| Mon 20 Feb 2012, 8:48 | | MOR - Morvest - Reviewed Condensed Consolidated Interim Financial Statements for |
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MOR
MOR
MOR - Morvest - Reviewed Condensed Consolidated Interim Financial Statements for
the six months ended 30 November 2011
Morvest Business Group Limited
(Previously Simeka Business Group Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/012583/06)
JSE code: MOR ISIN: ZAE000152567
("Morvest" or "the company" or "the group")
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED 30 NOVEMBER 2011
Highlights
* Revenue R 446 million Up 8%
* Headline earnings R 25 million Up 11%
* NAV per share 37 cents
* Transfer to the Main Board
Condensed consolidated statements of comprehensive income
Reviewed Unaudited Audited year
six months six months ended 31 May
to 30 Nov to 30 Nov 2011
2011 2010 R`000
R`000 R`000
Revenue 445 774 411 087 807 300
Turnover 445 774 408 462 807 300
Cost of sales (221 181) (228 180) (420 262)
Gross profit 224 593 180 282 387 038
EBITDA 73 430 60 070 105 681
Depreciation (6 636) (7 364) (15 139)
Amortisation of intangible
assets (3 413) (404) (2 003)
Impairment of goodwill and
intangible assets - - (14 938)
Impairment of investments - - (5 951)
Investment income 907 2 625 1 971
Finance costs (6 708) (9 122) (14 527)
(Loss)/income from associate (1 052) 27 (899)
Profit before taxation 56 528 45 832 54 195
Income tax expense (20 061) (15 767) (24 075)
Profit for the period 36 467 30 065 30 120
Other comprehensive
income/(loss) for the period,
net of tax 2 553 (1 275) (7 039)
Total comprehensive income for
the period 39 020 28 790 23 081
Profit attributable to:
Owners of the parent 25 481 22 854 11 469
Non-controlling interest 10 986 7 211 18 651
36 467 30 065 30 120
Total comprehensive income
attributable to:
Owners of the parent 28 034 21 579 4 430
Non-controlling interest 10 986 7 211 18 651
39 020 28 790 23 081
Earnings per share (cents) 4.87 4.25 2.13
Diluted earnings per share
(cents) 3.87 4.25 1.83
Notes to the statement of
comprehensive income
Headline earnings for the
period attributable to
ordinary shareholders 25 481 23 161 32 334
Headline earnings per share
(cents) 4.87 4.31 6.02
Diluted headline earnings per
share (cents) 3.87 4.31 5.17
Number of shares (`000`)
Weighted average number of
shares 523 264 537 497 537 319
Diluted weighted average
number of shares 658 264 537 497 625 236
Reconciliation of headline
earnings calculation:
Earnings for the period
attributable to owners of the
parent 25 481 22 854 11 469
Goodwill impairment - - 14 938
Profit/(loss) on disposal of
property, plant and equipment - 307 (24)
Impairment of investments in
associates - - 5 951
Headline earnings for the
period attributable to owners
of the parent 25 481 23 161 32 334
Condensed consolidated statements of financial position
Reviewed Unaudited Audited
six months six months year ended
at 30 Nov at 30 Nov 31 May
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 312 175 259 950 302 563
Property, plant and equipment 48 800 33 790 33 964
Goodwill 214 001 180 709 214 001
Intangible assets 6 151 4 115 5 473
Other financial assets - 3 968 -
Investment in associate 8 105 4 554 9 157
company
Deferred taxation 35 118 32 814 39 968
Current assets 321 561 301 261 251 518
Inventories 38 199 31 622 19 702
Trade and other receivables 172 849 166 145 130 824
Financial assets - 2 160 5 373
Taxation receivable 9 933 5 182 10 607
Operating lease assets 259 113 258
Cash resources 100 321 96 039 84 754
Total assets 633 736 561 211 554 081
EQUITY AND LIABILITIES
Capital and reserves 244 557 240 833 222 053
Share capital 297 751 300 742 298 613
Reserves (9 069) (6 952) (12 218)
Retained earnings (44 125) (52 957) (64 342)
Non-controlling interest 32 066 8 330 21 079
Total equity 276 623 249 163 243 132
Non-current liabilities 113 339 79 624 73 243
Vendor liabilities 22 169 - 22 170
Other financial liabilities
(interest-bearing debt) 79 975 73 907 44 347
Finance lease obligation 8 185 2 130 2 614
Deferred taxation 3 010 3 587 4 112
Current liabilities 243 774 232 424 237 706
Vendor liabilities 12 085 - 14 084
Other financial liabilities
(interest-bearing debt) 13 500 41 250 49 418
Finance lease obligations 2 962 7 421 9 272
Trade and other payables 197 148 158 927 145 283
Provisions 2 945 2 930 3 786
Operating lease liability 1 031 914 1 154
Current tax payable 14 103 20 982 14 709
Total equity and liabilities 633 736 561 211 554 081
Total shares in issue (`000) 679 159 679 159 679 159
Total shares in issue after
treasury shares (`000) 658 264 535 411 663 425
Net asset value per share
(cents) 37.15 44.98 33.47
Net tangible asset value per
share (cents) 3.71 10.46 0.39
Condensed consolidated statements of cash flows
Reviewed Unaudited Audited
six months six months year ended
to 30 Nov to 30 Nov 31 May
2011 2010 2011
R`000 R`000 R`000
Net cash flows from operating
activities 44 910 32 389 62 075
Net cash flows from investing
activities (20 191) (6 114) (18 963)
Net cash flows from financing
