| Mon 19 Sep 2011, 17:30 | | SBV - Silverbridge Holdings Limited - Abridged group report for the 16 months |
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SVB
SVB
SBV - Silverbridge Holdings Limited - Abridged group report for the 16 months
ended 30 June 2011 and notice of Annual General Meeting
SILVERBRIDGE HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1995/006315/06)
Share code: "SVB" ISIN: ZAE000086229
("SilverBridge" or "Group")
ABRIDGED GROUP REPORT FOR THE 16 MONTHS ENDED 30 JUNE2011 AND NOTICE OF ANNUAL
GENERAL MEETING
GROUP PROFILE
SilverBridge is proudly South African and committed to unlocking value in
emerging markets for financial service providers and their customers.
SilverBridge offers clients in the financial services industry reliable
solutions that aim to simplify their operations by enabling and improving their
business processes. We achieve this by implementing our system platforms and
customising them to meet client needs. The valuable experience we`ve gained
through our existing African footprint and strategic partnerships positions us
well to take advantage of opportunities while making life insurance simpler.
Exergy is our flagship platform that enables core back office policy
administration in the life assurance industry. The broader Exergy solution
package has specific applications which can be customised to suit the needs of a
long-term insurer. We use solution design to address more than just
customization of existing products and contract information to customer needs -
it allows our clients to drive their strategic business objectives efficiently.
Our approach is to identify and define strategic customer business objectives,
translate those to IT requirements and to implement winning, long-term
solutions.
We have integrated all operating subsidiaries into SilverBridge Software
Solutions (Proprietary) Limited. SilverBridge Holdings Limited and SilverBridge
Software Solutions (Proprietary) Limited are now jointly branded as
SilverBridge.
Financial Highlights
The Group changed its year end to 30 June to be more closely aligned to natural
selling and delivery cycles. It will also facilitate more efficient planning and
budgeting processes. The Group is therefore reporting on its result for the 16
months ended 30 June 2011.
SilverBridge`s annuity revenue lines of software rental and support reflected
positive growth. The increased implementation complexity within higher tier
clients negatively impacted the results in this period. This was felt at both
revenue and cost levels as we had to invest into projects to realign
deliverables with clients` capacity and expectations. The allocation of highly
skilled resources to these projects reduced the revenue generating capability of
the Group as these resources could not be utilised on new projects. Delays in
project completion led to delayed software rental and support income. The
acquisition of Acczone increased our cost base but did not deliver on revenue
expectations. Goodwill on Acczone and Ones & Zeros was fully impaired owing to
uncertainty in the market and integration of the subsidiaries into one operating
company.
As previously reported, SilverBridge took action to reduce costs and realign
skills. We improved our solution design, implementation and client service
methodologies and aligned our operations accordingly. Project deliverables were
also reassessed in conjunction with clients on specific projects. We integrated
the group structure into a single operating entity to ensure focus and to
further reduce the cost base. These corrective actions have had a negative
impact on the current operational performance but are expected to bring an
improvement in the next financial year.
Operational Highlights
1) Lessons learnt from complex projects
Although our core solution is comprehensive, we have learnt that it requires a
focused effort to ensure that the customisation for clients falls within their
end-to-end solution needs.
In order to achieve the objectives of a system implementation project, we must
understand the clients` complete business process environment to successfully IT
enable the processes our systems impact.
Projects come under pressure when we cannot assist our clients to understand the
end-to-end solution they need and support them in the implementation thereof.
2) Progress with implementation approach
We have made good progress with implementing the Exergy system for clients. We
have managed to implement our standardized, preconfigured offering, Exergy2Go
for two clients in a matter of weeks. This forms the base of any implementation
that requires customization to meet customer needs. We use our insurance
business architecture model to help map strategic client objectives to IT
requirements.
3) Implementation wins
We completed phase 1 of the ABSA project and phase 2 of the ABSA project is
healthy and continues to make good progress. We have a good sales pipeline for
new Exergy implementations including converting the majority of our existing
clients from our old system. We completed two such conversion projects, another
one is nearly completed and we are currently engaged in starting another such
project.
