| Fri 24 Aug 2001, 0:00 | | Comparex Holdings Limited - Audited Results |
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COMPAREX HOLDINGS LIMITED
Share code - CPX
ZAE00016812
* diluted headline ePS up 55%
* headline ePS up 43%
* Cash resources at R3,7 billion
Audited group results for the year ended 31 May 2001 Group income statement
(R millions)
Reviewed
Continuing
Audited businesses Audited
2001 % Change 2000 2000
Revenue 5 389,8 4,0 5 182,4 7 274,0
Cost of sales 3 362,6 (0,5) 3 380,0 4 915,1
Gross profit 2 027,2 12,5 1 802,4 2 358,9
Expenses 1 466,9 16,3 1 261,8 1 882,2
- Administrative
expenses 1 513,8 1 287,2 1 907,6
- Foreign exchange
gains (46,9) (25,4) (25,4)
Profit before
interest,taxation
and depreciation 560,3 3,6 540,6 476,7
Depreciation 306,3 19,0 257,3 264,2
Trading profit 254,0 (10,3) 283,3 212,5
Net investment income 179,7 4,7 5,5
Share of associate
companies' losses (0,3)
Profit before
exceptional items 433,4 50,5 288,0 218,0
Exceptional
(losses)/profits (6,5) 13 514,7
Profit before taxation 426,9 48,2 288,0 13 732,7
Taxation 45,3 89,3 (109,8)
Profit after taxation 381,6 92,0 198,7 13 842,5
Minorities 36,3 (31,0)
Earnings attributable
to shareholders 345,3 73,8 198,7 13 873,5
Adjusting items for
headline earnings:
Profit on sale of
Comparex Networks Europe 13 704,5
Impairment of assets (65,2)
Profit on sale of
investments 114,6 66,1
Tax effects and losses
on restructure of
international
operations (191,4)
Losses arising
on closure
of PQ Africa
operations (64,5)
Attributable to outside
shareholders 13,8 27,1
Headline earnings 282,1 42,0 198,7 331,7
Weighted number of
shares in
issue (000's) 328 228 331 153 331 153
Fully diluted
Weighted number
of shares
in issue (000's) 409 231 2,1 400 873 400 873
Earnings per share
(cents) 105,2 4 189,4
Headline earnings
per share (cents) 85,9 43,1 60,0 100,1
Fully diluted earnings
per share (cents) 96,7 3 463,9
Fully diluted headline
earnings
per share (cents) 84,6 55,2 54,5 86,4
Dividends
per share (cents) 2 950,0
Group balance sheet (R millions)
31 May
2001 2000
ASSETS
Non-current assets
Properties, fixtures,equipment
and vehicles 166,7 177,1
Capitalised leased assets 202,1 212,3
Rental assets 74,7 184,3
Investment in associate companies (0,3)
Other long-term investments 65,0 102,2
Long-term loans and advances -
interest-bearing 38,6 143,5
Long-term loans and
advances - interest-free 380,0 380,0
Deferred taxation asset 176,0 147,8
1 102,8 1 347,2
Current assets
Inventories 259,2 271,8
Trade accounts receivable 1 041,2 877,6
Other accounts receivable 120,5 127,9
Prepayments 48,0 72,6
Cash resources andfinancial
instruments 3 741,1 3 197,8
5 210,0 4 547,7
TOTAL ASSETS 6 312,8 5 894,9
EQUITY AND LIABILITIES
Ordinary shareholders' funds 3 365,4 3 164,1
Minority interests 126,3 80,8
3 491,7 3 244,9
Non-current interest-bearing
liabilities 252,3 255,4
Non-current interest-free liabilities 380,0 380,6
Post-retirement obligations 134,3 130,4
Deferred taxation liability 1,3
767,9 766,4
Current liabilities
Bank overdrafts and
short-term liabilities 35,4 41,4
Other short-term liabilities 2 017,8 1 842,2
2 053,2 1 883,6
TOTAL EQUITY AND LIABILITIES 6 312,8 5 894,9
Group cash flow statement (R millions)
Year ended
31 May
2001 2000
Cash generated from operations 430,7 659,5
Interest received 231,0 56,4
Dividends received 0,7 4,0
Interest paid (52,0) (54,9)
Dividends paid (92,1)
Taxation paid (20,9) (94,9)
Net cash flow from operating activities 589,5 478,0
Cash flows from investing activities
Acquisition/(disposal) ofsubsidiaries
and entities 11,2 (751,2)
Proceeds from disposal of investments 1 986,9 615,1
Advances from associate companies 15,0
Expansion relating to rental assets (75,0) (93,6)
Proceeds from sale of
properties,fixtures, equipment and
vehicles,rental and leased assets 29,0 2,0
Replacement of properties,
fixtures,equipment and vehicles (80,3) (45,4)
Expansion relating to
properties,fixtures, equipment
and vehicles (89,2) (70,2)
Net cash flow from investing activities 1 797,6 (343,3)
Cash flows from financing activities
