| Thu 26 Apr 2012, 16:16 | | IQG - IQuad Group Limited - Preliminary condensed reviewed financial |
|
IQG
IQG
IQG - IQuad Group Limited - Preliminary condensed reviewed financial
statements for the 12 months ended 29 February 2012
IQuad Group Limited
(Incorporated in the Republic of South Africa)
Registration number 2004/025177/06
Share code: IQG ISIN: ZAE000101622
("IQuad", "the Company" or "the Group")
Preliminary condensed reviewed financial statements for the 12 months ended
29 February 2012
Highlights
Dividend per share 26 cents
Net tangible assets per share up 15%
Headline earnings per share up 41%
Commentary on interim results for the period ended 29 February 2012
The acquisition by Sasfin Holdings Limited of a majority interest in the
IQuad Group has necessitated a change in our year-end from February to June.
Due to Companies Act restrictions, this change will be made in two stages,
with the first change being to 31 May in 2012, and thereafter to 30 June
2013. As a result of the above, the 12 month period to 29 February 2012 will
be reported as a second interim review period.
General comments and prospects
Overall headline earnings for the 12 months ended 29 February 2012 increased
by 41% from R10.22 million to R14.41 million. We are extremely pleased with
this result achieved under continuingly difficult trading conditions.
This achievement was made possible through strong performances from our
Global Trade and Treasury Outsourcing businesses, combined with the
successes achieved in rationalising non-core businesses and implementing a
range of group-wide cost-saving initiatives.
Strategic update
We remain committed to our overall mission to be the preferred supplier of
high-impact strategic outsource and compliance services to business.
Our medium-term strategic priorities identified at the beginning of 2011
have yielded the desired outcomes and are borne out through the much
improved financial performance of the Group. The following is a brief update
on various strategic initiatives:
1. Ensure the right team is in place to achieve the growth plan
Our simplified and streamlined management structure (MANCO),
represented by the heads of the major business units together with the
CEO and financial director, have worked well together as a team.
2. Win in the Gauteng Market
Our ongoing focus on Gauteng as a primary and key growth market
continues yielding positive results. New clients engaged in our
incentives consulting operation have shown a 33% increase in Gauteng,
in spite of the difficult trading outlook in the manufacturing sector.
Our alliance with Sasfin has increased our indirect sales force in the
Gauteng market and cross selling has been identified as a key future
growth opportunity.
3. Fix or exit underperforming businesses
As reported in the interim results, this has been a key focus area in
the past year. Our effort to streamline the business and focus on the
key business units in the Group has achieved the desired result from a
profitability perspective. As previously reported, we have concluded
our exit from IQuad Verification Services (Pty) Ltd, IQuad Finance
Solutions (Pty) Ltd and IQuad Technologies (Pty) Ltd during the
reporting period. We have seen an overall reduction in the number of
active trading entities from a total of 19 down to 12 at present. This
has improved our ability to focus on the true value-adding areas of the
Group.
Our strategy will continue focusing on businesses that display the
potential to grow into substantial profit contributors and exit those
with limited potential.
4. Grow inorganically through significant acquisitions
The acquisition by Sasfin Holdings Limited of a majority share in the
IQuad Group has created some natural growth opportunities within the
Group. This initiative offers substantial growth opportunities for
IQuad and will be the focus of our acquisitive growth opportunities in
the short to medium term.
5. Identify cost savings
It is very pleasing to see that we exceeded our goal to identify and
implement cost savings amounting to at least 5% of our budgeted
expenditure for the past year. In total, cost-saving initiatives
amounting to R4.88m or 7% of budgeted expenditure were achieved over
the period.
Segment report
Investment incentives
Improved processing throughput by the Department of Trade and Industry
("DTI") resulted in increased revenues of 30% during the second half of the
period. However, the improvement was not enough to compensate for cumulative
budget shortfalls, resulting in a disappointing performance from this
segment of our business.
Global trade services
Our global trade segment is collectively made up of IQuad Global Trade, our
specialist import/export administration division, and IQuad Treasury
Solutions, our foreign exchange risk management and execution business. Both
business units delivered excellent results under difficult trading
conditions.
