| Wed 9 May 2001, 0:00 | | Bytes Technology Group Limited - Results |
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bytes technOLOGY GROUP LIMITED
IT Services for the Enterprise
(Formerly USKO Limited)
(Registration number 1911/003874/06)
(Incorporated in the Republic of South Africa)
Financial results for the year ended 28 February 2001
Abridged consolidated income statement
Twelve Six Six Seventeen
months ended months ended months ended months ended
28 February 28 February 31 August 29 February
2001 2001 2000 2000
Figures in R000 (Audited) (Proforma) (Unaudited) (Audited)
Revenue 763 271 390 998 372 273 1 209 016
Continuing
operations 757 049 391 998 365 051 979 820
Discontinued
operations 6 222 (1 000) 7 222 229 196
Operating loss
before
goodwill and
exceptional items (59 017) (17 081) (41 936) (98 577)
Continuing
operations (45 260) (9 381) (35 879) (57 894)
Discontinued
operations (13 757) (7 700) (6 057) (40 683)
Goodwill -
amortisation (11 304) (7 445) (3 859) (14 543)
Goodwill -
impairment (8 162) (8 162) 0 (2 672)
Exceptional items (12 217) (7 054) (5 163) (24 328)
Operating loss (90 700) (39 742) (50 958) (140 120)
Interest paid (25 642) (10 912) (14 730) (30 452)
Interest received 15 608 11 800 3 808 26 518
Equity accounted
investment (13 260) (7 054) (6 206) (5 268)
Loss before
taxation (113 994) (45 908) (68 086) (149 322)
Taxation (1 613) (1 191) (422) (12 089)
Loss after
taxation (115 607) (47 099) (68 508) (161 411)
Outside shareholders'
interest 8 277 4 297 3 980 (28)
Attributable loss (107 330) (42 802) (64 528) (161 439)
Ordinary dividends - - - (1 000)
Loss for the period (107 330) (42 802) (64 528) (162 439)
Weighted number of
shares in issue
(000) 1 356 406 1 356 406 513 669 493 648
Loss per share -
Basic (cents) (7.91) (3.16) (12.56) (32.70)
Loss per share -
Fully diluted
(cents) (7.91) (3.16) (8.67) (32.63)
Headline loss per
share - Basic
(cents) (5.20) (1.11) (10.81) (21.75)
Headline loss
per share
- Fully diluted
(cents) (5.20) (1.11) (7.46) (21.70)
Abridged statement of changes in equity
28 February 29 February
2001 2000
Figures in R000 (Audited) (Audited)
Balance at beginning of period (43 860) 270 354
Loss attributable to ordinary shareholders (107 330) (161 439)
Issue of shares 613 590 12 504
Rights offer (6 708) -
Foreign currency translation reserve (3 263) (352)
Goodwill written off - (234 436)
Vendor liabilities reversed to NDR - 73 870
Share election reserve - (871)
Change in accounting policy - (2 097)
Deferred tax - (393)
Dividends - (1 000)
Balance at end of period 452 429 (43 860)
Abridged consolidated balance sheet
28 February 31 August 29 February
2001 2000 2000
Figures in R000 (Audited) (Unaudited) (Audited)
ASSETS
Non-current assets 431 339 100 944 123 421
Fixed assets 103 400 56 607 69 722
Investments & loans 34 190 30 800 36 518
Goodwill 262 629 13 537 17 181
Deferred taxation 31 120 - -
Current assets 681 168 152 405 154 180
Inventory 147 536 5 194 5 428
Accounts receivables 333 734 113 627 116 097
Short-term loans 41 000 (157) -
Bank & cash 158 898 33 741 32 655
TOTAL ASSETS 1 112 507 253 349 277 601
Ordinary shareholders'
equity 452 429 (108 308) (43 860)
Outside shareholders'
interest 74 405 3 095 5 516
Non-current liabilities 29 918 1 030 983
Long-term liabilities 29 918 929 883
Deferred taxation - 101 100
Current liabilities 555 755 357 532 314 962
Bank overdraft 12 562 181 867 135 981
Short-term borrowings 51 781 - 1 738
Other current liabilities 491 412 175 665 177 243
TOTAL EQUITY & LIABILITIES 1 112 507 253 349 277 601
Shares in issue at end of
period (000) 4 508 268 2 031 286 496 239
Net asset value per share
(cents) 10.04 (5.33) (8.84)
Abridged consolidated cash flow statement
Twelve Six Six Seventeen
months ended months ended months ended months ended
28 February 28 February 31 August 29 February
2001 2001 2000 2000
Figures in R000 (Audited) (Proforma) (Unaudited) (Audited)
Cash (utilised in)/
generated
from operations (6 884) 21 135 (28 019) (12 190)
Net interest
(paid)/received (10 034) 888 (10 922) (3 934)
Taxation paid (2 040) (354) (1 686) (15 153)
Dividends paid (2) - (2) (4 614)
Net cash (outflow)/
inflow
from operating
activities (18 960) 21 669 (40 629) (35 891)
Net cash inflow/
(outflow)
from investment
activities 36 980 42 961 (5 981) (160 866)
Net cash inflow/
(outflow)
from financing