activities (9 152) (24 035) (52 157)
Net increase/(decrease) in
cash and cash equivalents 15 567 2 240 (9 045)
Cash and cash equivalents at
beginning of the period 84 754 93 799 93 799
Cash and cash equivalents at
end of the period 100 321 96 039 84 754
Condensed consolidated statements of changes in equity
Reviewed Unaudited Audited
six months six months year ended
to 30 Nov to 30 Nov 31 May
2011 2010 2011
R`000 R`000 R`000
Capital and reserves - opening
balance 243 132 225 685 225 685
Shares issued - 198 12 343
Disposal of subsidiaries - - 2 600
Share-based payment expense 596 - 696
Share repurchase (862) - (2 130)
Treasury shares issued for
BEECo share scheme - - 9 257
Shares utilised for BEECo and
MANCo share schemes - - (21 599)
Acquisition of 32.5% interest
in Advocate Solutions by
outside shareholders - - 3 023
Total comprehensive income for
the period 39 020 28 790 23 081
Dividend paid to non-
controlling interest - (5 510) (9 824)
Dividend paid to owners of
parent (5 263) - -
Capital and reserves - closing
balance 276 623 249 163 243 132
Commentary
Independent review by the auditors
The condensed consolidated interim financial information has been reviewed by
our auditors PKF (Gauteng) Inc., who have performed their review in accordance
with the International Standards on Review Engagements 2410. A copy of their
unqualified review report is available for inspection at the registered office
of the company.
Basis of preparation
The reviewed condensed consolidated interim financial statements have been
prepared in compliance with the Companies Act of South Africa 2008,
International Financial Reporting Standards (IFRS), AC 500 Standards,
International Accounting Standards (IAS) 34 Interim Financial Reporting and its
interpretations adopted by the International Accounting Standards Board (IASB),
and with the JSE Limited Listings Requirements.
The reviewed condensed consolidated interim financial statements have been
prepared under the historical cost convention, save for certain financial
instruments.
The same accounting policies, presentation and methods of computation are
followed in these reviewed condensed consolidated interim financial statements
as were applied in the preparation of the group`s audited annual financial
statements for the previous year ended 31 May 2011.
The reviewed condensed consolidated interim financial statements have been
prepared under the supervision of Suren Singh in his capacity as Chief Finance
Officer.
Introduction
The directors of Morvest present the reviewed condensed consolidated interim
results for the six months ended 30 November 2011 ("the period"), reflecting
another solid performance.
The reviewed condensed consolidated interim financial statements for the period
were authorised for issue by the directors on 16 February 2012.
Group profile
Morvest is a black empowered group providing Business Support Services
(including Professional Services and Outsourcing Solutions) and ICT Solutions to
blue-chip customers in both the public and private sectors. Morvest has an
international footprint spanning South Africa, Africa (Nigeria, Mozambique),
India and the USA and a staff complement of over 2 000. The group is associated
with a number of leading global technology partners which include Intergraph,
Oracle, and Microsoft.
Operational overview
The South African economic conditions remain challenging with continued price
pressure being exerted by clients. Morvest focused on a cost management strategy
reducing costs for the period which is evident in the improved gross profit and
EBITDA margins. The group`s international focus remains on Africa, Asia and the
USA.
Main Board listing
With effect from 20 June 2011, Morvest`s listing transferred from the AltX to
the JSE Main Board in the "Business Support Services (2791)" sector. The
authorised share capital of Morvest transferred to the JSE Main Board totalled
R150 000 comprising 1 500 000 000 ordinary shares of R0.0001 each, and the
issued share capital totalled R67 916 comprising 679 158 613 ordinary shares of
R0.0001 each.
Dividend
Morvest paid a maiden dividend for the previous year ended 31 May 2011 of 1 cent
per share on 12 September 2011. No interim dividend has been declared.
Changes to the board of directors
During the period Morvest appointed A Evan as an executive director and A
Mohammadali-Haji as an independent non-executive director, effective 15 June
2011.
Settlement of Nedbank facility
In June 2011 the remaining capital outstanding on the Nedbank loan facility of
R4 million was settled in full.
Restructuring of Investec facilities
During the period Morvest restructured its Investec facility in order to obtain
additional finance for the payment of vendor liabilities and the acquisition of
the Midrand property for the establishment of a new head office. The
restructured facility terms are as follows:
Repayment of the existing debt facilities (approximately R67 million as at
September 2011) has been restructured over a revised term of five years
beginning September 2011.