IQuad Global Trade continues carving out a unique space as a niche service
provider to importers and exporters in areas such as duty optimisation,
motor industry development programme ("MIDP") and automotive and production
development programme ("APDP") claims administration and export process
optimisation. The business has been successful in diversifying income
streams away from key clients/industry segments and this will remain a key
strategic priority going forward.
IQuad Treasury Solutions performed well in the second half of the period and
generated increased performance-related revenue on the back of risk
management strategies implemented on behalf of clients to optimise the
impact of exchange rate movements.
The Kagiso Treasury acquisition has been fully integrated into IQuad
Treasury and the synergies are expected to have a positive impact going
forward.
Business development services
This segment of IQuad remains relatively small in comparison to the above
pillars. However, IQuad Integrated Management Systems (Pty) Ltd, which
provides management advisory services on compliance with international or
industry standards, continues showing good overall profit growth. The
alternative energy and carbon footprint reduction drive further provides
opportunities in this area of our business.
Audit and verification
We remain active in the BEE certification and advisory industry through our
majority stake in Integra Scores (Pty) Ltd. This industry faces unique
challenges from a regulatory and policy clarity perspective. However, we are
very pleased with the revenue growth and profit contribution of Integra in
the past 12 months.
Cash flow and dividends
The Group generated R26.7 million cash from its operating activities during
the period under review. This includes the cash flow benefit from delayed
provisional tax payments as a result of the change in year end, and an
increase in trade payables of R4.3 million related to VAT.
The directors are pleased to announce that an interim dividend of 26 cents
per share was declared on 30 March 2012.
Statement of financial position as at 29 February 2012
Reviewed Audited
29-Feb-12 28-Feb-11
R000 R000
Assets
Non-current assets 109 486 111 428
Investment property 14 434 14 434
Property, plant and equipment 13 908 14 163
Goodwill 66 326 65 524
Intangible assets 5 998 4 430
Investment in associate 1 503 -
Loan receivable 2 466 3 278
Operating lease rentals asset 151 -
Deferred tax assets 4 700 9 599
Current assets 40 178 33 660
Work in progress 2 819 1 927
Current tax assets 10 676
Trade and other receivables 22 197 26 408
Amounts owing by associates and joint ventures 1 468 787
Cash and cash equivalents 13 684 3 862
Total assets 149 664 145 088
Equity and liabilities
Equity and reserves 120 358 108 792
Share capital 101 200 101 200
Other reserves - (369)
Accumulated profits 17 746 9 776
Non-controlling interest 1 412 (1 815)
Non-current liabilities 990 15 279
Deferred tax liabilities 649 560
Operating lease rentals liability 288 421
Borrowings 53 14 298
Current liabilities 28 316 21 017
Current tax liabilities 3 677 304
Trade and other payables 17 140 12 064
Provisions - 25
Dividend payable - 750
Borrowings 7 499 7 874
Total liabilities 29 306 36 296
Total equity and liabilities 149 664 145 088
Statement of comprehensive income for the period ended 29 February 2012
Reviewed Audited
29-Feb-12 28-Feb-11
R000 R000
Revenue 85 171 85 628
Cost of services rendered (32 905) (38 625)
Gross profit 52 266 47 003
Other operating income 187 601
Operating expenses (38 561) (62 365)
Operating profit/(loss) 13 892 (14 761)
Investment income 3 921 3 553
Share of profits of associate companies 163 -
Finance costs (1 468) (2 099)
Profit/(loss) before taxation 16 508 (13 307)
Taxation (6 447) (4 062)
Profit/(loss) and total comprehensive 10 061 (17 369)
income/(loss) for the period
Profit /(loss) and total comprehensive 10 061 (17 369)
income/(loss) for the period attributable to:
