| Mon 30 Jul 2001, 0:00 | | Interconnective Solutions Limited - Audited Result |
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APRIL 2001
(Incorporated in the Republic of South Africa)
(Registration Number 1997/010640/06)
("Solutions" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 30 APRIL 2001
30 April
2001 2000
R R
INCOME STATEMENT
Revenue 13,876,392 23,327,816
Other operating income 1,100,016 810,000
Changes in inventory 463,994 53,044
Direct operating costs -10,307,611 -17,085,444
Staff Costs -3,350,172 -1,972,412
Depreciation and amortisation expenses -583,273 -321,546
Other operating expenses -5,439,237 -4,648,894
Profit / (loss) from operations -4,239,891 162,564
Finance costs -155,472 -272,374
Investment income 495,062 1,012,668
Net profit before equity accounted earnings -3,900,301 902,858
Equity accounted earnings - 319,377
Net profit/(loss) attributable to
ordinary shareholders -3,900,301 1,222,235
Number of shares in issue at end of year 96,600,000 95,000,000
Weighted number of shares in issue at
end of year 96,600,000 95,000,000
Earnings per share - Fully diluted -4.0 1.3
Headline earnings per share - Fully diluted -2.4 1.3
Reconciliation between earnings and
headline earnings
Per income statement -3,900,301 1,222,235
Items included in other operating
expenses above :
Loss on disposal of Paydirect (Pty) Ltd 786,753 -
Loss on disposal of Value Music (Pty) Ltd
And BG Music (Pty) Ltd 434,122 -
Provision for permanent dimunition in
value of Alnal Investments (Pty) Ltd 331,072 -
Headline earnings -2,348,354 1,222,235
30 April
2001 2000
R R
BALANCE SHEET
ASSETS
Non Current Assets 4,070,928 3,298,427
Fixed assets 1,466,496 1,089,534
Intangible assets 1,803,932 819,063
Loans receivable 800,000 320,148
Unlisted Investments - 331,072
Investments in associates and subsidiaries 500 738,610
Current Assets 6,861,192 9,720,010
Inventory 581,668 117,674
Trade and other receivables 4,255,300 2,591,574
Cash and cash equivalents 2,024,224 7,010,762
Total Assets 10,932,120 13,018,437
EQUITY AND LIABILITIES
Capital and reserves 6,954,071 10,076,447
Non current liabilities 202,039 653,574
Current liabilities 3,776,010 2,288,416
Trade and other payables 3,577,310 1,554,443
Current portion of non current liabilities 198,700 183,349
Bank overdraft - 544,378
Taxation - 6,246
Total liabilities 10,932,120 13,018,437
CASH FLOW STATEMENT
Cash flow from operating activities -1,876,180 10,870
Net cash utilized by operations -2,209,524 -717,198
Finance costs -155,472 -272,374
Investment income 495,062 1,012,668
Taxation paid -6,246 -12,226
Cash flow from investing activities -2,907,721 -2,248,936
Cash flow from financing activities 341,741 -1,807,321
Net decrease in cash and cash equivalents -4,442,160 -4,045,387
Cash and cash equivalents at the beginning
of the year 6,466,384 10,511,771
Cash and cash equivalents at end of the year 2,024,224 6,466,384
STATEMENT OF CHANGES IN EQUITY
Share Capital 96,600 95,000
Balance at the beginning of the year 95,000 95,000
Issue of share capital 1,600 -
Share Premium 12,483,431 11,707,106
Balance at the beginning of the year 11,707,106 11,775,527
Issues during the year 798,400 -
Share issue costs -22,075 -68,421
Accumulated losses -5,625,960 -1,725,659
Balance at the beginning of the year -1,725,659 -2,947,894
Attributable (losses)/income -3,900,301 1,222,235
6,954,071 10,076,447
FINANCIAL RESULTS
Revenue is down 41% and direct operating costs are down 40%. Both these
decreases are as a result of the group's decision to discontinue its
Advertising business as at 1 May 2000, in line with its restructuring. Staff
costs have increased due to the group gearing up its telephony platform in
line with the award of the Telkom premium rate contract.
Although direct operating costs are showing an increase of 17%, this is
primarily due to exceptional items as detailed in the reconciliation of
headline earnings as well as the fact that the group has decided to adopt a
prudent approach and provide against an outstanding debtor of R475,805. This
debtor relates back to revenue shown in the previous financial year.
Although the net loss attributed to shareholders is R3,9 million, headline
earnings as per the reconciliation is R2,3 million, the difference of which
is ascribed to the group's investment in PayDirect (Pty) Ltd, Alnal
Investments (Pty) Ltd and its music interests;
PayDirect (Pty) Ltd
The group incurred a loss of R786,753 on the disposal of the investment
that it made in PayDirect.
The group decided to effect a restitution with the vendors of PayDirect due
to:
- The rapidly changing dynamics within the telephony payment
businesses within South Africa and in particular, the increasing
competition that PayDirect faced from the major banks who offer
a similar business of account payments by phone; and
- The group's decision to re-focus as referred to below.
The group effected an amicable restitution with the vendors of PayDirect in
terms of which, except for the loan account of R786,753 which was written
off, the parties were placed in exactly the same position that they were,
before the investment in PayDirect was made by the group.
The purchase price for the investment which was 1.6 million Solutions
shares, at an issue price of 50 cents per share, was purchased by the
Interconnective Solutions Limited Share Incentive Trust and is shown as a
loan receivable in the balance sheet.