GROUP ABRIDGED AUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE 16 MONTHS ENDED
30 JUNE 2011
Group
16 months 12 months
ended ended 28
30 June February
2011 2010
Notes R`000 R`000
Revenue 1.6 121 042 106 508
Other income 1 074 1 223
Personnel expenses (94 520) (62 215)
Depreciation and amortisation (3 977) (3 383)
Professional fees paid for (6 671) (8 045)
services
Other expenses (19 952) (12 409)
Results from operating activities (3 004) 21 679
Impairment loss recognised on 1.2 (27 689) -
intangible assets
Fair value adjustment 1.2 11 737 -
Finance income 396 1 001
Finance costs (14) (517)
Share of (loss)/ profit in (34) 9
associate
(Loss)/profit before income tax (18 608) 22 172
Income tax (expense) (5 656) (6 012)
(Loss)/profit and total (24 264) 16 160
comprehensive income/(loss) for
the period
(Loss)/profit and total
comprehensive income/(loss)
attributable to:
Equity holders of the holding (24 782) 13 540
company
Non-controlling interest 518 2 620
(Loss)/profit and total (24 264) 16 160
comprehensive income/(loss) for
the period
Basic (loss)/earnings per share 1.4 (71.47) 39.78
Diluted (loss)/earnings per share 1.4 (71.47) 32.37
GROUP ABRIDGED AUDITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011
30 June 28 February
2011 2010
Notes R`000 R`000
ASSETS
Non-current assets 17 406 42 582
Plant and equipment 2 435 2 229
Intangible assets 1.2 14 103 38 095
Investment in associate 76 110
Deferred tax assets 792 2 148
Current assets 34 028 42 153
Income tax receivable 5 548 5 700
Revenue recognised not yet 1.5 530 6 657
invoiced
Trade and other receivables 11 450 15 364
Cash and cash equivalents 16 500 14 432
Total assets 51 434 84 735
EQUITY AND LIABILITIES
Equity 27 484 57 792
Share capital 348 348
Share premium 11 871 11 871
Treasury shares (197) (197)
Share based payment reserve 757 91
Retained earnings 14 705 41 798
Total equity attributable to 27 484 53 911
equity holders of the Group
Non-controlling interest - 3 881
Current liabilities 23 950 26 943
Trade and other payables 1.3 14 852 24 805
Deferred revenue 1.5 9 098 1 314
Provisions - 824
Total liabilities 23 950 26 943
Total equity and liabilities 51 434 84 735
Net asset value per share 79.26 166.67
Tangible net asset value per 38.59 56.8
share
GROUP ABRIDGED AUDITED STATEMENT OF CHANGES IN EQUITY FOR THE 16 MONTHS ENDED 30
JUNE 2011
Attributable to equity
holders of the Company
Issued Share Treasury
capital premium shares
R`000 R`000 R`000
Balance at 1 March 2009 336 8 608 (197)
Total comprehensive income for the
period
Profit for the period - - -
Other comprehensive income - - -
Total comprehensive income for the - - -
period
Transactions with owners, recorded
directly in equity
Contributions by and distributions to
owners
Allotment of 1 193 849 shares related 12 3 263 -
to acquisition of Ones & Zeros
Equity settled share based payment - - -
Capital distribution: amounts not - - -
exercised
Dividend paid by subsidiary - - -
Total contributions by and 12 3 263 -
distributions to owners
Changes in ownership interests in
subsidiaries that do not result in a
loss of control
Total transactions with owners 12 3 263 -
Balance at 28 February 2010 348 11 871 (197)
Total comprehensive (loss)/income for
the period
Loss for the period - - -
Other comprehensive income - - -
Total comprehensive (loss)/income for - - -
the period
Transactions with owners, recorded
directly in equity
Contributions by and distributions to
owners
Equity settled share based payment - - -
Dividend paid by subsidiary - - -
Dividend paid by holding company - - -
Transfer of reserve of share options - - -
that did not vest
Total contributions by and - - -
distributions to owners
Changes in ownership interests in - - -
subsidiaries that do not result In a
loss of control
Acquisition of 49% non-controlling - - -
interest in Ones & Zeros
Total transactions with owners
Balance at 30 June 2011 348 11 871 (197)
Attributable to equity holders of
the Company
Acquisition Share Retained
shares based earnings/
payment (Accumulated
reserve loss)
R`000 R`000 R`000
Balance at 1 March 2009 2 724 - 28 242
Total comprehensive income
for the period
Profit for the period - - 13 540
Other comprehensive income - - -
Total comprehensive income - - 13 540
for the period
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Allotment of 1 193 849 (2 724) - -
shares related to
acquisition of Ones & Zeros
Equity settled share based - 91 -
payment
Capital distribution: - - 16
amounts not exercised
Dividend paid by subsidiary - - -
Total contributions by and (2 724) 91 16
distributions to owners
Changes in ownership
interests in subsidiaries
that do not result in a loss
of control
Total transactions with (2 724) 91 16
owners
Balance at 28 February 2010 - 91 41 798
Total comprehensive
(loss)/income for the period
Loss for the period - - (24 782)
Other comprehensive income - - -
Total comprehensive - - (24 782)
(loss)/income for the period