An additional facility of R15 million was taken out in September 2011 on similar
terms to the restructured facility.
Changes in non-current assets
During the period the group acquired non-current assets relating to land,
intangible assets and other items of property, plant and equipment, amounting to
R26 million.
Share repurchase
The company repurchased 5 035 600 shares during the period at a total cost of
R861 674. Morvest intends continuing to repurchase shares in the current year.
Financial results
Revenue increased 8.4% to R445.8 million from R411.1 million in the comparative
period, with 93% being generated from South African operations and the remainder
from the rest of Africa. EBITDA of R73.4 million (2010: R60 million) was
reported for the period. Net profit margins improved from 7.3% to 8.2% as a
result of cost reductions in the period.
Financing costs reduced to R6.7 million from R9.1 million largely due to a
decrease in the prime lending rate during the period and repayments now
servicing more capital than interest.
The company has a strengthened statement of financial position following the
impairment of goodwill and intangible assets absorbed in the prior years. Cash
on hand of R100 million is reflective of effective working capital management
despite a substantial increase in inventory to R38.2 million from new orders.
Segmental reporting
The Business Support Services division contributed 62% of group turnover with
Technology (ICT) contributing the balance of 38%.
Business Support Technology (ICT)
Services
Nov 11 Nov 10 Nov 11 Nov 10
R`000 R`000 R`000 R`000
External sales 275 866 277 091 169 908 131 371
Internal sales 3 272 19 851 25 284 27 643
Total segment 279 138 296 942 195 192 159 014
turnover
Net profit from 30 567 31 090 24 707 12 353
ordinary
activities
Consolidated 525 212 267 783 221 623 75 408
total assets
Consolidated 247 887 213 272 136 860 40 066
total
liabilities
Corporate Eliminations
Nov 11 Nov 10 Nov 11 Nov 10
R`000 R`000 R`000 R`000
External sales - - - -
Internal sales 82 185 26 447 (110 741) (73 941)
Total segment 82 185 26 447 (110 741) (73 941)
turnover
Net profit/ 4 337 (734) (23 144) (12 644)
(loss)from
ordinary
activities
Consolidated 543 928 845 908 (657 027) (627 888)
total assets
Consolidated 486 113 477 968 (513 747) (419 258)
total
liabilities
Total
Nov 11 Nov 10
R`000 R`000
External sales 445 774 408 462
Internal sales - -
Total segment 445 774 408 462
turnover
Net profit/
(loss)from 36 467 30 065
ordinary
activities
Consolidated 633 736 561 211
total assets
Consolidated 357 113 312 048
total
liabilities
Related parties
During the period certain subsidiaries, in the ordinary course of business
entered into various loans and transactions with related parties under terms
that are no more favourable than those arranged with third parties.
Transactions between the company and its subsidiaries, which are related parties
of the company, have been eliminated and consolidated.
Post period events
There were no significant transactions post the reporting period.
Outlook
The board anticipates that the tough market conditions coupled with pricing
pressure from clients will continue. Morvest therefore remains focused on
maintaining its cost management strategy and identifying innovative means of
cost cutting by at least a further 10%. Nonetheless the group remains optimistic
of sustainable growth by targeting government and parastatals, the power and
energy sector and the broader mobile consumer markets.
At the same time Morvest will continue to strengthen its existing businesses
through building management capacity, investing in strong leadership, improving
productivity and entrenching a culture of excellence.
The group will continue with its diversification strategy, which includes
exploring new markets and territories as well as expanding into the retail and
services industries. Morvest has plans to launch a new online portal with walk-
in stores in all major centers as part of its strategy to diversify into retail
in partnership and co investment with MS Varachia in terms of the company
policy.
The group expects the trend from prior years to continue with the first six
months of the year exceeding the second half.
Appreciation
We thank all directors, managers and staff for their tenacity and drive which
contributed to the group`s performance in a tough economic environment.
We further extend our appreciation to all our shareholders, business associates
and loyal customers for their unwavering support in these difficult times.
By order of the board
Mohammed Varachia Suren Singh
Chief Executive Officer Chief Financial Officer
20 February 2012
Directors:
Dr PS Molefe (Chairman)*, M Varachia (CEO), S Singh (CFO), M Papiyana, N Singh,
A Evan, Prof. B Marx *, NY Mhinga*,A Mohammadali-Haji(* *Non-executive
Independent)
Registered office:
10 Kikuyu Road, Sunninghill, 2191
(PO Box 4307, Halfway House, Midrand, 1685)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg
(PO Box 61051, Marshalltown, 2107)
Company secretary:
Noelene Beryl January, 10 Kikuyu Road, Sunninghill
(PO Box 4307, Halfway House, Midrand, 1685)
Sponsor:
Sasfin Capital (a division of Sasfin Bank Limited)
Auditors:
PKF(Gauteng) Inc.
Date: 20/02/2012 08:48:01 Produced by the JSE SENS Department.
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