| Wed 21 Feb 2001, 0:00 | | Siltek Limited - Interim Results |
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INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2000
Business Review
Volume Products
A sharp sustained downturn in demand for IT products in the second half of 2000
resulted in the group straining under a large under-utilised cost structure.
Sales in the corporate market were found to be extremely slow and a highly
volatile Rand/Dollar exchange rate created an uncertain trading environment.
Increased competition as a result of lower demand also put severe pressure on
gross margins. This was particularly prevalent for the PC and printer product
lines.
The acquisitions of One Technology Group (OTG) and Prion in 1999 failed to
achieve the volumes and growth expected which necessitated rationalisation to
help reduce costs and restore unit of scale efficiencies.
The disappointing results in Australia have necessitated a review of our
current strategy. Various options are being explored at present.
Specialist Products
Tough market conditions resulted in sales below budgeted expectations and a
slight reduction in margins. The division, however, produced very positive
results when compared to the previous six-month period.
Prospects in the telecommunications and storage sectors look promising and
further growth from the division is expected.
Supply Chain Services
The services division growth slowed largely as a result of the drop in volumes
of product from our high-volume operations.
Significant progress was, however, made in growing the range of services we
offer. Agreement has been reached with Imperihold to establish an inbound
logistics company which will help lower costs for product companies and create
opportunities for improving the "just in time" programme, enabling us to offer
these services to other partners.
New e-commerce and financial service offerings are at an advanced stage of
planning and should reach market by midyear.
Working capital
Adverse trading conditions and changes to the supply chain model have resulted
in an increase in the utilization of our banking facilities.
We are in negotiations with our principal suppliers to assess the feasibility
of the current South African model and with our bankers to ensure that we have
adequate funding to meet our ongoing working capital requirements.
Acquisitions
During the period the remaining 50% of MMW was acquired. This was largely
needed to be able to fully merge the operations of Memtek and MMW into a fully
fledged components distributor. This process has been completed and, although
sales in this sector have been well below expectations, the merged operations
are performing well together.
Ariel Toshiba have entered a joint venture whereby SDD will distribute and sell
Toshiba products on their behalf in a profit share arrangement.
Changes to the Board
Dave Lello was appointed CEO in place of Rob Matthews, who left the group on 31
October 2000. Gary Smith and Tony Leng resigned as directors effective 5
October and 31 December 2000 respectively.
Exceptional Items
Exceptional items include the following:
1 Rationalization cost
R17,2 million has been provided for the rationalization of the OTG business,
which will be combined with the operations of SDD.
2 Write-off of share trust debtor
Due to the decrease of Siltek Limited's share price over the last six
months, the underlying shares in the employee share trust have been marked to
market and a net amount of R10,1 million has been written off.
3 Discontinued operations
During the year ended 30 June 2000, the board of Directors decided to close
down CIE Pacific and Siltek Communications in Australia. The board initially
expected the process to be completed by October 2000. However, due to the
extension of certain agency agreements, it is anticipated that this process
will now be completed by 30 June 2001. The loss of these businesses for the six
months was R2,1 million.
A further underprovision for costs relating to operations discontinued
during the year ended June 1999 of R7,2 million is included in exceptional
items.
4 Properties
The group entered into certain sale and leaseback agreements for four
properties in June 1999. Detailed discussions are currently in progress to
reduce the group's exposure to property risk. A provision of R30 million has
been made for onerous contractual obligations over the remaining lease periods.
5 Investment in Australian operations
A provision of R15 million has been made against the carrying value of the
investment in the Australian operations.
Changes in contingent assets
The group did not provide for any increase in the deferred tax asset during the
current period. The possible contingent asset amounts to R17 million.
Capital expenditure and commitments
Capital expenditure for the group during the six months ended 31 December 2000
amounts to R21 million (1999: R11 million) for maintaining the operations.
No capital expenditure has been authorised and committed for the period (1999:
R4,2 million). Capital expenditure of R5 million (1999: R586 500) has
been authorised but not committed.
Finance and operating lease commitments
The group's finance lease commitments are
- payable during the next 6 months R2 178 563
- payable thereafter R8 760 164
The group's operating lease commitments are
- payable during the next 6 months R19 705 125
- payable thereafter R319 410 650
Dividends
No dividend has been proposed for the six months ended 31 December 2000.
Prospects
While the market remains tough, the directors are confident that the changes
effected to reduce overheads and focus on the more profitable product lines
will result in the volume product operations producing improved results.
Concerted efforts are in place to reduce the amount of working capital required
to fund these businesses. Significant changes to systems and staff reward
schemes have been implemented to ensure that improved profitability and
cashflow targets are met.
We believe that certain financial service offerings will also contribute to a
lowering of the demands placed on Siltek to finance its resellers.