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Equity settled share based - 689 -
payment
Dividend paid by subsidiary - - -
Dividend paid by holding - - (1 733)
company
Transfer of reserve of share - (23) 23
options that did not vest
Total contributions by and - 666 (1 710)
distributions to owners
Changes in ownership - - -
interests in subsidiaries
that do not result In a loss
of control
Acquisition of 49% non- - - (601)
controlling interest in Ones
& Zeros
Total transactions with (2 311)
owners
Balance at 30 June 2011 - 757 14 705
Total Non- Total
controlling equity
interest
R`000 R`000 R`000
Balance at 1 March 2009 39 713 3 531 43 244
Total comprehensive income for
the period
Profit for the period 13 540 2 620 16 160
Other comprehensive income - - -
Total comprehensive income for 13 540 2 620 16 160
the period
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Allotment of 1 193 849 shares 551 - 551
related to acquisition of Ones &
Zeros
Equity settled share based 91 - 91
payment
Capital distribution: amounts 16 - 16
not exercised
Dividend paid by subsidiary - (2 270) (2 270)
Total contributions by and 658 (2 270) (1 612)
distributions to owners
Changes in ownership interests
in subsidiaries that do not
result in a loss of control
Total transactions with owners 658 (2 270) (1 612)
Balance at 28 February 2010 53 911 3 881 57 792
Total comprehensive
(loss)/income for the period
Loss for the period (24 782) 518 (24 264)
Other comprehensive income - - -
Total comprehensive (24 782) 518 (24 264)
(loss)/income for the period
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Equity settled share based 689 - 689
payment
Dividend paid by subsidiary - (2 450) (2 450)
Dividend paid by holding company (1 733) - (1 733)
Transfer of reserve of share - - -
options that did not vest
Total contributions by and (1 044) (2 450) (3 494)
distributions to owners
Changes in ownership interests - - -
in subsidiaries that do not
result In a loss of control
Acquisition of 49% non- (601) (1 949) (2 550)
controlling interest in Ones &
Zeros
Total transactions with owners (1 645) (4 399) (6 044)
Balance at 30 June 2011 27 484 - 27 484
GROUP ABRIDGED AUDITED CASH FLOW STATEMENT FOR THE 16 MONTHS ENDED 30 JUNE 2011
16 months 12 months
ended ended
30 June 2011 28 February
2010
R`000 R`000
Cash generated from operations 17 704 18 777
Interest received 396 939
Interest paid (14) (10)
Dividends paid by subsidiary (2 450) (2 270)
Taxation paid (2 821) (6 201)
STC paid (500) (463)
Net cash inflow from operating activities 12 315 10 772
Cash flows from investing activities
Plant and equipment acquired to expand operations (2 174) (1 734)
Proceeds from sale of equipment 55 104
Acquisition of Ones & Zeros (600) (3 535)
Acquisition of Acczone - (3 241)
Listing fees on the issue of shares - (8)
Capitalisation of development costs (5 797) (2 759)
Net cash used in investing activities (8 516) (11 173)
Cash flows from financing activities
Dividend paid to equity holders (1 731)
Reduction in liability of previous year`s capital - (1 265)
distribution from share premium
Net cash (outflow)/inflow from financing (1 731) (1 265)
activities
Net increase/(decrease) in cash and cash 2 068 (1 666)
equivalents
Cash and cash equivalents at the beginning of the 14 432 16 098
period
Cash and cash equivalents at the end of the 16 500 14 432
period
GROUP ABRIDGED AUDITED SEGMENT REPORTS FOR THE 16 MONTHS ENDED 30 JUNE 2011
BUSINESS SEGMENTS
Research
Implemen and
tation Support deve-
16 months services services lopment
2011 R`000 R`000 R`000
Segment total revenue 42 344 24 158 -
Inter-group revenue (477) - -
Segment external revenue 41 867 24 158 -
Direct segment cost (30 585) (17 410) (18 939)
Cost capitalised - - 5 797
Segment gross profit/(loss) 11 282 6 748 (13 142)
Indirect segment cost (16 486) (9 384) (10 208)
Segment result (5 204) (2 636) (23 350)
Unallocated expenses **
Operating loss
Impairment loss (1 819) (1 819) (4 719)
Fair value adjustment 1 467 1 467 -
Finance income
Finance expense
Share of loss in associate
Income tax expense
Loss for the period
Assets and liabilities
Software
rental and Consulting
16 months maintenance fees Total
2011 R`000 R`000 R`000
Segment total revenue *39 309 20 442 126 253
Inter-group revenue - (4 734) (5 211)
Segment external revenue 39 309 15 708 121 042
Direct segment cost - (10 405) (77 339)
Cost capitalised - - 5 797
Segment gross profit/(loss) 39 309 5 303 49 500
Indirect segment cost - (5 608) (41 686)
Segment result 39 309 (305) 7 814
Unallocated expenses ** (10 818)
Operating loss (3 004)
Impairment loss (10 911) (8 421) (27 689)
Fair value adjustment 8 803 - 11 737
Finance income 396
Finance expense (14)
Share of loss in associate (34)
Income tax expense (5 656)
Loss for the period (24 264)
Assets and liabilities
* R7.3 million in license fees is included in software and rental in
this period and not in the previous period
**Unallocated expenses relate to costs incurred at a corporate
level.
