Finance and
Administration
Midrand
13 February 2001
Registered office: PQ Park, 789 16th Road, Randjespark, Midrand 1685 (Private
Bag X48, Halfway House 1685)
Transfer secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg 2001 (PO Box 1053, Johannesburg 2000)
Directors: RJ Marnitz (Chairman), WA du Plessis (Chief Executive Officer), DC
Arnold, S Carlin, RKJ Chambers, WAM Clewlow, , JR Cohen, DH Erasmus, KRM Evans,
DW Henwood, HO Hetz (German), WC van der Merwe and PA Watt
COMPAREX HOLDINGS
INTERIM RESULTS FOR THE SIX MONTHS TO NOVEMBER 2000
Turnaround in PQ Africa and progress made in restructuring of Europe
JOHANNESBURG, South Africa - 15th February 2001 - This month marks the first
anniversary of the commencement of the repositioning of Comparex Holdings and
the new management team at the helm. The most notable achievement during the
last six months is a comprehensive turnaround in PQ Africa. Good progress has
also been made in the repositioning of the group's European operations.
As a result of the repositioning of the Group, announced at the end of February
2000, it is more meaningful to compare the results for the first 6 months of
the 2001 financial year with the results of the last 6 months of the 2000
financial year. Using this comparison, EPS on continuing businesses of 39.7
cents represents a five-fold increase on the 6.8 cents achieved in the six
months to May 2000.
Group turnover (R2.7 billion) similarly improved by 18%. Particularly
noticeable is the increase of 36% in the turnover of the African operations in
the six months to November 2000, when compared to the 6 months to May 2000.
The Group's Storage turnover also rose by more than 137% - evidence of the
progress being made in settling into the strategic partnership with EMC. Group
trading profit of R150 million for the six months to November 2000, has
increased 271% over the trading profit of R40 million reported for the last 6
months of the 2000 financial year. The Group operating margin on continuing
operations has increased to 5,6% from the 5,0% reported for the 2000 financial
year, and is significantly better than the 1.8% achieved in the 6 months to May
2000.
Net investment income increased by 308,2% to R138.8 million due to the
revaluation of the Group's remaining 16.6 million Dimension Data shares to the
30 November closing price of R52.50, which resulted in an unrealised profit of
R 66 million, as well as net interest received on cash resources.
Comparex Holdings CEO Rian du Plessis says, "I am particularly pleased with
Africa's performance. It achieved an operating profit of R86 million for the
six months to November versus R34m for the whole of the previous financial
year, and a loss of R53million for the six months ended May 2000. In light of
the magnitude of the repositioning which we are undertaking in Europe we also
consider the R45 million trading profit achieved by our European operations
satisfactory, "
Du Plessis adds, "We still have a fair amount of work to do in Europe,
particularly in settling into the new partner relationships with EMC and Sun.
This will be achieved mostly through further re-training and recruitment.
Growth will be assisted by strategic acquisitions. The prospects for
value-adding acquisitive expansion have significantly improved following the
recent substantial correction in the value of companies in our focus area. Our
geographic focus remains on Europe and Africa. We are well positioned for this,
with cash and near cash resources of approximately R3,7 billion. With our share
price at present levels, we will also strongly consider implementing a share
buyback. "
Comparex boasts a very strong balance sheet to fulfil this acquisition
strategy. Net financial short-term assets, including 16,6 million Dimension
Data shares, totalled R 3,7 billion at November 2000. Fully diluted net asset
value per share as at November 2000 was R9.35. Comparex still owns 13.8
million Dimension Data shares with a present market value of approximately
R725 million.
Management no longer considers it necessary for the group to own 100% or
control ASPs or proprietary software companies and therefore mechanisms to add
value by combining such businesses or introducing partners were pursued. As a
result QEDI was merged with the medical switching business of USKO (pending
approval of the Competition Board) and GE Capital was introduced as a partner
in Mosaic Software. Comparex also subscribed for a 49% shareholding in
Intenda, which acquired the ProQure proprietary software suite developed by the
Group, with the balance of the shareholding held by the management team and
Brait Technology and Innovation Fund. The Smart Shed, an electronic procurement
exchange in the household goods industry was formed in partnership with leading
industry players - Comparex retains a 30% holding.
Companies that do not, nor will have the ability to, contribute meaningfully to
profits were disposed of. These included Q Data Networks Cabling and Motodata.
Two of Nanoteq's proprietary technology divisions, TimPlus and SecMod , were
also sold.
Subject to shareholder approval, Comparex has agreed to an early release of the
National Information Technology Acquisition Consortium (Nitac) shares in
Dimension Data. Nitac has also irrevocably undertaken to exchange their shares
in PQ Africa for shares in Comparex by no later than 31 October 2002. Comparex
has at the same time obtained the right to cause an immediate exercise of this
exchange option. PQ Africa will continue to grow its business, strictly
committed to the South African marketplace, and will also pursue selected
opportunities on the African continent. As such, one of the primary business
objectives remains the transformation of the business. PQ Africa recently
entered into a partnership with the Black Management Forum who will assist in
the facilitation of cultural and environmental changes within the
organisation, in support of PQ Africa's employment equity bill.
Whilst the Group's African businesses are expected to continue to perform
satisfactorily for the remainder of the 2001 financial year, the strategic
repositioning of the Group's European operations remains challenging.
However, the prospects for a resumption of the growth in headline earnings per
share on continuing operations for the full financial year remain good.
About Comparex
Comparex Holdings is an EMEA "Best of Breed" integrator of eBusiness Solutions.
Comparex has an annual turnover of approximately EURO 1 billion, with offices
throughout the EMEA (Europe/Middle East/Africa), a workforce of almost 7 000
and derives the majority of its revenues from continental Europe. Its customers
include the leading companies in Austria, Belgium, Germany, Hungary,
Luxembourg, the Netherlands, Poland, Portugal, Southern Africa, Slovakia, Spain
and the Czech Republic. Comparex is listed on the JSE and trades under the
symbol CPX. Comparex recently announced that it intends aggressively
expanding its European presence in the eBusiness infrastructure area, given its
current strengths in distributed storage and servers, and its strategic
partnerships with EMC and SUN.
For more information: http://www.comparexgroup.com
For more information please contact:
Rian du Plessis (South Africa and Europe)
Chief Executive Officer
+27 (0) 82 551 5578
Carel van der Merwe (South Africa and Europe)
Executive Director - Corporate Finance, Comparex Holdings
+44 20 7290 9750
Kate Rushton (South Africa)
Manager - Investor Relations, Comparex Holdings
+27 (0) 11 266 5361