activities 2 845 1 240 1 605 (5 792)
Proceeds from share
issues 228 797 228 592 205 2 259
Net increase/
(decrease)
in cash and cash
equivalents 249 662 294 462 (44 800) (200 290)
Cash and cash
equivalents at
beginning of
period (103 326) (148 126) (103 326) 96 964
Cash and cash
equivalents at
end of period 146 336 146 336 (148 126) (103 326)
Abridged segmental analysis
Twelve Six Six Seventeen
months ended months ended months ended months ended
28 February 28 February 31 August 29 February
2001 2001 2000 2000
Figures in R000 (Audited) (Proforma) (Unaudited) (Audited)
Revenue
Software 115 980 48 159 67 821 270 206
Networking 165 814 93 383 72 431 201 055
E - Commerce 15 514 7 636 7 878 -
Enterprise
Solutions (UK) 459 741 242 820 216 921 508 559
Total continuing
operations 757 049 391 998 365 051 979 820
Discontinued
operations 6 222 (1 000) 7 222 229 196
Total all
operations 763 271 390 998 372 273 1 209 016
Operating (loss)/
profit before
goodwill and
exceptional items
Software (16 221) (2 634) (13 587) 15 069
Networking (30 114) (11 928) (18 186) (51 188)
E - Commerce (6 316) (3 101) (3 215) (4 436)
Enterprise
Solutions (UK) 6 930 5 731 1 199 13 824
Other 461 2 551 (2 090) (31 163)
Total continuing
operations (45 260) (9 381) (35 879) (57 894)
Discontinued
operations (13 757) (7 700) (6 057) (40 683)
Total all
operations (59 017) (17 081) (41 936) (98 577)
Depreciation
Software 5 039 2 447 2 592 6 619
Networking 8 622 1 649 6 973 15 436
E - Commerce 8 221 4 123 4 098 3 324
Enterprise
Solutions (UK) 2 139 963 1 176 3 184
Other 1 423 707 716 1 612
Total continuing
operations 25 444 9 889 15 555 30 175
Discontinued
operations 451 (9) 460 7 000
Total all
operations 25 895 9 880 16 015 37 175
Message to stakeholders
PREAMBLE
At the time of issuing the annual report to shareholders in July last year, it
was pointed out that the coming year (ie to February 2001) was expected to be
"difficult and require major adjustments". It was also anticipated that a
further significant, albeit reduced, loss would be incurred but nonetheless a
return to profitability on a monthly basis was expected by the end of the
financial year.
As matters unfolded, it became evident that the magnitude of the difficulties
faced and the poor IT trading environment had been somewhat underestimated.
Coupled with extended restructuring timetables, this has resulted in the
forecast break-even position having been delayed.
RESTRUCTURING AND ANTICIPATED BENEFITS
The material restructuring initiatives which have taken place during the past
12 months have been comprehensive.
In respect of the United Kingdom based operations, the termination of the
services of several senior executives, most of whom were the original vendors,
and a greater operational focus with resultant efficiencies yielded
significantly improved profitability in the second half. This is expected to
continue to improve during the financial year to February 2002.
In the case of our Mediswitch business, it became abundantly clear that
without a significant increase in business volumes in the immediate future, a
sustainable profitable position was unlikely to be achieved despite major
marketing and selling efforts and the securing of an acceptable share in the
practice management software market. Accordingly, a merger with QEDI, PQ
Africa's operation in the healthcare industry, was negotiated. Regrettably, and
notwithstanding considerable effort, securing Competition Commission approval
took significantly longer than expected. Final approval was only obtained post
year end (in April 2001), thus denying the group synergistic savings during the
year under review. It is anticipated, however, that the merged operation in
which the company has a 40% equity stake will be profitable in its first year
of operation and should become a major player in its designated market sector.
The group's networking operations around the country have, in line with general
industry trends, had a very difficult year. This has necessitated considerable
rightsizing and structural changes in management responsibilities, resulting in
more focused and rationalised businesses. Whilst market conditions in this
arena are not expected to improve materially, with competition remaining
fierce, significant improvement for these operations is forecast through
consolidated efforts.