The assets and liabilities of the Group are organised and managed at
an operating segment level and are not separately identifiable on a
business segment level.
Research
Implemen and
tation Support deve-
12 months services services lopment
2010 R`000 R`000 R`000
Revenue from external clients
Segment external revenue 39 326 12 667 -
Direct segment cost (19 856) (7 414) (9 108)
Cost capitalised - - 2 759
Segment gross profit/(loss) 19 470 5 253 (6 349)
Indirect segment cost (11 176) (4 172) (4 760)
Segment result 8 294 1 081 (11 109)
Unallocated expenses *
Operating profit
Finance income
Finance expense
Share of profit in associate
Income tax expense
Profit for the year
Assets and liabilities
Software
rental and Consulting
12 months maintenance fees Total
2010 R`000 R`000 R`000
Revenue from external clients 22 584 31 931 106 508
Segment external revenue - (18 513) (54 891)
Direct segment cost - - 2 759
Cost capitalised 22 584 13 418 54 376
Segment gross profit/(loss) - (6 243) (26 351)
Indirect segment cost 22 584 7 175 28 025
Segment result (6 346)
Unallocated expenses * 21 679
Operating profit 1 001
Finance income (517)
Finance expense 9
Share of profit in associate (6 012)
Income tax expense 16 160
Profit for the year
Assets and liabilities
* Unallocated expenses relate to costs incurred at a corporate level.
The assets and liabilities of the Group are organised and managed at an
operating segment level and is not separately identifiable on a business segment
level.
Operating segments
Life Loans
insuranc Consulting Adminis- Corporate
e trator
16 months industry fees Industry office Total
2011 R`000 R`000 R`000 R`000 R`000
Segment total 103 516 19 940 2 797 - 126 253
revenue
Inter-Group (54) (4 735) (422) - (5 211)
revenue
Segment revenue 103 462 15 205 2 375 - 121 042
Direct segment (56 659) (13 628) (7 052) - (77 339)
cost
Cost 1 751 - 4 046 - 5 797
capitalised
Segment gross 48 554 1 577 (631) - 49 500
profit
Indirect (33 271) (4 352) (4 063) (10 818) (52 504)
segment cost
Segment result 15 283 (2 775) (4 694) (10 818) (3 004)
Impairment loss - (8 421) (19 268) - (27 689)
Fair value 11 737 11 737
adjustment
Finance income 396
Finance expense (14)
Share of loss (34)
in associate
Income tax (5 656)
expense
Loss for the (24 264)
period
Assets and liabilities
Plant and 2 435 - - - 2 435
equipment
Intangible 14 103 - - - 14 103
assets
Investment in 76 - - - 76
associate
Deferred tax 793 (1) - - 792
Income tax 4 871 677 - - 5 548
receivable
Revenue 530 - - - 530
recognised not
yet invoiced
Trade and other 10 310 516 159 465 11 450
receivables
Cash and cash 15 162 881 279 178 16 500
equivalents
Total assets 48 280 2 073 438 643 51 434
Trade and other 12 203 531 86 2 032 14 852
payables
Deferred 9 098 - - - 9 098
revenue
Total 21 301 531 86 2 032 23 950
liabilities
Other segment
information
Depreciation 1 510 184 100 83 1 877
Amortisation 1 747 - 353 - 2 100
Loans
Life Consulting Adminis- Corporate
insurance trator
12 months industry fees Industry office Total
2010 R`000 R`000 R`000 R`000 R`000
Segment revenue 73 900 31 931 677 - 106 508
Direct segment (34 930) (18 513) (1 448) - (54 891)
cost
Cost 2 099 - 660 - 2 759
capitalised
Segment gross 41 069 13 418 (111) - 54 376
profit
Indirect (19 682) (6 243) (426) (6 346) (32 697)
segment cost
Segment result 21 387 7 175 (537) (6 346) 21 679
Finance income 1 001
Finance expense (517)
Share of profit 9
in associate
Income tax (6 012)
expense
Profit for the 16 160
year
Assets and liabilities
Plant and 1 790 191 238 10 2 229
equipment
Intangible 14 112 8 421 15 562 - 38 095
assets
Investment in 110 - - - 110
associate
Deferred tax (1 187) 107 20 3 208 2 148
Income tax 6 248 (548) - - 5 700
receivable
Revenue 6 657 - - - 6 657
recognised not
yet invoiced
Trade and other 11 219 4 056 89 - 15 364
receivables
Cash and cash 5 521 7 943 88 880 14 432
equivalents
Total assets 44 470 20 170 15 997 4 098 84 735
Trade and other 8 305 3 857 12 265 378 24 805
payables
Deferred 1 314 - - - 1 314
revenue
Provisions 824 - - - 824
Total 10 443 3 857 12 265 378 26 943
liabilities
Other segment
information
Depreciation 982 50 19 7 1 058
Amortisation 624 1 613 88 - 2 325
COMMENTARY
1. NOTES TO THE ABRIDGED GROUP FINANCIAL STATEMENTS
1.1 Basis of presentation
The abridged Group annual financial statements are prepared in accordance with