Value Music (Pty) Ltd & BG Music (Pty) Ltd
The group incurred a loss on the disposal of its interest in music of
R434,122. The pressure on consumer spending impacted not only on the music
division but the entire music industry, with industry volumes declining by
in excess of 30% during the accounting period.
The pressure on the music industry locally and internationally, as well as
the introduction of technologies such as MP3 which offers easy duplication,
negatively impacted on music sales and in line with the group's re-focus it
was decided to dispose of its two music interests previously accounted for
as associates.
Alnal Investments (Pty) Ltd
Alnal Investments were the owners of all rights relating to the musical
show commonly known as "Ipi Ntombi". The directors have decided to provide
against this investment as Alnal Investments no longer has exclusive rights
to Ipi Ntombi.
COMMENTS AND PROSPECTS
Shareholders were advised in the group's interim report that Solutions had
been awarded a license from Telkom to operate premium rate services as a
Telkom service provider. This license enables Solutions to offer a host of
services which include: televoting (08621), competitions (08622) and
information and business services (0867).
The services offered are housed and managed by Valuecare Telemanagement
Services (Pty) Ltd ("VTS"), a wholly owned subsidiary of the group.
Premium rate services, both locally and internationally, have demonstrated
that they can generate substantial earnings in the form of rebates paid by
the telecommunications network providers to service providers, resulting
from calls generated to services managed by service providers.
VTS has developed its own voice and data platform which currently offers 600
ports of voice, fax and data capability running on its own proprietary
software. The VTS infrastructure is rapidly and easily scalable with the
current infrastructure offering a further 2,000 lines of connectivity via
its fibre optic and microwave installation.
VTS has developed and continues to develop a bouquet of voice and data
services which incorporate interactive voice response services, fax on
demand, associated speech response, voice recognition, text to speech,
automated outbound telemarketing services and a host of unified messaging
services. Since the award of the Telkom license to Solutions, VTS has
rapidly demonstrated that it can offer world class unified messaging
services on a bureau basis and has provided services to over 100 blue chip
companies.
In order to grow this platform and service offering, the staff complement
within VTS has been increased in areas relating to programming, sales and
administration. The company is attracting a number of clients based on
referrals which illustrates that the market is starting to identify VTS as a
leader of interactive voice response services. The group has also attracted
and developed highly skilled staff who are visionary and passionate about
the benefits of unified messaging services.
Excellent inroads have been made in the convergence of voice and data
within the Worldwide Web, by integrating the services developed and managed
on the VTS platform with the benefits of flexibility of the Web, thereby
offering the client enhanced service.
VTS is currently developing a number of new and exciting service offerings
which will enhance its revenue potential and increase its portfolio of
services to its rapidly increasing client base.
Due to the significant potential identified in VTS, it has been decided
that the group will focus its entire efforts, in line with the re-focus,
primarily in the arena of the services offered by VTS and those of
Valutronics (Pty) Ltd which is also a wholly owned subsidiary of the group.
Valutronics develops and assembles software and hardware solutions to the
manned guarding industry in South Africa, United Kingdom and Australia.
This company will continue to produce value-added services to the manned
guarding industry and also incorporate telephony and cellular interfaces to
enhance data collected and transferred from multiple sites to a central
portal.
In line with the group's restructuring it has developed a business model of
forming strategic joint venture associations with key niche sectoral
companies that have developed and manage large communities of customers,
with the intention of offering their customers value-added unified messaging
services. An example of this strategy, is the joint venture agreement
entered into with Media 24 Limited, a wholly owned subsidiary of Naspers
Limited. Media 24 has in excess of 140 publications with loyal brand
following from millions of readers. This joint venture was contractually
concluded on the 22nd of February 2001 and practically commenced during June
2001. The potential from this relationship is enormous and Solutions
anticipates that over the next few months, call traffic from this joint
venture will be substantial.
A number of joint venture agreements have and will be entered into by the
group based on this business model which leverages off the voice and data
platform and offer the joint venture partner access to all the group's
unified telephony services on a bureau basis.
In line with the group's restructuring, Retail Card Club (Pty) Ltd ("RCC")
which offered fast moving consumer goods to a number of wholesale and retail
outlets, sold its customer base for no commercial value to Unitrade
Management Services (Pty) Ltd effective from the 23rd of June 2001. RCC,
after this transaction, continues to hold the distribution license for the
distribution of pre-paid cellular phone cards. This company will offer
virtual pre-paid cards to clients using the VTS platform to execute the
virtual re-charging.
Despite the number of protracted negotiations and delays in the award of
certain key licenses or contracts occasioned over the last 18 months, the
group is extremely positive about the future. The group has developed a
solid voice and data network and has the potential to attract very large
clients individually or via joint ventures. The group offers a full turnkey
solution to clients who require unified communication and messaging services
which includes; creative input, system design, studio recording,
programming, service hosting, back office and administration.
In addition, management is now far more focussed after the restructuring
which is now complete.
By order of the board
Interconnective Solutions (Pty) Ltd
Johannesburg
30 July 2001
Directors: M.A. Smith (Chairman & CEO), S. Bentel, R. Graver, D.R. McCusker,
M.M.D. Mogatle, D.J.S. Smith, A.N. Bentel* G. Mooney* L.T. Muller* (*Non-
Executive)
Registered office: 372B Oak Avenue, Randburg, 2194, Po Box 2404, Randburg,
2125 (P O Box 2404, Randburg, 2125)
Transfer Secretaries: Computershare Services Limited, Edura, 41 Fox Street,
Johannesburg, 2001 (P O Box 61051, Marshaltown, 2107)