Shares repurchase (162,9)
Proceeds from long-term
loans and advances 100,0 5,5
Proceeds from long-term liabilities 3,2
Payment of capital element
of finance leases (2,7)
Net cash flow from financing activities (62,4) 5,5
Net changes in cash 2 324,7 140,2
Cash at beginning of year 1 381,0 1 240,8
Cash at end of year 3 705,7 1 381,0
Short-term investments 1 775,4
Cash and cash equivalents 3 705,7 3 156,4
Shown as:Cash resources and
financial instruments 3 741,1 3 197,8
Bank overdrafts and short-term
liabilities (35,4) (41,4)
3 705,7 3 156,4
Group segmental analysis (R millions)
Reviewed
Continuing
Audited businesses Audited
2001 % Change 2000 2000
REVENUE
AFRICA(principally
South Africa) 2 557,3 6,6 2 399,5 2 470,3
EUROPE 2 739,9 1,6 2 697,3 4 650,8
OTHER (principally
USA,Australia
and Middle East) 92,6 8,2 85,6 152,9
5 389,8 4,0 5 182,4 7 274,0
TRADING PROFIT
AFRICA(principally
South Africa) 190,5 240,8 55,9 37,9
EUROPE 91,8 (62,7) 246,3 216,8
OTHER (principally
USA,Australia
and Middle East) (7,7) 51,0 (5,1) (28,4)
CENTRAL FUNCTIONS (20,6) 49,3 (13,8) (13,8)
254,0 (10,3) 283,3 212,5
REVENUE
Continuing
businesses 5 271,7 2,1 5 165,8 5 165,8
Acquisitions 16,6 16,6
Discontinued
businesses/converted
to associates 118,1 2 091,6
5 389,8 4,0 5 182,4 7 274,0
TRADING PROFIT
Continuing
businesses 278,7 (7,0) 299,8 299,8
Acquisitions (16,5) (16,5)
Discontinued
Businesses converted
to associates (24,7) (70,8)
254,0 (10,3) 283,3 212,5
Business groupings
revenue
Services 1 935,2 (11,8) 2 193,7 2 894,5
Storage 1 825,0 53,6 1 187,9 1 329,0
Servers 1 010,5 27,9 790,3 819,7
Networks 446,4 (42,9) 782,4 1 989,0
Application
Software Providers
and Proprietary
Software 172,7 (24,3) 228,1 241,8
5 389,8 4,0 5 182,4 7 274,0
Other Group salient information (R millions)
Year ended
31 May
2001 2000
Movement in provisions Balance at
beginning of year 326,7 640,9
Increase due to consolidation of PQAfrica 24,8
Relating to disposal of operations (1,2) (32,9)
Utilised (151,4) (210,9)
Foreign exchange variance 9,8
Reclassified (95,2)
Balance at end of year 183,9 326,7
Balance sheet ratiosNumber of shares
in issue (000's) 331 153 331 153
Fully diluted number of shares (000's) 412 155 400 873
Net asset value per share (cents) 1 054,4 979,9
Fully diluted net assetvalue
per share (cents) 847,2 809,5
Interest bearing debt-equity ratio (%) 8,2 9,1
Commitments
D Capital 2,6
D Unutilised forward exchange contracts 82,1 11,9
D Lease commitments 413,9 364,2
Accounting policies
The accounting policies used in the preparation of these group results are
consistent with those used in the annual financial statements for the year
ended 31 May 2000, except that the revised Statement AC105 in respect of
leases has been adopted. This policy change has been effected by a
restatement of prior year numbers as follows:
Year ended
31 May
R millions 2000
Balance sheetIncrease in leased assets 212,3
Increase in long-term interest-bearing liability (226,7)
Increase in short-term interest-bearing liability (14,8)
Effect on minority 12,5
Effect on retained income (16,7)
Income statement
Changes in depreciation (7,5)
Decrease in operating leases 29,5
Changes in finance charges (31,8)
Effect on minority 4,2
Net income statement effect (5,6)
Effect on opening retained income (11,1)
Effect on retained income (16,7)
Group statement of changes in equity (R millions)
Non-
distribut- Foreign Distribut-
Share capital able exchange able
and premium reserves reserve reserves Total
Balance at
31 May 2000 864,6 215,0 (12,3) 2 113,5 3 180,8
Effect of changesin
Accounting standards (16,7) (16,7)
As restated 864,6 215,0 (12,3) 2 096,8 3 164,1
Foreign exchangegains
arising onconsolidation 18,9 18,9
Attributable
Earnings per the
incomestatement 345,3 345,3
Transfers betweenreserves 3,0 (3,0)
Costs of shares
Repurchased (162,9) (162,9)
Balance at31 May 2001 701,7 218,0 6,6 2 439,1 3 365,4
strategic
The process of repositioning the Group as an integrator of eBusiness
solutions, based upon best-of-breed hardware and software, continued in the