the recognition and measurement requirements of International Financial
Reporting Standards ("IFRS") International Accounting Standard 34 (IAS 34)
Africa, the AC 500 series as published by the Accounting Practices Board (APB),
the Listings Requirements of JSE Limited ("the Listings Requirements") and the
requirements of the Companies Act of South Africa. The abridged Group annual
financial statements for the 16 months ended 30 June 2011 incorporate extracts
of the Group`s unqualified audited financial statements, which are prepared in
accordance with IFRS and the Companies Act, 2008 (Act 71 of 2008) of South
Africa ("the Companies Act"). The accounting policies applied are consistent
with those of the previous financial year. For a better understanding of the
Group`s financial position and results of operations, these abridged financial
statements must be read in conjunction with the Group`s audited annual financial
statements for the 16 months ended 30 June 2011 which include all disclosures
required by IFRS, and which are expected to be released on or about 20 September
2011. The Group`s integrated report which incorporates the Annual Financial
Statements can be obtained from our website or by contacting the Company
directly. These Annual Financial Statements was prepared by the Group Financial
Manager, Petro Mostert CA (SA) under the supervision of the Financial Director,
Jaco Maritz CA (SA).
1.2 Goodwill and intangible assets
Intangible assets summary of movements during the period per category of asset:
Goodwill Contracts Exergy .Net Total
capitalis software Develop
ed in and ment
acquisiti complemen
ons tary
products
and tools
Group R`000 R`000 R`000 R`000 R`000
Cost
Balance at 1 March 16 641 2 845 5 869 - 25 355
2009
Arising on 14 196 794 - - 14 990
acquisition of
Acczone
Change in estimate (43) - - - (43)
relating to Ones &
Zeros acquisition
Development costs - - 2 099 660 2 759
capitalised
Balance at 28 30 794 3 639 7 968 660 43 061
February 2010
Impairment of (2 459) - - - (2 459)
goodwill from
Acczone
acquisition -
original amount
incurred
Impairment of (11 737) (11
Goodwill from 737)
Acczone -
additional amount
as per original
estimate
Impairment of (8 421) - - - (8 421)
goodwill from ONZ
acquisition
Impairment of - (353) - - (353)
contracts
capitalised on
Acczone
acquisition
Development costs - - 1 738 4 059 5 797
capitalised
Impairment of - - - (4 719) (4 719)
development cost
capitalised
Balance at 30 June 8 177 3 286 9 706 - 21 169
2011
Accumulated
amortisation
Balance at 1 March - 1 232 1 410 - 2 642
2009
Amortisation for - 1 701 623 - 2 324
the period
Balance at 28 - 2 933 2 033 - 4 966
February 2010
Amortisation for - 353 1 747 - 2 100
the period
Balance at 30 June - 3 286 3 780 - 7 066
2011
Carrying amount
At 1 March 2009 16 641 1 613 4 459 - 22 713
At 28 February 30 794 706 5 935 660 38 095
2010
At 30 June 2011 8 177 - 5 926 - 14 103
Goodwill of R8.421 million acquired by the Group through the acquisition of Ones
& Zeros was previously allocated to Ones & Zeros, being the smallest cash
generating unit which would benefit from the acquisition. The goodwill was fully
impaired during the current financial period based on current cash flow
projections, market conditions and the integration of this business unit into
the SilverBridge operating company.
Goodwill, based on an estimated purchase price consideration, of R14.196 million
acquired by the Group through the acquisition of Acczone has been allocated to
Acczone, being the smallest cash generating unit which will benefit from the
acquisition. The performance of the business subsequent to the acquisition
indicated that the profit after tax will be substantially lower than the
original projections for purposes of determining the cost of the acquisition and
the actual purchase priced paid. An adjustment of R11.737 was therefore made for
the purchase price liability to be in line with the actual purchase price
consideration. The remaining goodwill of R2.459 million based on actual cost
incurred as well as the R11.737 excess on the estimate were subsequently fully
impaired during the current financial period based on the current cash flow
projections, the current market conditions and the integration of this business
unit into SilverBridge operating company.