For and on behalf of the board
Dr MF Kunene Chairman
DR Lello CEO
21 February 2001
Directors
MF Kunene* (Chairman) DR Lello (Deputy Chairman and CEO)
DC Ashmore (Financial Director) JR Parekh RS Rindel* GJ Royston*
SDM Zungu* * Non-executive
Transfer secretaries Registered office
Mercantile Registrars Limited Siltek Limited
10th Floor 11 Diagonal Street Reg no 1942/015386/06
Johannesburg 2001 Block A Siltek Park
505 15th Road
Sponsor Randjespark
Investec Midrand
100 Grayston Drive 1685
Sandton
Unaudited Audited
Six months ended Year ended
31 December 30 June
2000 1999 2000
GROUP INCOME STATEMENT R000 R000 R000
Revenue 1 866 046 1 658 840 3 495 072
Cost of sales 1 682 441 1 461 630 3 062 724
Gross profit 183 605 197 210 432 348
Depreciation 10 083 5 851 11 907
Operating expenses 212 522 136 581 315 417
Operating (loss)/profit (39 000) 54 778 105 024
Net interest paid (20 109) (6 977) (14 915)
(Loss)/Profit before tax (59 109) 47 801 90 109
Taxation 2 718 11 700 14 011
(Loss)/Profit after taxation (61 827) 36 101 76 098
Attributable to minority shareholders (1 429) 1 414 1 832
Headline (loss)/earnings for
the period (60 398) 34 687 74 266
Goodwill written off 9 958 - -
Exceptional items (110 602) (1 600) (7 741)
(Loss)/Earnings for the period (180 958) 33 087 66 525
Dividend declared - - 6 945
Retained (loss)/earnings for
the period (180 958) 33 087 59 580
Number or ordinary shares in
issue (000) 69 446 69 446 69 446
Headline (loss)/earnings per share
(cents) (86,97) 49,95 106,94
(Loss)/Earnings per share (cents)* (195,78) 47,64 95,79
Dividend per share (cents) - - 10,00
*Fully diluted
Unaudited Audited
Six months ended Year ended
31 December 30 June
2000 1999 2000
GROUP BALANCE SHEET R000 R000 R000
ASSETS
Non-current assets 103 528 84 598 107 170
Equipment 64 108 63 751 57 976
Deferred tax 36 627 6 800 38 208
Long-term receivables 2 793 14 047 10 986
Current assets 1 139 290 1 133 112 1 153 029
Inventories 345 599 393 344 360 656
Trade and other receivables 620 415 654 465 612 871
Cash and cash equivalents 173 276 85 303 179 502
Total assets 1 242 818 1 217 710 1 260 199
EQUITY AND LIABILITIES
Capital and reserves 145 049 299 389 316 995
Issued share capital 20 834 20 834 20 834
Non-distributable reserves 11 115 169 2 103
Distributable reserves 113 100 278 386 294 058
Minority interest 5 769 8 427 7 559
Non-current liabilities 139 035 4 862 138 282
Interest-bearing borrowings 137 459 4 862 135 051
Non-interest bearing borrowings 1 576 - 3 231
Current liabilities 952 965 905 032 797 363
Trade and other payables 610 468 574 806 602 576
Bank overdrafts 299 254 285 504 172 437
Short-term borrowings 52 - -
Current portion of long-term borrowings 45 - 13 767
Shareholders for dividend 206 - 7 151
Taxation (receivable)/payable (11 424) 41 636 (12 185)
Warranty and other provisions 54 364 3 086 13 617
Total equity and liabilities 1 242 818 1 217 710 1 260 199
Unaudited Audited
Six months ended Year ended
31 December 30 June
2000 1999 2000
GROUP CASH FLOW STATEMENTS R000 R000 R000
Cash receipts from customers 1 845 054 1 493 482 3 344 221
Cash payments to suppliers
and employees 1 908 858 1 682 185 3 317 539
Cash (utilised by)/generated
from operations (63 804) (188 703) 26 682
Net interest paid (20 109) (6 977) (14 915)
Dividends paid (6 945) (11 543) (11 337)
Taxation paid (377) (4 157) (43 330)
Exceptional items paid (6 287) - (56 696)
Net cash outflow from operating
activities (97 522) (211 380) (99 596)
Net cash paid on acquisition
of subsidiaries (9 958) (32 120) (62 719)
Net property and equipment purchased (19 811) (10 952) (48 974)
Net cash outflow from investment
activities (29 769) (43 072) (111 693)
Repayment of non-current borrowings (12 924) (212) (4 822)
Proceeds from non-current borrowings - - 149 243
(Additional credit granted to)/Payments received from
long-term receivables (1 877) 14 401 20 462
Short-term borrowings 2 139 - (2 108)
Proceeds from the disposal of future
rental income - - 15 517
Net cash (outflow)/inflow from financing
activities (12 662) 14 189 178 292
Net decrease in cash and cash
equivalents (139 953) (240 263) (32 997)
Cash and cash equivalents at the
beginning of the year 7 065 40 062 40 062
Translation differences on opening
balances 6 911 - -
Cash and cash equivalents at the end
of the period (125 977) (200 201) 7 065
Unaudited Audited
Six months ended Year ended
31 December 30 June
2000 1999 2000
STATEMENT OF CHANGES IN EQUITY R000 R000 R000
Issued share capital 20 834 20 834 20 834
Non-distributable reserves
Opening balance 2 103 552 552
Translation of foreign operations 9 012 (383) 1 551
Closing balance, which comprises 11 115 169 2 103
- Capital redemption reserve fund 111 111 111
- Foreign currency translation
reserve 11 004 58 1 992
Distributable reserves
Opening balance 294 058 280 897 280 897
(Loss)/Profit for the period (180 958) 33 087 66 525
Dividends declared - - (6 945)
Goodwill written off - (35 598) (46 419)
Closing balance 113 100 278 386 294 058
TOTAL CAPITAL AND RESERVES 145 049 299 389 316 995
SEGMENT RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2000 (R000)
Segment revenue
Hardware and consumables 1 490 169
Software 372 537
Services 29 708
Segment results
Hardware and consumables (34 903)
Software 8 739
Services 2 529
Notes
1 The preliminary report has been prepared using accounting policies which are
consistent with those applied in the financial statements for the year ended 30
June 2000 with the exception of adopting AC 131 "Business combinations" whereby
goodwill represents the excess of the cost of an acquisition over the fair
value of the group's share of the net assets of the acquired subsidiary
undertaking at the date of acquisition.
The carrying amount of goodwill on the acquisition of MMW has been reviewed
and written off as a conservative measure.
2 Where appropriate, comparative figures have been restated.
3 The auditors reviewed but did not audit the financial results.