period under review. Good progress is being made with the process, which is
largely complete in Africa. In Europe work remains to be done, particularly
in settling into the new partner relationships with EMC, Sun Microsystems
and Compaq.
The core business of the Group is that of an integrator. Forhistoric
reasons, the Group has a number of investments inproprietary software
companies and Application Service Providers. It is no longer considered
necessary for the Group to own 100% of, o
r control, such companies and therefore mechanisms to add value by combining
such businesses or introducing partners are being pursued. In accordance
with this strategy, QEDI was merged with the medical switching business of
the Bytes Technology Group to form Digital Healthcare Solutions, and GE
Capital was introduced as a partner in Mosaic Software. The Group subscribed
for a 49% shareholding in Intenda, which acquired the ProQure pro-prietary
software suite developed by the Group, with the balance of
the shareholding held by the management team and Brait Technology and
Innovation Fund. The Smart Shed, an electronic procurement exchange in the
household goods industry, was formed in partnership with leading industry
players, with the Group subscribing for a 30% shareholding. The Group also
reduced its shareholding in Perago Financial System Enablers from 51% to 49%
in favour of the management of Perago.
The Group continues to identify businesses that do not, nor have the ability
to, contribute meaningfully to profits and will dispose of them over time.
Such companies disposed of during the period, included Q Data Networks
Cabling and Motodata. In addition, PQ Telesystems and Q Data Telecoms were
closed. The Group also disposed of two proprietary technology divisions of
Nanoteq, namely TimPlus and SecMod.
The above transactions, although not significant to the current results of
the Group, are expected to materially improve focus within the core
integration business of the Group and enhance shareholder value in the
future.
The Group's remaining Dimension Data shares were disposed of during the
course of the year at an average price of R52,21 per share. The Comparex
Holdings Share Purchase Trust disposed of 7,8 million Dimension Data shares,
received out of the unbundling of Dimension Data shares, and utilised most
of the proceeds to acquire 10,6% (35 million) Comparex shares. In terms of
the Group's share buy-back programme, 4,7% (15,3 million) Comparex shares
were acquired at an average price of R10,59 per share.
The Group agreed to an early release from escrow of the National Information
Technology Acquisition Consortium's (Nitac) shares in Dimension Data
Holdings plc. In terms of this agreement, Nitac has irrevocably undertaken
to exchange its shares in PQ Africa for shares in Comparex by no later than
31 October 2002. Comparex has at the same time also obtained the right to
cause an imme-diate exercise of this exchange option. The fully diluted
number of shares reflected in the Group's results takes account
of the approximately 64 million Comparex shares to be issued upon the
exercise of this option.
Numerous opportunities to further the Group's strategy in Europe by
acquisition were evaluated during the course of the year. The extreme
volatility in values attributed to information technology companies
contributed materially to the Group deciding to follow a particularly
prudent approach to value determination and therefore no acquisition was
concluded in the year under review.
operational
The disposal of the Group's European network integration businesses and the
repositioning of the Group which followed this during February 2000, renders
a direct comparison between the statutory income statements for the years
ended 31 May 2001 and 31 May 2000 of little value. To make a meaningful
assessment of the Group's operational performance, a separate consolidated
income statement for the year ended 31 May 2000 of the Group's continuing
operations to reviewed by the auditors has been presented and is commented
on below.