Intangible development costs of R4.719 million have been impaired in the period.
This relates to previous efforts in modernising the Acczone loan administration
system onto a .NET platform. Although the deliverables will add future value,
the Group has taken a prudent stance to impair the cost fully in line with the
Acczone impairment.
1.3 Trade and other payables
Trade and other payables comprised of the following:
2011 2010
R`000 R`000
Trade payables 1 743 734
Liability on capital reduction 31 29
Other payables (accruals) 2 979 4 335
Ones & Zeros purchase price liability 1 950 -
Acczone purchase price liability - 11 737
Withholding tax rebate payable 4 798 5 860
VAT payable 1 274 489
Leave accrual 2 077 1 621
Total trade and other payables 14 852 24 805
1.4 Earnings/(Loss) per share
Basic earnings/(loss) per ordinary share
Basic earnings per ordinary share is calculated by dividing the (loss)/earnings
for the period attributable to ordinary equity holders of the parent, of (R24.8)
million (2010: R13.5 million) by the weighted average number of ordinary shares
outstanding during the period of 34.7 million (2010: 34.0 million).
2011 2010
Number Number
of shares of shares
`000 `000
Reconciliation of the weighted average number of
shares in issue
Shares in issue at the beginning of the period 34 781 33 588
Effect of treasury shares acquired on 1 March 2007 (106) (106)
Weighted average shares effect of share allotment of - 417
644 378 shares on 7 July 2009
Weighted average shares effect of share allotment of - 135
549 399 shares on 1 December 2009
Weighted average number of shares in issue at the end 34 675 34 034
of the period
Earnings attributable to ordinary shareholders (24 782) 13 540
(R`000)
Basic (loss)/earnings per share (cents) (71.47) 39.78
Headline earnings per ordinary share
Headline earnings per ordinary share is calculated by dividing the headline
earnings attributable to ordinary equity holders of the parent of R2.9 million
(2010: R13.5 million) by the weighted average number of ordinary shares
outstanding during the period of 34.7 million (2009: 34.0 million).
2011 2010
Number Number
of shares of shares
`000 `000
Weighted average number of shares in issue 34 675 34 034
R`000 R`000
Reconciliation between basic earnings and headline
earnings
Basic (loss)/ earnings (24 782) 13 540
Adjusted for:
- Loss/(Profit) on disposal of equipment 36 (15)
- Impairment loss on intangible assets recognised 27 689 -
Headline earnings 2 943 13 525
Headline earnings per share (cents) 8.49 39.74
Diluted earnings/ (LOSS) per ordinary share
Diluted earnings per ordinary share is calculated by dividing the diluted
(loss)/ earnings attributable to ordinary equity holders of the parent of (24.8)
million (2010: R13.1 million) by the diluted average number of ordinary shares
of 37.8 million (2010: 40.4 million).
2011 2010
Number Number
of shares of shares
`000 `000
Weighted average number of shares in issue 34 675 34 034
Adjusted for shares to be issued in the future - 6 352
Shares used for diluted earnings per share 34 675 40 386
R`000 R`000
Reconciliation between basic earnings and diluted
earnings
Basic (loss)/ earnings (24 782) 13 540
Diluted effect of earnings - (466)
Diluted(loss)/ earnings (24 782) 13 074
Diluted(loss)/ earnings per share (cents) (71.47) 32.37
Diluted Headline earnings per ordinary share
Diluted headline earnings per ordinary share is calculated by dividing the
diluted headline loss/ earnings attributable to ordinary equity holders of the
parent of (R2.9) million (2010: R13.1 million) by the weighted average number of
ordinary shares outstanding during the period of 37.8 million (2010: 40.4
million).
Group
2011 2010
Number Number
of shares of shares
`000 `000
Weighted average number of shares in issue 34 675 34 034
Adjusted for shares to be issued in the future - 6 352
Shares used for diluted earnings per share 34 675 40 386
R`000 R`000
Reconciliation between basic earnings and headline
earnings
Basic (loss)/ earnings (24 782) 13 540
Adjusted for:
Diluted effect of earnings - (466)
- Loss/(gain) on disposal of equipment 36 (15)
- Impairment loss on intangible assets recognised 27 689 -
Diluted earnings (2 943) 13 059
Diluted headline earnings per share (cents) 8.49 32.34
1.5 - Deferred revenue and revenue recognised BUT not yet invoiced
Deferred revenue and revenue recognised but not yet invoiced refers to the
timing difference between recognition of revenue and invoicing to the client
based on the contracts. The Group is in a net liability position which means it
has received more cash than what has been recognised as income, which has a
positive impact on working capital. These current liabilities will be converted
to revenue in the short-term and are recoverable from the current client base.