The group's software and services group also continued to suffer from the poor
market conditions particularly in the ERP sector (SAP and JDEdwards) where new
projects have been either delayed or abandoned. There are signs of a moderate
improvement in this market which, coupled with certain new software offerings
and a tighter organisation both in Gauteng and the regions, should produce a
more satisfactory return in the current year.
The group's software development business in the Cape, Uskotec, a jointly-owned
operation with Old Mutual, had a most disappointing year with delays and cost
overruns of a material nature severely affecting results. Considering that in
the previous year this operation appeared to have performed well, such a
reversal was doubly disappointing. Despite this however, significant progress
has been achieved in marketing Uskotec's generic versions of its advanced
employee benefits software both locally and in the United Kingdom. Greater
efforts will be made during the ensuing financial year to build on these
successes and to diversify the operation from what has been essentially a
one-customer business with the concomitant vulnerability. Old Mutual will
however remain a significant customer into the future.
A rights issue, undertaken during the year, successfully raised approximately
R228 million, converting the ordinary shareholders' deficit of R108 million pre
the rights issue into a positive balance of R120 million.
FINANCIAL RESULTS
It should be borne in mind that the results for the year under review are
compared to those for the 17 month period ended February 2000.
Monthly turnover from continuing operations rose by 8 and half percent compared
with the previous period and resulted in a reduced operating loss of R59,0
million (R98,6 million). Attributable loss for the year was R107,3 million
(R161,4 million). More significantly, the group's operating loss, before
goodwill and exceptional items, decreased from R41,9 million for the first six
months of the year to R17,1 million for the second half and in the case of
continuing operations from R35.9 million to R9.4 million respectively.
Furthermore, cash of R21,1 million was generated from operations during the
second half.
Headline loss per share reduced to 5.2 cents compared with a loss of 21.7 cents
for the previous 17 months.
With the various changes and measures effected during the year the deficit on
ordinary shareholders' funds of R43,9 million as at 29 February 2000 was
converted to a positive balance of R452,4 million representing a net asset
value of 10,04 cents per share. A positive cash and cash equivalent position of
R146 million was achieved by year-end compared with a negative position of R103
million a year earlier. The balance sheet at February 2001 includes the
acquired operations referred to elsewhere in this commentary.
ACQUIRED OPERATIONS
Stakeholders will gather that substantial progress has been made across a broad
front in managing a turnaround in the company and improving prospects from its
existing operations. Whilst over time these measures would have ensured the
survival of the group, it was abundantly clear that to make further meaningful
progress a larger and more profitable, focused group needed to evolve. Clearly
this would not have been possible to achieve organically within a reasonable
timescale.
Consequently, and with effect from 28 February 2001, the company purchased
Fintech Limited's IT and IT related interests in 3 operations, namely Xerox SA,
Alcatel Business Systems and National Data Systems ("NDS"). The aggregate
operating profits of these businesses were R93.1 million for the year to
February 2000 and R87.1 million for the year to February 2001. An improved
level of profitability in excess of the performance achieved during the
February 2000 year is anticipated in the current year. Furthermore, subsequent
to the year end, Xerox SA has secured the existing profitable business and
exclusive distribution rights from Xerox UK for an additional 10 countries in
Sub-Saharan Africa.
These operations, each a serious player in their respective market sectors
will, along with the group's existing businesses, form an IT group with a
turnover in excess of R2 billion and a staff complement of over 3000 for the
year ahead. The task now faced is one which involves enhancing customer
credibility, leveraging organisational and operational synergies and
harmonising cultures all of which will be immeasurably assisted by achieving a
profitable and cash positive business.
CHANGE OF NAME AND SHARE CONSOLIDATION
Following shareholder approval, the name of the company was changed from USKO
Limited to Bytes Technology Group Limited ("BTG") with effect from 26 March
2001. A consolidation of shares in the ratio of 30:1 was also effected on this
date.
PROSPECTS
With a number of the major structural and operational issues either resolved or
substantially resolved and on the assumption that the anticipated benefits
referred to earlier will indeed be realised, the group can be expected to post
a solid, profitable result for the year ending February 2002. Additionally it
is anticipated that the group will produce strong operating cash flows. The
group will also continue to seek appropriate alliances, disposals and
acquisitions to further its growth strategies.
DIVIDENDS
The directors do not propose to declare a dividend in respect of the year ended
28 February 2001.
ANNUAL REPORT
The annual report and financial statements for the year 28 February 2001 will
be posted to shareholders during June 2001.
On behalf of the board
David Redshaw Peter Riskowitz
Executive Chairman Group Financial Director 8 May
2001
This report is available on the company website at www.btgroup.co.za.
