| Tue 18 Sep 2001, 0:00 | | Ast Group Limited - General Announcement |
|
AST Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/021790/06)
("AST" or "AST Group")
(Share Code: AAA ISIN Code: ZAE000027397)
General announcement
- Further Australian acquisition in line with stated intent
- Extension of AST's internationalisation strategy
1.Introduction
The AST Group is pleased to announce the acquisition of 100% of the issued
share capital of Red Rock Consulting (Pty) Ltd ("Red Rock"), a systems
integration company, with effect from 1 July 2001 ("the transaction"). This
transaction represents the next important step in the execution of the AST
Group's expansion into Australia.
2. Transaction
Based on projected future growth rates of 30% the nominal value of the
transaction is Aus$13,3m (R58,3m). An initial payment of Aus$6m (R26,8m)
will be made, followed by three future payments subject to the performance
of the business and future contingencies ("the purchase consideration"). The
management and key staff of Red Rock have committed to remain in the service
of the AST Group in Australia for at least three years in terms of service
and restraint contracts, which include performance related retention
payments.
The purchase consideration will be paid in cash to be funded from South
African resources. The transaction is subject to the final approval of the
Exchange Control Committee of the South African Reserve Bank.
3. Financial impact of transaction
It is anticipated that the transaction will have a positive impact on the
AST Group's headline earnings per share for the financial year ending 30
June 2002.
The table below shows the effect on headline earnings per share and net
asset value per share, had the transaction been effective for the financial
year to
30 June 2001.
Before transaction After transaction % change
Headline earnings per share2 26,2c 27,1c 3,3
Earnings per share3 3,0c 0,6c (80,0)
Net asset value per share4 67,0c 62,8c (6,2)
Assumptions:
1. The calculation of the financial effects shown in the above table are
based on a R/AU$ exchange rate of 4,40 and an after-tax cost of interest of
7,7%.
2. The effect on HEPS is based on the assumption that the transaction had
been in effect for the full financial year from 1 July 2000 to 30 June 2001
and a weighted average number of shares in issue of 550 271 049.
3. The effect on EPS is based on the assumption that the transaction had
been in effect for the full financial year from 1 July 2000 to 30 June 2001
and a weighted average number of shares in issue of 550 271 049.
The dilutive effect on the EPS is as a result of the application of AST's
accounting policy on goodwill in terms of which the total goodwill of the
acquisition is written off over the earn out period of the transaction.
4. The effect on NAV is based on the assumption that the transaction was
effective on 30 June 2001 and the actual number of shares in issue of 554
122 919.
4. Introducing Red Rock Consulting (Pty) Ltd
Red Rock is a respected Australian IT services company, providing a range of
system integration services with a key focus on Oracle development,
implementation and support services. Its client base includes prominent
names in the Australian economy such as Vodafone, Toshiba and Coca-Cola, as
well as various government bodies.
Red Rock operates from offices in Sydney, Melbourne and Canberra and
currently employs 70 staff. Red Rock is the premier independent Oracle
consulting firm in Australia and has an impressive track record of sustained
growth since its inception in 1997.
5. Rationale for the acquisition
The AST Group's Australian expansion plan
The AST Group's stated intent is to build an integrated IT services and
solutions business in Australia along the lines of its successful South
African business model. The cornerstone of this strategy is to find
successful strategic partners in Australia, to jointly adapt the South
African business model to Australian conditions and to acquire the necessary
IT assets to serve as building blocks for the integrated services capability
in Australia. The AST Group has executed a number of key objectives in
realising its Australian expansion plan:
- Acquisition of a software products and support company in 1999 based in
Sydney and Melbourne.
- Establishment of a successful contracting and resource placement business
in 1999 in Sydney.
- Acquisition of a strategic management consulting practice in 2000 based in
Sydney, Melbourne and Perth.
- Acquisition of Red Rock in 2001 as the initial building block for its
system integration capability in Australia.
In Red Rock the AST Group has procured the initial key capability for its
system integration building block envisaged in Australia. The system
integration ability is a crucial component in packaging end-to-end IT
services and solutions to clients. The Red Rock delivery capacity will
enable the AST Group's existing Australian IT assets to synergistically
leverage their market positioning.
It is further expected that synergies can be unlocked between Red Rock and
AST IT Solutions, the leading independent system integrator in the South
African market. Various opportunities exist to share best practise
methodologies; technologies and alliances; resources; clients and focused
industry skills.
Integrated consulting and IT services
A core element of AST's value proposition is its ability to create value for
its clients at all levels, from business strategy through to IT operations.
In combining its IT service offerings with the consulting services of
Bentley West, AST is a leader in the southern African market. Similarly, the
combination of Red Rock and GEM Consulting create the building blocks with
which the AST Group will build and implement the business model in
Australia.
6. Conclusion
The addition of Red Rock to the existing Australian assets represents
another important milestone in building an integrated IT services and
solutions business in Australia. The acquisition is not only an exciting
financial investment but also forms a very important step in the execution
of the Australian strategy.
The AST Group has always had a strong commitment to business governance, and
in line with this commitment Red Rock will report to the existing AST Group
governance structure in Australia.
The experience of the AST Group in Australia since 1999 has been successful.
The product and GEM Consulting business units have increased the Group's
customer base in the region whilst delivering on profit expectations. The
management team reiterates its commitment to achieving an Aus$100m turnover
business by December 2002.
Johannesburg
18 September 2001
AST sponsor
HSBC