Non-controlling interest 219 (1 800)
Owners of the parent 9 842 (15 569)
Basic and diluted earnings/(loss) per share 35,9 (56,9)
(cents)
Condensed statement of changes in equity for the period ended 29 February
2012
Attributabl Non- Total
e to equity controlling equity
holders of interest
Company
R000 R000 R000
Balance at 1 March 2010 - audited 135 954 2 013 137 967
Total comprehensive loss for the (15 569) (1 800) (17 369)
period
Non-controlling interest acquired (1 993) (331) (2 324)
in subsidiary
Other movements in non-controlling - (241) (241)
interests
Dividends (7 785) (1 456) (9 241)
Balance at 28 February 2011 - 110 607 (1 815) 108 792
audited
Total comprehensive income for the 9 842 219 10 061
period
Business combinations - 1 244 1 244
Share reserve converted to loan 369 - 369
receivable
Disposals of shares in - 1 437 1 437
subsidiaries
Dividends - (668) (668)
Acquisition of non-controlling (1 872) 1 872 -
interest in subsidiary
Other movements in non-controlling - (877) (877)
interests
Balance at 29 February 2012 - 118 946 1 412 120 358
reviewed
Statement of cash flow for the period ended 29 February 2012
Reviewed Audited
29-Feb-12 28-Feb-11
R000 R000
Cash generated from operations 26 692 12 525
Investment income received 3 638 3 303
Finance costs paid (1 398) (2 066)
Tax paid (2 029) (8 144)
Cash flows from operating activities 26 903 5 618
Additions to investment property - (1 343)
Acquisition of property, plant and equipment (859) (1 987)
Proceeds on disposal of property, plant and - 51
equipment
Business combinations (838) (3 583)
Deconsolidation of subsidiary (63) -
Disposals of investments in subsidiaries 3 431 (194)
Acquisition of intangible assets (2 507) (1 334)
Additions to non-current asset held for sale - (1 100)
Proceeds on disposal of non-current asset held - 11 800
for sale
Cash flow on consolidation of non-current asset - 98
held for sale
Contingent consideration paid (967) (265)
Cash flows from investing activities (1 803) 2 143
Amounts advanced to associates and joint venture (27) (265)
Non-controlling interests` loans repaid - (238)
Loans receivable repaid 492 -
Borrowings (repaid)/advanced (14 675) 241
Acquisition of additional shares in subsidiary (400) (2 324)
from non-controlling interest
Dividends paid (668) (8 492)
Cash flows from financing activities (15 278) (11 078)
Net increase/(decrease) in cash and cash 9 822 (3 317)
equivalents
Cash and cash equivalents at beginning of period 3 862 7 179
Cash and cash equivalents at the end of the 13 684 3 862
period
Selected explanatory notes
Basis of preparation and accounting policies
This condensed interim financial report has been compiled in
accordance with International Financial Reporting Standards
("IFRS"); IAS 34: Interim Financial Reporting; the Companies
Act of South Africa, as well as AC 500 standards and the JSE
Limited Listings Requirements.
The accounting policies and critical accounting estimates and
judgements applied to this financial report are consistent
with those applied for the year ended 28 February 2011. This
report was prepared under the supervision of the financial
director, Frans Botha (CA) SA.
Financial results
This condensed interim report has been reviewed by the
Group`s auditors, PKF (JHB) Inc. The unmodified review report
is available for inspection at the registered offices of the
Group.
Business combination
On 1 March 2011, 51% of Integra was acquired for a total
consideration of R3 104 828. The purchase consideration was
partially settled by converting an existing loan of R1 095
000 to shares and Integra issued ordinary shares to the value
of R1 291 444 to the Company, which were paid for by
transferring intangible assets to the same value to Integra.
The balance of the purchase consideration of R718 384 was
settled in cash.
Goodwill of R1 809 593 arose on the transaction and is
attributable to Integra`s business methodology and operating
model.