2011 2010
R`000 R`000
Current asset
Revenue recognised not yet invoiced 530 6 657
Current liability
Deferred revenue (9 098) (1 314)
Net (liability)/asset (8 568) 5 343
1.6 Revenue per geographical segment
Total South Other
Africa African
countries*
R`000 R`000 R`000
16 months ended 30 June 2011 121 042 80 508 40 534
12 months ended 28 February 2010 106 508 70 293 36 215
* Other African countries include Kenya, Malawi, Nigeria, Ghana,
Namibia, Lesotho, Swaziland and Zimbabwe.
2. CORPORATE ACTIVITY
2.1 Acquisition of 49% minority interest in Ones & Zeros
As part of the process of integrating the operations of SilverBridge, the Group
has acquired the remaining 49% of Ones & Zeros for an amount of R2.5 million
that will be fully settled in cash. This will enable SilverBridge to integrate
the specific skills of Ones & Zeros into the operations and entrench the
consulting approach into our implementation methodology. Consolidating the
companies will decrease overhead cost structures and ensure operational focus.
2.2. Dividend
The board declared a dividend of 5 cents per share on 5 May 2010, which was paid
on 31 August 2010. No further dividend or capital distribution was declared for
the period under review.
3. AUDIT REPORT
The annual financial statements for the 16 months ended 30 June 2011 have been
audited by KPMG Inc. Their unmodified audit report is available for inspection
at the Group`s registered office.
4. SUBSEQUENT EVENTS
No events occurred subsequent to the period end that would require the abridged
Group annual financial statements to be adjusted.
5. FINANCIAL RESULTS AND PERFORMANCE
SilverBridge had a disappointing 16 month period, largely owing to
implementation delivery challenges on specific complex projects, a slowdown in
the consulting segment and the Acczone acquisition not delivering on
expectations. Goodwill on Acczone and Ones & Zeros was fully impaired during the
period under review and these subsidiaries have been integrated into our
operating company.
We are starting to see positive signs from the corrective action taken during
the period, but its full effects have not yet been felt in the recent 4 months
since February 2011.
Despite these challenges, we are pleased to report continued growth in our
annuity lines of business. We have also made good progress with current projects
using our revised implementation approach and have a healthy pipeline.
For the period under review, we reported positive operating cash flow of R12.3
million, supported by working capital inflow. Our balance sheet remains debt-
free with R16.5 million cash on hand.
Growth in annuity revenue remains the Group`s primary strategic objective. It
consists of software rental and contracted support revenue. It is driven and
preceded by project activity from consulting and/or implementation and
customisation engagements.
Segmental review
Consulting - Consulting revenue was generated by Ones & Zeros. The Mercantile
project was concluded after a period of two and half years, coinciding with a
decline in market conditions for consulting firms. The banking industry
aggressively reduced its consulting complement, which impacted the business
negatively. Our skilled consultants were redeployed in the life insurance
industry via the SDT client base. SilverBridge has acquired the remaining 49%
from the minority shareholders of Ones & Zeros and this business has been
integrated with the implementation team of SilverBridge Software Solutions
(Proprietary) Limited.
Implementation - This segment was negatively impacted by the delivery challenges
of several complex projects (as highlighted at the end of February 2011). Some
of these projects required further investment of highly skilled resources. After
joint client reviews, loss-making projects were terminated - with associated
revenue not being recognised. In addition, resources allocated to these projects
decreased the overall revenue generating capability of the unit. These actions
were concluded in the past 4 months period and still impacted the results. In
the recent 4 months, this segment was further impacted by taking on the staff
and costs of the Ones & Zeros business. Profitability has reduced as a result.
Corrective actions have been taken, including a redesign of our implementation
approach, to prevent these challenges from recurring. We are pleased to report
that the ABSA implementation project continues to proceed well, with regard to
timeous delivery and budget.
Support - Support revenue is contracted on a monthly basis and is annuity based.
Revenue grew well from increased contracted support. However some contracts were
at lower margin. This, together with the general pressure in the implementation
environment affected the support margin negatively.
Software rental - Software rental is annuity based. It grows with new clients
and usage of the system within each client - based on the number of contracts or
policies administered. It typically grows slowly over time. Excluding
R7.3million of license fees and annualising the 16 months, software rental grew
moderately (in single digits) on a comparable basis owing to slight usage gains.
Given the implementation challenges, no new software rental clients were added.