In the light of disappointing financial performance by the Group's African
operations during the 2000 financial year, it is particularly pleasing to
report a material turnaround in the Group's South African operations in the
2001 financial year. As expected, the Group's European operations were the
most affected by the restructuring during the period and reported lower
profits than in the same period last year.
Revenue of the Group's continuing operations increased by 4% to R5,4
billion. This increase is attributable to a 2% increase in the revenue of
the Group's European operations and a 7% increase in the revenue of the
Group's African operations. The 54% increase in the Group's Storage revenue
is evidence of the emphasis being placed on storage and the progress being
made in the strategic partnership with EMC. The Group's 28% increase in
revenue of Servers is attributed to a material increase in server sales in
Europe. Material delays in the placing of orders contributed to a decline of
43% in the revenue of the African Networking Business. The 12% reduction in
revenue of Services was caused by a 65% decline in maintenance revenue in
Europe. The sale, reduction in shareholding and/or closure of Application
Software Providers and Proprietary Software business units was responsible
for the 24% reduction in the revenue of this business segment.
The operating margin on continuing operations benefited from a foreign
exchange gain of R47 million on cash on hand, but was affected negatively by
the reduced European throughput, and accordingly decreased to 4,7% compared
to the 5,5% achieved for the year ended 31 May 2000. Of particular
significance is the increase in the operating margin of the Group's African
operations over the same period from 2,3% to 7,4%.
The disposal of the Group's remaining Dimension Data shares resulted in an
exceptional profit of R211 million. Losses of R218 million incurred on the
European restructuring, closure of operations and impairment of assets
resulted in a net exceptional loss of R7 million.
Interest received on the Group's cash resources, which were materially
enhanced by the sale of the Group's remaining Dimension Data shares,
resulted in net investment income increasing to a total of R180 million.
The Group's rate of tax remains low largely as a result of deductions
attributable to trademarks acquired by the Group, which were written off,
but are being amortised for tax purposes. Deductions claimed in respect of
certain of these trademarks have been disallowed and are the subject of an
appeal to the Special Tax Court. As reported previously and on the advice of
Senior Counsel, the directors are confident of the success of such
deductions claimed, but have decided not to raise a deferred tax asset
attributable to the future tax benefits of the trademarks until this matter
is resolved.
The fully diluted headline earnings per share increased by 55% in comparison
to the previous year.
The Group's balance sheet also remains extremely strong with net cash
resources of R3,7 billion.
The balance sheet has been affected by the revision of the accounting
statement requiring capitalisation of finance leases and has resulted in
approximately R241 million being added to interest bearing long-term
liabilities and R212 million tocapital le
ased assets.
PROSPECTS
Strategic acquisitions are being prudently pursued in the areas of the
Group's strategic focus. The prospects for value-adding acquisitive
expansion have significantly improved following the substantial correction
in the value of companies in the Group's focus area during the year. The
Group's geographic focus remains on Europe and Africa.
In accordance with the approval obtained from shareholders, the Group will
continue to buy back its own shares.
The weak global economic environment and the concomitant weakness in capital
expenditure is materially impacting information technology budgets around
the world. Delayed purchases and cancelled projects are expected to have an
impact on the results of the Group in the short term. Accordingly it is
expected that the Group will report a decline in earnings per share for the
first half of the 2002 financial year. Whilst it is more difficult to
predict the effect of the global economic decline on the Group beyond 30
November 2001, the Group continues to target an increase in earnings per
share for the year to end May 2002.
On behalf of the board
RJMarnitz WAdu Plessis KRMEvans
Chairman Chief Executive Officer Group Financial Director
Midrand 22 August 2001
(Registration number 1994/002506/06) (Incorporated in the Republic of
South Africa)Internet address: http://www.comparexgroup.com
Registered office: PQPark, 789 16th Road, Randjespark, Midrand 1685 (Postal:
Private Bag X48, Halfway House 1685)
Transfer secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg 2001 (POBox 1053, Johannesburg 2000)
Directors: RJ Marnitz (Chairman), WAdu Plessis (Chief Executive Officer), DC
Arnold, SCarlin, RKJ Chambers, WAM Clewlow,JRCohen, DH Erasmus, KRM Evans,
DW Henwood, HOHetz (German),DPSullivan and PAWatt