The respective book and fair values acquired in the business
combination are as follows:
Reviewed
Book values Fair values
R000 R000
Property, plant and equipment 24 24
Deferred tax asset 676 676
Trade and other receivables net of impairment (323) (323)
Cash and cash equivalents 163 163
Trade and other payables (332) (332)
Intangible assets 1 308 2 615
Net assets acquired 1 516 2 823
Non-controlling interest (1 244)
Loans advanced to associate and joint (841)
venture, now consolidated
Goodwill 2 367
Purchase price 3 105
Cash and cash equivalents (163)
Part-payment through sale of intangible asset (1 291)
Loan converted to equity (1 095)
Amount included in trade and other 282
receivables
Cash outflow on business combination 838
The business combination contributed revenue of R6 568 100
and profit after tax of R376 276 to the Group since the date
of acquisition.
A reconciliation of the Group`s goodwill is as follows:
Reviewed Audited
29-Feb-12 28-Feb-11
R000 R000
Opening balance 65 524 87 006
Additions through business combinations 2 367 3 472
Adjustments through contingent considerations - 259
Impairment losses (557) (25 213)
Deconsolidation of subsidiaries (1 003) -
Disposal of shares in subsidiaries (5) -
Closing balance 66 326 65 524
Changes in investments
On 1 March 2011 the Group disposed of 12.6% of the interest
in IQuad Technologies (Pty) Ltd for a consideration of R1
cash. Consequently the Group lost control and the investment
has been equity-accounted from disposal date.
The investment and related loans were measured at fair value
and a Group loss of R3 067 288 arose on the transaction.
On 1 August 2011 the Group disposed of its entire interest in
IQuad Verification Services (Pty) Ltd for a consideration of
R1 500 000 and at a Group loss of R778 942. The proceeds have
been settled in full.
On 1 March 2011 the Group ceased accounting for IDEC
Consulting Service (Pty) Ltd "IDEC" as a subsidiary and has
equity-accounted the investment from that date. No profit or
loss arose as a result of the deconsolidation.
The deconsolidation arose as the Group no longer controlled
the company.
The book values of the entities disposed of during the period
are as follows:
Reviewed
29-Feb-12
R000
Non-current loans payable (492)
Goodwill 5
Property, plant and equipment 281
Intangible assets 497
Trade and other receivables 2 146
Cash and cash equivalents 699
Trade and other payables (1 744)
Deferred tax 5 613
Net assets disposed of 7 005
Non-controlling interests 2 115
Loan to associate retained (921)
Loss on disposal (4 069)
Proceeds on disposal 4 130
Cash and cash equivalents (699)
Cash inflow on disposals of subsidiaries 3 431
The book values of the entities deconsolidated during the
period are as follows:
Reviewed
29-Feb-12
R000
Goodwill 1 003
Property, plant and equipment 32
Intangible assets 80
Trade and other receivables 3 038
Cash and cash equivalents 63
Trade and other payables (1 895)
Tax payable (116)
Deferred tax (212)
Net assets disposed of 1 993
Non-controlling interests (603)
Investment in associate retained (1 465)
Loan to associate retained (750)
Loss on disposal 75
Proceeds on disposal (750)
Amount included in loans to associates 750
Cash and cash equivalents (63)
Cash outflow on disposals of subsidiaries (63)
On 1 December 2011 the Group acquired the non-controlling
interests in an existing subsidiary, IQuad Property
Investment (Pty) Ltd. The shares were acquired for R1 and a
loan for R400 000, resulting in a Group gain of R563 572 on
the transaction.
The transaction did not result in a change of control and was
accounted for as an equity transaction as per IAS 27
(revised).
Earnings, dividend and net asset value per share
Reviewed Audited
29-Feb-12 28-Feb-11
R000 R000
Headline earnings per share 52.6 37.3
Dividend per share
- Interim 26.0 8.0
- Final - -
Weighted average number of ordinary shares in 27 382 27 382
issue (`000s)
Headline earnings are reconciled to earnings per the
statement of comprehensive income as follows:
Reviewed Audited
29-Feb-12 28-Feb-11
R000 R000
Profit/(loss) attributable to equity 9 842 (15 569)
shareholders of the Company
Goodwill impairments 557 25 213
Impairment of intangible assets - 977
Loss/(profit) on disposal of property, plant 22 (1)
and equipment
Fair value adjustment on re-measurement of - -
disposal group held for sale
Loss/(profit) on disposal of investments 3 992 (232)
Profit on disposal of non-current asset held (164)
for sale
Headline earnings for the period 14 413 10 224
Net asset value per ordinary share
Reviewed Unaudited
29-Feb-12 28-Feb-11
Cents Cents
Net assets 434,4 403,9
Net tangible assets 170,3 148,5
Other significant matters
As per the SENS announcement on 22 November 2011, the
following changes to the board were made with effect from
Wednesday 16 Noveber 2011: Resignations:
Mr. PN de Waal, Mr. M Edas and Miss S Totaram resigned as non-
executive directors.