However, existing customers were retained and many have been converted to the
new Exergy platform, preserving future annuity income. Corrective actions taken
in the implementation area should improve the future growth of software rental.
Research and development - An increase in research and development costs (and
specifically capitalisation cost) resulted from the redevelopment of the loans
administration system bought from Acczone. R4.1 million was capitalised during
the period on the loan administration system and R1.7 million on Exergy. The
Acczone loans product was fully impaired (R4.7 million) subsequent to the
February 2011 reporting.
6. GROUP OUTLOOK
Building our annuity revenue base remains an ongoing goal and depends on how
well we understand and empower our clients and how effectively we implement our
solutions. Extensive intellectual property resides in our systems and people.
We are a learning organisation that strives for continuous improvement within
ourselves, our systems, our approaches and by extension for our clients. We have
faced and overcome significant challenges in the way we contract and execute on
projects. We have redesigned our operating model to better retain, transfer and
leverage our knowledge.
The changing environment within our target market presents new opportunities as
financial service institutions search for ways to reduce costs and improve
services to their clients. We see financial service providers increasing their
focus on improving relationships with their clients, driving internal efficiency
and differentiating their products as a means to capture and retain market
share. SilverBridge`s offerings are well positioned to meet these needs.
The outlook for the Group remains positive. Our annuity revenue remains a strong
pillar for growth.
7. CORPORATE GOVERNANCE INTERNAL AUDIT
The board, its committees and our employees reaffirm their commitment to the
principles and cornerstones of sound corporate governance and aims to maintain a
balance between compliance with the ever changing regulatory requirements and
the need to deliver sustainable performance to shareholders.
SilverBridge complied with the Companies Act, the Listings Requirements and
applied the King Report on Governance 2009 ("King III") except for:
Principle 2.16 of King III recommends that the chairman of the board should be
an independent non-executive director. He was employed by Kagiso Group (now
KagisoTiso) and represented their shareholding until 4 November 2009, after
which he moved onto other opportunities. Resultantly, he no longer represents
the shareholder. The board therefore views Andile as independent for all
purposes.
The internal audit function is an integral part of the corporate governance
regime. The primary goal of the internal audit is to evaluate the company`s risk
management, internal control and corporate governance processes, and to ensure
that they are adequate and functioning correctly. The position of the audit and
risk committee was that the internal audit function would be performed by the
Group finance department. The audit and risk committee however has taken a more
prudent view on internal audit taking into account the recent developments of
consolidating the Group structure and financial performance. An independent
person was contracted to perform internal audit functions under control of the
audit and risk committee chairman.
The Companies Act came into effect on 1 May 2011 and SilverBridge is geared to
align itself with the new requirements within the transitional period.
8. NOTICE OF THE ANNUAL GENERAL MEETING
The Annual General Meeting of SilverBridge will be held at Unit EG001, Sandhurst
Office Park, Cnr Katherine & Rivonia Rd, Sandton, on 19 October 2011, 10:00.
9. DIRECTORATE
During the year under review the board changed as follows:
Mr David Smollan, a non-executive director, retired by rotation on 25 June 2010,
however, did not offer himself for re-election;
Mr Dinga Madubela was appointed as non-executive director with effect from 14
July 2010;
Ms NthabisengMokone resigned as non-executive director with effect from 14 July
2010;
Mr Robert Emslie was appointed as an independent non-executive director, with
effect from 17 January 2011; and
Ms Sandra Duetsch`s changed from an executive director to a non-executive
director with effect from 4 May 2011, following the acquisition of the minority
shareholding in Ones & Zeros by SilverBridge Holdings.
On behalf of the board
Jaco Swanepoel
Chief Executive Officer
Andile Sangqu
Chairman
Pretoria
19 September 2011
CORPORATE INFORMATION
Directors of SilverBridge:
Andile Sangqu (Chairman)*, Jaco Swanepoel (CEO), Jeremy de Villiers**, Robert
Emslie**, Dinga Madubela*, Tyrrel Murray*, Sandra Duetsch*, Jaco Maritz,
Sphelele Sangweni***.
(All the directors are South African citizens).
* Non-executive
**Independent non-executive
***Alternate directors
SilverBridge Registered offices
First Floor, Castle View North
495 Prieska Street, Erasmuskloof,
Pretoria, 0048
(PO Box 11799, Erasmuskloof, 0048)
Company Secretary:
Fusion Corporate Secretarial Services (Proprietary) Limited,
represented by Melinda van den Berg
Group Auditors:
KPMG Incorporated
(Registration number: 4530188665)
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
Designated adviser:
Merchantec (Proprietary) Limited
(Registration number: 2008/027362/07)
www.silverbridge.co.za
Date: 19/09/2011 17:30:01 Produced by the JSE SENS Department.
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