Appointments:
Mr. RDEB Sassoon and Mr. TD Soondarjee were appointed as non-
executive directors.
Contingent asset
Future revenue approximating R15 million, to be earned from
incentive claims submitted to regulatory authorities but
still waiting approval for payment as at the reporting date,
has not yet met the revenue recognition criteria. Accordingly
this revenue has not been recognised as income in these
financial statements (28 February 2011 R10 million).
Subsequent events
No material events have been identified subsequent to the
reporting date of the Group up to the date of this report,
other than those disclosed in these condensed financial
statements and the commentary thereon.
Segment report
The Group has four reportable segments within which the
Group`s operating units ("SBUs") are categorised.
The SBUs offer different services and are managed separately
as they require different technology and marketing
strategies, and are reported separately to the board of
directors.
Investment incentives
Render consulting services aimed at enabling clients to
obtain the maximum benefits and refunds from Government and
DTI incentive programmes.
Global trade services
Offer import and export business solutions, including customs
consulting, rebate administration, financial market analysis
and interest rate and forex risk management.
Business development
Provide consulting services and management tools to optimise
business systems and processes and technological solutions
for third-party payment transactions.
Verification services
Conduct quality assurance, VAT and customs audits and verify
BEE compliance.
Investmen Global Business Verifi- Total
t trade develop- cation
incentive services ment services
s
Operating segments R000 R000 R000 R000 R000
29 February 2012 -
reviewed
Revenue - internal 55 250 153 - 458
Revenue - external 20 839 49 258 3 225 9 754 83 076
Profit before tax 5 020 12 845 794 1 630 20 289
28 February 2011 -
audited
Revenue - internal 192 - 1 113 - 1 305
Revenue - external 31 711 37 916 5 320 8 926 83 873
Profit/(loss) before 10 508 12 912 (3 620) (2 604) 17 196
tax
Reviewed Audited
29-Feb-12 28-Feb-11
Segmental profit reconciliation R000 R000
Profit before tax for reportable segments 20 289 17 196
Group impairment losses (596) (28 030)
Losses/(profits) from unallocated segments (2 151) 5 574
Elimination of intersegment and corporate (1 034) (8 047)
profits
Group profit/(loss) before tax as per 16 508 (13 307)
statement of comprehensive income
Transactions with individual clients did not amount to 10% or
more of the Group`s total revenue.
Dividends
The directors of IQuad are pleased to announce that they have
declared a dividend of 26 cents per share on 30 March 2012
and wish to ensure that the shareholders receive payment
thereof as expeditiously as possible in terms of the JSE
Listings Requirements.
The salient dates for the payment of this dividend are set
out as follows:
Last day to trade cum dividend Thursday, 19 April 2012
Trading ex-dividend commences Friday, 20 April 2012
Record date Thursday, 26 April 2012
Payment date Monday, 30 April 2012
Ordinary share certificates may not be dematerialised or
rematerialised between Friday, 20 April 2012, and Thursday,
26 April 2012, both days inclusive.
For and behalf of the board:
Dave Edwards Frans Botha
(Chief Executive Officer) (Financial Director)
Port Elizabeth
26 April 2012
Designated Advisor: PSG Capital (Pty) Ltd
Corporate Advisor: Sasfin Capital Ltd (a division of Sasfin
Bank Ltd)
Date: 26/04/2012 16:16:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
